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July 17, 2023
NEWS ANALYSIS — On July 14, the U.S. Court of Appeals for the Ninth Circuit denied the Federal Trace Commission’s appeal of a district court decision refusing to issue an injunction in Microsoft’s pending $69 billion acquisition of Activision Blizzard, whose Call of Duty franchise dominates the video game market.
The FTC had asked the appeals court for a temporary pause on the July 18 termination date where Microsoft or Activision could walk away from the deal (and Microsoft pays Activision a $3 billion dollar separation fee). Last week, the U.S. District Court in San Francisco denied the FTC’s motion for a preliminary injunction during the federal government’s review process continued, with the trial set to begin on Aug. 2.
In addition, the S.F. court modified its temporary restraining order unless the FTC was able to obtain a stay from the Ninth Circuit Court of Appeals. The FTC did not get that stay, and the restraining order has now expired. The U.K.’s regulatory “Competition and Markets Authority” ruling remains the lone obstacle to consummation of the deal.
In response to the appeals court decision, U.K. regulators said they would be open to reviewing a restructured deal, extending its final decision from July 18 to Aug. 29, in order to receive “a detailed and complex submission from Microsoft claiming that there are material changes in circumstance.”
Michael Pachter, media analyst with Wedbush Securities in Los Angeles, remains confident Microsoft can operate its Game Pass subscription business in the U.K. separately and will receive the CMA’s approval.
Even Sony Interactive Entertainment, a major objector to the deal, has reportedly accepted the reality Activision Blizzard being owned by one its largest competitors.
That’s because on July 16, Phil Spencer, CEO of Microsoft Gaming, tweeted that Microsoft and PlayStation had signed a binding agreement to keep Call of Duty on the PlayStation platform.
“The most likely change, if any, could be the extension of the termination date through Aug. 29,” Pachter wrote in a July 17 note. “It is also possible that the $95 per share deal price could be increased to $99 or more to account for the termination fee if the deal is terminated due to an injunction by July 18.”