Microsoft and Activision Blizzard extend deadline for merger

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Microsoft and Activision Blizzard have pushed back the deadline for the completion of their $75bn merger agreement until mid-October as the two companies seek to resolve UK regulatory concerns about the impact of the tie-up on the nascent cloud gaming market.

The extension to October 18 does not alter the original $95 per share, all-cash purchase price that Microsoft will pay for the developer of Call of Duty and Candy Crush Saga. However, the parties have agreed to increase the termination fee that Microsoft would pay Activision to as much as $4.5bn, if the deal is scuttled after September 15.

The extension will provide “ample time to work through the final regulatory issues”, said Microsoft’s president Brad Smith in a tweet on Wednesday.

“We will honour all commitments agreed upon with the [European Commission] and other regulators and continue to work with the [Competition and Markets Authority] on the issues raised in the UK,” Smith said. “We are confident about our prospects for getting this deal across the finish line.”

Activision’s board has also authorised a 99 cent per share dividend, a payout to investors totalling about $780mn.

The companies had set an 18-month deadline when they announced the deal in January 2022 to allow time for regulatory clearances around the world. The original agreement called for Microsoft to pay a break-up fee of as much as $3bn if its acquisition of the gaming company was not completed by July 18.

An attempt by US regulators to prevent the deal from being closed failed in court last week. That technically left Microsoft in a position to complete the acquisition immediately, even though the CMA in the UK said in April that it would block the transaction.

The companies extended the deal on its current terms to allow more time to win over the British regulators, who have invited them to submit amendments to resolve their concerns.

“The recent decision in the US and approvals in 40 countries all validate that the deal is good for competition, players, and the future of gaming,” Activision said.

“Given global regulatory approvals and the companies’ confidence that CMA now recognises there are remedies available to meet their concerns in the UK, the Activision Blizzard and Microsoft boards of directors have authorised the companies not to terminate the deal until after October 18,” the company added. “We’re confident in our next steps and that our deal will quickly close.”

Even if Microsoft is able to appease the CMA and close its acquisition in the coming weeks, it still faces potential hurdles in the US.

The Federal Trade Commission has not dropped a separate complaint that is due to be heard in its in-house court, starting on August 2. If the FTC prevails in that case, a court could force Microsoft to unwind the transaction long after it has been completed.