Microsoft, Activision Blizzard Extend Merger Deadline as They Seek Final U.K. Regulatory Approval

Todd Spangler

Microsoft and Activision Blizzard extended the deadline to close their $69 billion mega-deal by three months as the parties work to get approval from U.K. regulators.

Microsoft and Activision Blizzard’s original merger agreement expired July 18, 2023. On Tuesday, the companies entered into an agreement waiving certain rights to terminate the merger if the transaction has not closed prior to Oct. 18, 2023. The agreement also includes amendments to Activision Blizzard’s commercial Xbox arrangements with Microsoft, valued at up to $250 million for each of fiscal years 2023 and 2024.

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The deal, announced in January 2022, has cleared most regulatory and legal challenges, including U.S. federal courts’ rejection of the FTC’s bid to block the deal and the Supreme Court’s denial of a last-minute appeal to stop the deal by a group of gamers opposed to Microsoft’s takeover of Activision.

In the U.K., where the country’s Competition and Markets Authority (CMA) issued a decision in April to stop the Microsoft-Activision merger on grounds that it is anti-competitive. Last week, Microsoft and the CMA said they were pausing their legal fight over the deal to work out an acceptable compromise.

The extension of the merger agreement is to “provide ample time to work through the final regulatory issues,” Microsoft president Brad Smith tweeted. “We will honor all commitments agreed upon with the EC and other regulators and continue to work with the CMA on the issues raised in the U.K. We are confident about our prospects for getting this deal across the finish line.”

An Activision Blizzard rep said in a statement, “The recent decision in the U.S. and approvals in 40 countries all validate that the deal is good for competition, players and the future of gaming. Given global regulatory approvals and the companies’ confidence that CMA now recognizes there are remedies available to meet their concerns in the U.K., the Activision Blizzard and Microsoft boards of directors have authorized the companies not to terminate the deal until after October 18. We’re confident in our next steps and that our deal will quickly close.”

Under the terms of the extension, if the deal does not close by Aug. 29, 2023, the termination fee payable by Microsoft if the agreement is terminated will increase from $3 billion to $3.5 billion. If the deal does not close by Sept. 15, 2023, the breakup fee will increase from $3.5 billion to $4.5 billion. Any termination fee will only be paid if the deal fails to close, according to the companies.

As announced on Jan. 18, 2022, Microsoft plans to acquire Activision Blizzard for $95/share in an all-cash transaction valued at about $69 billion. The deal has been approved by the boards of directors of both Activision Blizzard and Microsoft and by Activision Blizzard’s stockholders.

Also Wednesday, Activision Blizzard reported second-quarter 2023 financial results and announced that its board declared a 99-cent-per-share cash dividend, payable on Aug. 17 to shareholders of record at the close of business on Aug. 2.

For Q2, Activision Blizzard’s net revenue was $2.21 billion, up 35% year over year compared with $1.64 billion for the second quarter of 2022. Earnings per diluted share were 74 cents, compared with 36 cents/share for the second quarter of 2022. Activision Blizzard generated $590 million in operating cash flow for the quarter compared with $198 million for the second quarter of 2022.

“While we continue to have concerns about the economy and growing industry competition, we remain focused on the long-term opportunities ahead and completing our merger with Microsoft,” Bobby Kotick, CEO of Activision Blizzard, said in announcing the Q2 results.

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