Activision Blizzard: U.K. Regulator Blocks Sale to Microsoft, Increasing the Odds of Deal Failing

Activision Blizzard Stock at a Glance

• Fair Value Estimate: $92
• Star Rating: 3 stars
• Uncertainty Rating: High
• Economic Moat Rating: Narrow

Activision Blizzard Stock Update

In a shocking move, the U.K.’s Competition and Markets Authority, or CMA, moved to block Microsoft’s MSFT acquisition of Activision Blizzard ATVI due to concerns about the deal’s impact on the cloud gaming market. The CMA had previously been worried about the impact on Sony PlayStation, but Microsoft ameliorated those concerns. Microsoft had signed a flurry of agreements to allow Call of Duty on competing platforms, including Nvidia GeForce Now.

However, the CMA remained concerned about the constraints around those deals. Microsoft and Activision Blizzard have both already released statements vowing to appeal the ruling. Given the CMA decision and the U.S. Federal Trade Commission, or FTC, hearing set for August, we are lowering our conviction that the deal will be approved to 50/50 from more likely than not.

Additionally, we now project the deal closure will be pushed out to 2024, if it happens at all. We are maintaining our Activision fair value estimate of $92, which equals our standalone valuation and is near the present value of the $95 per share Microsoft has offered to pay.

Given the CMA action, Microsoft and Activision Blizzard now face three key dates over the next four months. The first is the May 22 deadline for the European Commission, or EC, the EU’s regulator, to issue its ruling. The EC is expected to approve the deal, but the CMA ruling may impact the outcome. The second date, July 18, is the deadline for closing the deal, but we expect Microsoft and Activision Blizzard to extend the deadline. Finally, the evidentiary hearing for the FTC lawsuit is set for Aug. 2.