European Union regulators approved Microsoft Corp.’s $69 billion deal for Activision Blizzard Inc. Monday, but the acquisition still faces hurdles, as it was previously blocked by U.K. regulators.
The European Commission said Monday that it was approving the deal because Microsoft’s
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commitments to address anticompetitive concerns “represent a significant improvement for cloud gaming as compared to the current situation.”
Microsoft pledged to allow EU gamers to stream all current and future Activision Blizzard
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PC and console games for which they have a license for 10 years. The company will also offer a free license to cloud-game-streaming services to allow consumers in the EU to stream those games.
“These licenses will ensure that gamers that have purchased one or more Activision games on a PC or console store, or that have subscribed to a multi-game subscription service that includes Activision games, have the right to stream those games with any cloud game streaming service of their choice and play them on any device using any operating system,” the E.C. said in its release.
However, the U.K.’s Competition and Markets Authority was unsatisfied with the commitments around cloud gaming and said in late April that it would prohibit the deal on anticompetitive concerns. Activision and Microsoft are appealing that decision.
See more: Why the U.K. is blocking Microsoft’s deal for Activision and what comes next
Baird analyst Colin Sebastian sees a number of ways the deal drama could play out now given the differing views from various regulators.
See also: FTC sues to block Microsoft’s $69 billion acquisition of game giant Activision Blizzard
He thinks it’s unlikely that Microsoft and Activision agree to allow the deal to expire at the mid-July deadline and views it as more plausible that the companies extend the deadline to let the U.S. case and U.K. appeals process progress more fully.
Other options include that Activision asks for a higher acquisition price or walks away from the deal, something he deems “possible, and perhaps increasingly likely,” while Microsoft could also opt to abandon the deal and invest its cash in other areas.
As “likely a last resort,” the companies could try to move ahead with the combination if U.S. regulators approve it but U.K. regulators still don’t change their minds. In doing so, they would “potentially face protracted litigation and/or disruption of operations in that market.” he wrote in a note to clients.
Activision shares were up 1.4% in afternoon trading Monday, with Wells Fargo analyst Brian Fitzgerald writing that “the limited magnitude of the move” reflects arbitragers’ stance that “CMA rejection/MSFT appeal remain the key drivers of the stock.”
