Microsoft and Activision Blizzard on Wednesday agreed to extend the deadline for their merger agreement until Oct. 18, Activision said in a statement Wednesday, CNBC reported. The two companies had originally agreed to complete the transaction by July 18, but regulatory pushback from the U.S. and U.K. delayed the takeover.
According to CNBC, if Microsoft had not extended the deal deadline, the company could have been on the hook for a $3 billion breakup fee to Activision Blizzard. By extending the period for the companies to close their transaction, Microsoft and Activision are giving themselves more time to satisfy regulators’ concerns and to get it over the line.
A new agreement between Microsoft and Activision, struck on July 18, included a provision to bump up the termination fee by increments at certain periods, if the merger is not cleared by the new deadline.
CNBC also reported that by August 29, the breakup fee will be increased to $3.5 billion of the transaction is terminated by the parties, while by September 15, the potential breakup fee will rise to $4.5 billion.
Activision Blizzard posted the following press release on BusinessWire. From the press release:
“This quarter, our talented teams delivered strong performance for our players and shareholders. We delivered a 50% year-over-year increase in net bookings, operating income growth over 70%, earning per share growth over 80%, and a record quarter for Blizzard with over $1 billion in net bookings for the first time,” said Bobby Kotick, CEO of Activision Blizzard. “Most importantly, we continue to set new standards of excellence for workplace culture and provide joy and connection to hundreds of millions of players around the world. While we continue to have concerns about the economy and growing industry competition, we remain focused on the long-term opportunities ahead and completing our merger with Microsoft.”
Polygon reported that the CMA blocked Microsoft’s buyout of Activision Blizzard in April, arguing that the merger would lead to “reduced innovation and less choice for UK gamers over the years to come” in the burgeoning cloud gaming market.
According to Polygon, on Monday, the Xbox maker and the CMA asked a judge to stay that process – the parties are reported to have held “productive” talks on remedies that Microsoft could agree to in order to help the deal pass.
“The recent decision in the U.S. and approvals in 40 countries all validate that the deal is good for competition, players, and the future of gaming,” an Activision Blizzard spokesperson said in a statement to Polygon. “Given global regulatory approvals and the companies’ confidence that the CMP now recognizes there are remedies available to meet their concerns in the U.K., the Activision Blizzard and Microsoft boards of directors have authorized the companies not to terminate the deal until after October 18. We’re confident in our next steps and that our deal will quickly close.”
Polygon also reported that Microsoft and Activision will be hoping to close the deal well before the Oct. 18 deadline. The U.K.’s Competition Appeal Tribunal has given Microsoft and the CMA until late September to reach an agreement, while the CMA says it expects to have finalized its conclusions well in advance of its own deadline on Aug. 29.
It seems to me that the date of the acquisition has been moved up a bit, in part to allow Microsoft to appease the CMA’s concerns. Considering the huge financial penalties that Microsoft and/or Activision Blizzard would face if the merger doesn’t close by then, I expect things will work out.