Largest Tech Deal Ever: Microsoft (MSFT) Buys Activision Blizzard (ATVI) for $68.7 Billion, Seen as an 'Aggressive Consumer Acquisition'

January 18, 2022 9:22 AM EST
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Microsoft (NASDAQ: MSFT) announced today it will acquire Activision Blizzard (NASDAQ: ATVI) in the largest ever tech deal.

Microsoft agreed to pay $95.00 per share in cash to acquire ATVI, which represents a 45% premium compared to the last price. Once the deal is closed, Microsoft will become the world's third-largest gaming company by revenue, behind Tencent and Sony (NYSE: SONY).

"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," said Satya Nadella, chairman and CEO, Microsoft.

"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."

Microsoft expects to close the deal in FY23 with a $3 billion breakup fee included in the agreement.

Wedbush analyst Daniel Ives has weighed in positively on the ATVI deal, seen as “an aggressive consumer acquisition that includes core franchises such as Call of Duty, Warcraft, and Candy Crush among many others now integrated into the Redmond ecosystem and streaming endeavors.”

Ives expects the deal to clear regulators although he sees “some inherent speed bumps navigating both the Beltway and Brussels on a tech deal of this size.”

“Acquiring Activision will help jump start MSFT's broader gaming endeavors and ultimately its move into the metaverse with gaming the first monetization piece of the metaverse in our opinion. With Activision's stock under heavy pressure (CEO related issues/overhang) over the last few months, MSFT viewed this as the window of opportunity to acquire a unique asset that can propel its consumer strategy forward,” Ives said in a client note.

Stifel analyst Drew E. Crum believes the ATVI deal "shines a positive light" on the video gaming sector after a recent pullback in shares of the major companies. He sees Microsoft being driven by the desire to bolster its metaverse offerings.

"Microsoft cited mobile as another important piece of this transaction, which we think adds some credence to the Take-Two/Zynga deal (we heard some negativity around why Take-Two would acquire a mobile publisher)," Crum said in a client note.

On the other hand, he sees the acqusition as a "favorable near/intermediate-term outcome for ATVI shareholders, and the path of least resistance for Activision Blizzard as a company, given the recent workplace turmoil, disappointing Call of Duty: Vanguard release, and questions concerning the timing and quality of upcoming Blizzard titles."

ATIV stock price is up over 33% on the news while Microsoft shares are down 1.4%.

By Senad Karaahmetovic | [email protected]

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