Microsoft's $69 billion acquisition of Activision Blizzard is on track to finally gain regulatory approval, as the UK Competition and Markets Authority (CMA) has indicated it will accept the latest concessions. This comes after a wait of over a year and a half to complete what is the largest-ever gaming deal.
The CMA announced on Friday that Microsoft's proposal paves the way for the deal to be cleared. Under the restructured offer, Microsoft will sell certain gaming rights to French publisher Ubisoft Entertainment. The regulator believes that this move will ensure competition in cloud gaming remains open for years to come. The CMA will review the offer until October 6th.
This development marks a remarkable turnaround for a deal that seemed to be in jeopardy after facing concerns from antitrust regulators, including an initial rejection from the UK earlier this year. However, Microsoft gained unexpected momentum when it successfully defended against the Federal Trade Commission's legal challenge. The European Union granted clearance with behavioral remedies in May, leaving the CMA as the final regulatory hurdle.
Colin Raftery, a senior director of mergers at the CMA, stated, "This is a new and significantly different deal, which ensures that the cloud distribution of these important games remains in the hands of a strong independent supplier, Ubisoft, rather than under Microsoft's control."
Following the news, Activision's shares rose by as much as 2.2%, reaching $94.39 in pre-market trading, just shy of Microsoft's $95 per share offer. Ubisoft's shares also enjoyed a boost, climbing as high as 4.2% in Paris.
The acquisition of Activision provides Xbox chief Phil Spencer with a strategic foundation to revitalize Microsoft's struggling mobile games business, albeit later than originally anticipated. However, he must now execute on a strategy unveiled around the deal in a shifting market, where the focus on the metaverse, which Microsoft initially cited as a driving force behind the acquisition, is fading.
While approving the deal, the CMA cautioned potential acquirers against delaying the submission of concessions. It stated that Microsoft's late restructuring highlights the costs, uncertainties, and delays that can occur when a credible and effective remedy is not presented in a timely manner.
The CMA had previously blocked the deal, citing concerns of potentially higher prices, reduced options, and less innovation for UK gamers. However, under the new offer, Microsoft is prohibited from restricting access to Activision's crucial content to its own cloud gaming service or withholding those games from competitors.
Alex Haffner, a competition lawyer at UK law firm Fladgate, remarked, "The parties have arguably gone further in the UK to secure regulatory clearance than elsewhere."
Jonathan Compton, a dispute resolution and antitrust lawyer at DMH Stallard, described the structural change in the deal as Microsoft relinquishing the cloud gaming rights owned by Activision. He characterized it as a mere "fig leaf."
Brad Smith, a Microsoft executive, expressed the company's encouragement with the CMA's positive development in the review process. Smith added that Microsoft has presented solutions that address the CMA's remaining concerns related to cloud game streaming and will continue working towards final approval to close the deal by October 18th.
Activision CEO Bobby Kotick acknowledged the criticality of the CMA's preliminary approval in completing the deal in a blog post.