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Microsoft Buying Video Game Giant Activision for $69 Billion

Microsoft Jan. 18 announced plans to acquire Activision Blizzard, a leader in video game development and interactive entertainment content publishing, for $68.7 billion in cash.

Activision properties include the “Call of Duty,” “Candy Crush,” “Diablo,” “StarCraft,” “Warcraft” and “Overwatch” franchises. The acquisition aims to accelerate the growth in Microsoft’s Xbox gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse — described as a virtual-reality space in which users can interact with a computer-generated environment and other users.

With 3 billion people actively playing video games, including 200 million Americans, and fueled by a new generation of interactive features, gaming is now the largest and fastest-growing form of home entertainment.

Microsoft will acquire Activision Blizzard for $95 per share, inclusive of Activision Blizzard’s net cash. When the transaction closes, Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony. The planned acquisition also includes Activision’s global eSports activities through Major League Gaming. The company has studios around the word with nearly 10,000 employees.

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Bobby Kotick will continue to serve as CEO of Activision Blizzard, and he and his team will maintain their focus on driving efforts to further strengthen the company’s culture and accelerate business growth. Once the deal closes, the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming.

“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Satya Nadella, chairman/CEO of Microsoft, said in a statement. “We’re investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all.”

Inclusivity and diversity remain a hot button issue at Activision, which saw thousands of employees reportedly sign an online petition last summer seeking improvements to a company culture that reportedly bordered on operating like a frat house. Activision has denied the claims.

Mobile is the largest segment in gaming, with nearly 95% of all players globally enjoying games on mobile. Activision Blizzard´s mobile business represents a significant presence and opportunity for Microsoft in this fast-growing segment.

“Players everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them,” said Spencer. “Together we will build a future where people can play the games they want, virtually anywhere they want.”

The acquisition also bolsters Microsoft’s Game Pass portfolio with plans to launch Activision Blizzard games into Game Pass, which has reached a new milestone of over 25 million subscribers. With Activision Blizzard’s nearly 400 million monthly active players in 190 countries and three billion-dollar franchises, this acquisition will make Game Pass one of the most compelling and diverse lineups of gaming content in the industry. Upon close, Microsoft will have 30 internal game development studios, along with additional publishing and esports production capabilities.

“The combination of Activision Blizzard’s extraordinary franchises with Microsoft’s technology, distribution, access to talent, ambitious vision and shared commitment to gaming and inclusion will help ensure our continued success in an increasingly competitive industry,” said Bobby Kotick, CEO of Activision Blizzard.

The transaction is subject to customary closing conditions and completion of regulatory review and Activision Blizzard’s shareholder approval. The deal is expected to close in fiscal-year 2023 and will be accretive to non-GAAP earnings per share upon close. The transaction has been approved by the boards of directors of both Microsoft and Activision Blizzard.

Government approval could be a sticky issue, says Michael Pachter, media analyst with Wedbush Securities in Los Angeles.

‘[The deal] has great potential to hurt PlayStation, and that is likely to be the sticking point with regulators,” Pachter said in an email.

Specifically, the analyst contends consumers could be leery buying a PS5 if they aren’t assured that future Activision games would be available on the platform.

“That is a problem, and I expect regulators to raise it,” Pachter said. “The ultimate solution is likely to issue a consent decree [merger allowed] that requires Microsoft to continue to offer Activision games on PS5 for a number of years, but until the regulators look at this, we won’t know for sure.”

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