The $69 billion takeover is anticipated to proceed with a modified plan addressing regulatory concerns.
Microsoft’s $69 billion acquisition of Activision Blizzard, known for games like Call of Duty and World of Warcraft, appears likely to receive approval from the UK competition regulator. The Competition and Markets Authority (CMA) initially sought to halt this historic tech deal in April due to fears that Microsoft would have excessive control over the emerging cloud gaming sector.
This decision had stirred frustration at Microsoft, with the company describing it as one of the most challenging moments in its four-decade presence in the UK. However, a revised proposal has since been submitted, which includes the sale of cloud gaming rights outside Europe to the French company Ubisoft.
On Friday, the CMA indicated that the sale of these rights has “significantly alleviated prior concerns and paves the way for potential clearance of the deal.” The regulatory body did acknowledge that it still harbored “some remaining concerns” related to potential circumvention, termination, or lack of enforcement of certain aspects of Activision’s cloud streaming rights sale.
Nevertheless, Microsoft has offered assurance that the CMA can oversee the terms of the rights sale, a step that the UK regulator has preliminarily determined will resolve its remaining apprehensions. Colin Raftery, the Senior Director of Mergers at the CMA, remarked, “This represents a new and substantially different agreement, ensuring that the cloud distribution of these crucial games remains in the hands of a robust independent supplier, Ubisoft, rather than being controlled by Microsoft.”
By implementing additional safeguards to ensure proper execution of the agreement, this will preserve the market structure, allowing healthy competition to continue shaping the future of cloud gaming. This, in turn, will provide UK gamers with diverse avenues to access Activision’s games, including through multi-game subscription services based on the cloud.
The CMA has initiated a consultation on these measures, scheduled to conclude on October 6th, preceding its ultimate decision regarding the clearance of the deal. The UK regulator had seemed increasingly isolated in its stance against the takeover, especially after its EU counterparts approved the deal, and the US competition authority failed in its court attempt to prevent it.
On Friday, the CMA rebuked Microsoft for delaying the presentation of a viable solution to competition concerns, which should have been provided much earlier during the investigation process.
Sarah Cardell, the CEO of the CMA, remarked, “Microsoft has now significantly reconfigured the agreement, taking the required actions to resolve our initial concerns. However, it would have been considerably more preferable if Microsoft had proposed these changes during our initial inquiry. This case underscores the potential expenses, uncertainty, and delays that parties may face when a credible and effective remedy is available but is not presented at the appropriate juncture.
Microsoft is hopeful that the CMA’s review of its new agreement can be concluded before the expiration of the acquisition deal with Activision Blizzard on October 18th. To address regulatory concerns, the company had previously extended the deal timeline, which surpasses its previous largest acquisition of LinkedIn in 2016, from July 18th.
Brad Smith, Microsoft’s Vice-Chair and President, expressed optimism about this positive development in the CMA’s review process, stating, “We have presented solutions that we believe fully resolve the CMA’s remaining concerns related to cloud game streaming, and we will continue working towards obtaining approval to close the deal before the October 18th deadline.”
As part of the revised agreement, Microsoft will not acquire cloud rights outside of Europe for existing Activision desktop and console games or for new games released by the developer over the next 15 years.
Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown, noted, “The relinquishment of cloud gaming rights is not an ideal concession for Microsoft, but it is a necessary compromise for the deal to be approved. This appears to be the final hurdle, and approval should be imminent, ultimately a victory for Microsoft.
