Activision Blizzard set to be acquired by Microsoft for $68.7 billion

Microsoft has reportedly entered an agreement to buy video game giant, Activision Blizzard for around $68.7bn (£50.5bn) in an all-cash deal. This would be the biggest ever deal for the US tech company.

If the deal is approved by regulators, the deal is expected to complete in the 2023 financial year and it would make Microsoft the third-largest gaming company in the world by revenue.

Activision Blizzard is a US video game company based in Santa Monica, California. Founded in 2008 after a merger of Activision, Inc. and Vivendi Games, the company has nearly 10,000 employees and itst products include the Call of Duty series, World of Warcraft, Spyro the Dragon and Hearthstone.

More recently, Activision Blizzard was sued by the California Department of Fair Employment and Housing because of its reported failure to handle sexual harassment and discrimination against female employees. The company reported yesterday (17th January) that since the lawsuit was filed in July 2020, they have fired or pushed out more than three dozen employees and disciplined another 40.

After shares hit a record high last year, the allegations led to share prices dropping by almost 40%.

However, the Financial Times reports that under the terms of the deal, Microsoft will pay Activision Blizzard $95 per share, which is a 45 percent premium on last week’s closing price.

Activision shares also rose 29.0% in pre-market trading.

Satya Nadella, Chairman and CEO of Microsoft, commented: “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.”

Industry reaction

Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdon, commented: “Activision Blizzard holds some of the most valuable IP in the world, thanks to the likes of Call of Duty and a host of other games with dogmatically loyal customers. However, today’s news isn’t just about people liking gaming, we’ve known that for a long time.

“It says a lot more about how gaming is viewed as an integral part of our future social and digital lives. The mushrooming popularity of this hobby is why Microsoft has delved into its very well-lined pockets and splashed out on the gaming production giant. From an outside perspective, the logic is fairly flawless.

“Microsoft is already the go-to provider of must-have software, so tacking on a gaming arm is a stroke of genius from a cross-selling potential standpoint. The likes of Netflix have already said they’d like to foray into gaming themselves, but Microsoft has come out swinging with today’s rather generous offer, which would make Microsoft the third-largest gaming company in the world.

“Execution risk is still a factor, though. This still marks some new territories for Microsoft and is hardly a small-fry deal, so the time to pop champagne will be when the deal has first been fully approved, and second, showed that Microsoft’s model can stomach this new gaming hoard.”