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FTC delays could send Microsoft and Activision back to the bargaining table

Microsoft and Activision may be sent back to the bargaining table thanks to FTC delays.
Enlarge / Microsoft and Activision may be sent back to the bargaining table thanks to FTC delays.

Getty Images | Bloomberg

When Microsoft first announced its intention to buy Activision Blizzard nearly a year ago, the companies said they expected the deal to close during the 2023 fiscal year, which ends this coming June. That schedule now seems exceedingly unlikely, thanks to a Federal Trade Commission scheduling order setting a hearing on the government’s lawsuit for August 2. That means a final government decision on the matter could be delayed until the fall or later.

More importantly, that hearing schedule would likely push the final merger approval past a contractual deadline to close the deal by July 18, as reported by the Associated Press. Hitting that deadline would technically trigger the payment of a $3 billion breakup fee from Microsoft to Activision Blizzard. In practice, though, passing the deadline would likely force both parties to come back to the table to renegotiate the deal’s specifics.

Taking a fresh look

Such an opportunity for a fresh look at the deal this summer could lead to a new perspective for both sides. A year ago, Microsoft’s original offer valued Activision Blizzard at about $95 per share, a more than 40 percent premium over the company’s roughly $65 share price at the time. Since that offer, though, there has been a broad market downturn that has seen the value of the S&P 500 fall by nearly 15 percent in just 12 months.

As of this writing, Activision Blizzard’s stock price is $76.94, well below Microsoft’s per-share offer price. That gap reflects the market uncertainty over whether the deal will be allowed to proceed and whether Microsoft will be able to stick with its initial offer during any renegotiation.

Representatives from Microsoft and Activision have yet to respond to a request for comment from Ars Technica. But both sides have expressed public confidence in seeing the deal through in light of the FTC’s actions. Last month, Activision Blizzard CEO Bobby Kotick sent a message to employees “reinforc[ing] my confidence that this deal will close. The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge.”

“There is no sensible, legitimate reason for our transaction to be prevented from closing,” Microsoft said in a December statement following the FTC’s announcement. “Our industry has enormous competition and few barriers to entry… The breadth of distribution options for games has never been more widespread. We believe we will prevail on the merits of the case.”

While the FTC’s August hearing date was tentatively set in late December, the scheduling order issued this week formally lays out months of pre-hearing deadlines for witness lists, document requests, expert testimony, hearing exhibits, and pre-hearing motions.

Outside of the US, the European Commission said it would make a final decision in its “in-depth investigation” of the proposed merger by April 11. The UK’s Competition and Markets Authority faces a statutory deadline of April 26 to conclude its investigation of the matter.

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