Microsoft Pdf Merger

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Followingshareholder approval of the acquisition, the merger was reviewed by several national anti-trust bodies, with early approvals granted by the European Commission and China's State Administration for Market Regulation (SAMR), among others. The United States' Federal Trade Commission (FTC) and the United Kingdom's Competition and Markets Authority (CMA) issued formal challenges to the acquisition. Sony also criticized the merger, concerned that Microsoft would make the lucrative Call of Duty franchise exclusive to the Xbox platform, though Microsoft committed to non-exclusivity through 2033. The FTC withdrew its request after courts did not find their anti-trust compelling to block the merger, while Microsoft offered to offload its cloud gaming support for Activision Blizzard's games for ten years to Ubisoft to appease the CMA.

Activision Blizzard is one of the largest video game publishers in the world, with annual revenues of about $8.8 billion in 2021.[3] The company is composed of five business units:[4] Activision Publishing, Blizzard Entertainment, King,[5] Major League Gaming,[6] and Activision Blizzard Studios.[7][8] Among its assets are ownership of Call of Duty, Crash Bandicoot, and Spyro from Activision's studios; Warcraft, Diablo, StarCraft, and Overwatch from Blizzard Entertainment; and Candy Crush Saga from King.[9][10]

Microsoft is a dominant player in computing software, and also makes the Xbox line of game consoles and operates Xbox Game Studios, a collection of developers to create first party titles. In March 2021, Microsoft closed on its acquisition of ZeniMax Media and Bethesda Softworks for an estimated $7.5 billion, making it one of the largest video game acquisitions by that time.[11]

On January 18, 2022, Microsoft announced its intent to acquire Activision Blizzard for $68.7 billion in an all-cash deal, or approximately $95 per share. Activision Blizzard's stock price jumped nearly 40% that day in pre-market trading. The deal would make Microsoft the third-largest gaming company in the world and the largest headquartered in the Americas, behind Chinese company Tencent and the Japanese conglomerate Sony. If closed, it would also be the most expensive video game-related acquisition in to date.[12] Goldman Sachs will serve as the financial advisor to Microsoft, and Allen & Company will be Activision's financial advisors. Simpson Thacher will serve as legal advisor for Microsoft while Skadden will serve as legal advisor for Activision.[13] The deal has been approved by both companies' board of directors and is expected to close in 2023 following international government regulatory review of the action.[14][15] Upon completion of the deal, Activision Blizzard would be a sibling entity to Xbox Game Studios under a new Microsoft Gaming division with Phil Spencer as its lead. The deal would also allow Microsoft to offer Activision Blizzard games on its Xbox Game Pass service.[15] Spencer also spoke about reviving some older Activision Blizzard franchises he himself enjoyed, mentioning series such as King's Quest, Guitar Hero and Hexen: Beyond Heretic.[16]

Kotick stated that he, Spencer, and Microsoft's CEO Satya Nadella have had discussions in 2021 on their concern of the power of Tencent, NetEase, Apple, Inc. and Google, and that Activision Blizzard lacked the computation expertise in machine learning and data analytics that would be necessary to compete with these companies. According to Kotick, this led to the idea of Microsoft, which does have those capabilities, acquiring Activision Blizzard at an attractive price point.[17] Spencer further had stated that Microsoft's intent with the acquisition is access to Activision's mobile games, which would include those by its King division such as Candy Crush Saga. He said that while there are 200 million game console users worldwide, the mobile market reaches over 3 billion people.[18] In a statement released on Activision Blizzard's investor website, the company said its industry is the "most dynamic and exciting category of entertainment across all platforms" and that gaming will be the forefront of the development of the emerging metaverse. Some journalists saw this acquisition, and Microsoft's March 2021 acquisition of Bethesda Softworks, as a bid to compete against Meta Platforms, formerly known as Facebook.[19][14][15]

According to official announcements, under the deal Kotick will remain the CEO of Activision Blizzard,[29][30][31][32] and is expected to keep the position while the deal goes through regulatory processes, as Activision Blizzard remains independent from Microsoft until the deal closes.[33] According to The Wall Street Journal, Kotick "will depart once the deal closes" under Microsoft's management, while Kotick said in an interview that he has an interest in remaining in the company.[22][34][35][17] Microsoft has yet to speak directly about the Activision Blizzard lawsuit following news of the acquisition, however the company announced a week prior that it would be reviewing its own sexual harassment and gender discrimination policies.[36]

The deal was set to close by July 18, 2023, after which Microsoft would owe Activision Blizzard $3 billion if the deal failed to close. However, the companies would be able to mutually extend the deadline, or if the deal expired, renegotiate the terms.[38] By this date, as described below, the UK's Competition and Markets Authority, after an initial ruling denying the merger, had extended their deadline to August 29, 2023, to rule on a new proposal by Microsoft. It was later extended their deadline to the same day as the acquisition closing date to provide its Phase 1 investigation of the merger. The companies agreed to extend the close of the acquisition until October 18, 2023, as to resolve the CMA issue.[39] Following the CMA's approval of the revised terms on October 13, 2023, Microsoft completed the acquisition of Activision Blizzard the same day.[40]

In the United States, the acquisition was reviewed by the Federal Trade Commission (FTC) rather than traditionally by the U.S. Department of Justice, as the agency had raised more concerns over mergers and acquisitions in the Big Tech sector in the last decade.[64] U.S. Senators Elizabeth Warren, Bernie Sanders, Sheldon Whitehouse, and Cory Booker expressed their concerns about the merger to the FTC as part of the FTC's investigation, saying that both companies have "failed to protect the rights and dignity of their workers" and that the merger should be opposed if "the transaction is likely to enhance monopoly power and worsen the negotiating position between workers and the parties."[65] The FTC formally stated its intention to block the acquisition as proposed on December 8, 2022. The FTC expressed concern that the acquisition would harm consumers of Activision Blizzard's games and give Microsoft too much control of certain parts of the industry, such as cloud gaming. The FTC also pointed to the acquisition of Zenimax, which the FTC claimed that Microsoft had agreed to a concession from the European Union to not make their games exclusive to the Xbox and later broke.[66][67] In a statement made to Axios' Stephan Totilo, the European Commission stated that they had cleared Microsoft's acquisition of Zenimax unconditionally as they saw no "material impact" on the gaming market even if Microsoft made Zenimax's titles exclusive.[68]

Microsoft responded to the FTC's complaint that Sony itself is one of the largest platforms with exclusive titles that contractually cannot be made for Xbox. They also said they still plan to offer content for multiplayer Bethesda games like Elder Scrolls Online and Fallout 76 for all platforms to avoid undercutting the playerbase. Microsoft also initially challenged the constitutionality of the FTC due to the ability for the Commissioner to be removed by the President at will, and their use of administrative law judges to initially review cases, both which have founding in recent Supreme Court cases,[69] but removed this language in an amended response, sticking to the video game market.[70] In February 2023, the FTC denied a request by Sony to drop a subpoena filed by Microsoft, requesting internal documentation from Sony related to their third-party exclusivity deals.[71]The FTC requested a temporary restraining order and a preliminary injunction to block the merger on June 12, 2023. The FTC stated that Microsoft and Activision Blizzard "have represented in the past that they cannot close their deal due to antitrust reviews of the transaction in other jurisdictions. But Microsoft and Activision have not provided assurances that they will maintain that position."[72]

The court granted the temporary restraining order on June 13, 2023,[73] while a hearing to determine if a preliminary injunction on the deal should be granted was held from June 22 to 30, 2023, before Judge Jacqueline Scott Corley. Microsoft said that if the injunction should be granted, they may consider abandoning the deal which they described as being a "three-year administrative nightmare".[74] During the hearing, the FTC was focused on the effect of Call of Duty in the competitive market, console exclusivity, and the impact of the nascent cloud gaming field.[75]

Judge Corley denied to apply a permanent injunction on July 11, 2023, lifting the temporary restraining order to allow Microsoft to proceed to close the deal, though the case will continue to trial later. Corley wrote, "For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content."[76] The FTC formally filed an appeal to Judge Corley's denial to the Court of Appeals for the Ninth Circuit on July 12, 2023.[77] The FTC also filed a separate motion to Corley on July 13 arguing for another injunction until the Ninth Circuit had time to decide to stay Corley's previous ruling, but she denied that motion.[78] The Ninth Circuit court denied the emergency appeal to block the merger on July 14, 2023.[79]

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