Microsoft reportedly acquired Activision Blizzard for $68.7 billion and turned the two biggest video gaming companies into a powerful entity and the world’s third-largest gaming company.
As per Bloomberg News, Microsoft will pay $95 per share in cash for the makers of legendary games such as World of Warcraft and Call of Duty. Activision CEO Bobby Kotick will continue in the same role. After the acquisition, the Activision Blizzard business will be handled by Phil Spencer, who heads Microsoft Gaming.
The deal will help Microsoft add Activision’s popular titles and help its Xbox console compete better with Sony’s PlayStation. Activision’s earlier association with Microsoft was its game Call of duty, becoming popular on the live multiplayer matches on Xbox. Many Activision games are published on Microsoft Xbox consoles.
According to Dan Ives, an analyst at Wedbush Securities, the acquisition will help Microsoft broaden its gaming endeavors and ultimately move to the metaverse space. Activision faced CEO-related issues, and its stock under pressure for the past few months. Microsoft took the opportunity to acquire a unique asset that can help its consumer strategy.
Microsoft, which bid at a 45% premium on Activision’s share price Friday, saw its share slide by 1.3% after the news. This bid price is a bargain deal as the prices of Activision came down by half after a sexual bias lawsuit was filed against the company in July last year.
The scandal affected Activision which was already struggling to adapt to the video game boom during the Pandemic. In November, Activision delayed the launch of its new game, and its sales forecast fell short for the fourth quarter. CEO Kotick also came under pressure from shareholders to resign after being with the company for three decades. Ongoing lawsuits, including allegations of mistreatment of women and years of sexual misconduct, are in the company, which Kotick was aware of but did not report to the board. Kotick had promised to make changes after apologizing.
Spencer said last November that Microsoft was revaluating with Activision and making adjustments after the wall street journal report. CEO Satya Nadella told the investors that Microsoft would build a culture where everyone can do their best work.
Activision was founded in 1979 and is the maker of some of the most popular game franchises globally, including Candy Crush, Destiny, Skylanders, Crash Bandicoot, and Tony Hawk titles.
Its Call of Duty franchise has been a hit with its mobile edition launch in China in December 2020 brought millions of fans with player investment on par with all other games combined globally. This franchisee is Activision’s most important business as it alone accounted for 55% of the operating profit.
Some of Activision’s games did not catch attention. According to Baird, analysts report, in 2021, World of Warcraft and Call of duty searches were down by 44% and 32%, respectively. Microsoft plans to keep some Activision games for PlayStation but will keep some games exclusive for Xbox consoles.
Microsoft has acquired several brands to strengthen its games studio platform. In 2020, it bought ZeniMax Media Inc. and Bethesda Softworks for $7.5 billion, considered Microsoft’s biggest purchase of video games. After the Activision deal, Microsoft will catapult to the third position after Sony and China’s Tencent Holdings.
The game pass subscription is driving Microsoft’s ambition which allows members to access all the first-party games of Microsoft, including those on their first day of commercial release, at no extra charge.
The acquisition deal is handled by Simpson Thatcher & Bartlett LLP and Goldman Sachs Inc. on behalf of Microsoft. Allen & Company LLC and Skadden are working for Activision.
