Activision Blizzard: Microsoft Merger Appears Set To Close After Court Win Over FTC

Activision Blizzard Stock at a Glance

• Fair Value Estimate: $95
• Morningstar Rating: 3 stars
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow

Activision Blizzard Stock Update

Microsoft MSFT and Activision Blizzard ATVI won their case to deny the U.S. Federal Trade Commission’s request for a preliminary injunction of the merger on July 11. A U.S District Court in California ruled that the FTC failed to demonstrate that the agency would succeed in its claim that the vertical merger would lessen competition and also found that Microsoft’s commitments to offer Call of Duty and other Activision games to other consoles and cloud providers increased consumer access to the games. The decision means that the acquisition of Activision Blizzard will likely close in the near future as the deal deadline is July 18. The FTC could still decide to appeal the decision this week. However, the FTC has recently walked away from appealing similar adverse decisions like the Meta-Within deal.

Soon after the decision was announced, Microsoft and the U.K. regulator announced that the two parties decided to halt Microsoft’s appeal of the decision to block the merger in the U.K. and work on restructuring the deal to alleviate any concerns, which primarily dealt with the cloud gaming. The U.S. and U.K. were the only two markets to block or attempt to block the deal as other major markets like the EU and China signed off earlier this year. Given the willingness of both parties to pause the litigation, we assume that the initial discussions are proceeding well, and an agreement is likely forthcoming in the next week or so.

Given these two outcomes, we now believe that the deal is highly likely to close and are raising our fair value estimate to the deal price of $95 from $92. In the unlikely case that the merger falls apart, our stand-alone fair value estimate remains at $92.