Microsoft Corp is paying $68.7 billion for “Call of Duty” producer Activision Blizzard in the largest game industry transaction in history, as global technology behemoths stake their claims to a virtual future.
Microsoft’s announcement on Tuesday, its largest-ever and the largest all-cash acquisition on record, would enhance its firepower in the expanding videogames sector, where it competes with giants Tencent and Sony.
It also reflects the American multinational’s bet on the “metaverse,” or virtual online worlds where people can work, play, and socialize, which several of its competitors are already undertaking.
“Gaming is the most dynamic and interesting area in entertainment across all platforms today,” Microsoft CEO Satya Nadella stated. “Gaming will play a significant role in the development of metaverse platforms.”
Microsoft, one of the world’s largest corporations, due primarily to business software such as its Azure cloud computing platform and Outlook franchise, is proposing $95 per share, a 45 percent premium to Activision’s Friday closing.
Activision’s stock was recently up 26% at $82.10, but trading at a substantial discount to the offer price, underscoring worries that the acquisition may get caught in the sights of authorities.
Microsoft has so far avoided the type of scrutiny faced by Google and Facebook but this deal, which would make it the world’s third largest gaming company, will put the Xbox maker on lawmakers’ radars, said Andre Barlow of the law firm Doyle, Barlow & Mazard PLLC.
“Microsoft is already big in gaming,” he said.
However, a source familiar with the matter said Microsoft would pay a $3 billion break-fee if the deal falls through, suggesting it is confident of winning antitrust approval.
The tech major’s shares were last down 1.9%.
The deal comes at a time of weakness for Activision, maker of games such as “Overwatch” and “Candy Crush”. Before the deal was announced, its shares had slumped more than 37% since reaching a record high last year, hit by allegations of sexual harassment of employees and misconduct by several top managers.
The company is still addressing those allegations and said on Monday it had fired or pushed out more than three dozen employees and disciplined another 40 since July.
CEO Bobby Kotick, who said Microsoft approached him about a possible buyout, would continue as CEO of Activision following the deal, although he is expected to leave after it closes, a source familiar with the plans said.
In a conference call with analysts, Microsoft boss Nadella did not directly refer to the scandal but talked about the importance of culture in the company.