Microsoft to Gobble Activision in $69 Billion Metaverse Bet

The cash deal announced by Microsoft on Tuesday, its biggest acquisition ever, will bolster its firepower in the booming video game market where it takes on leaders Tencent and Sony.

It also represents the American multinational’s bet on the “metaverse”, online virtual worlds where people can work, play and socialize, as many of its biggest competitors already do.

“Gaming is the fastest growing and most exciting entertainment category on any platform today and will play a key role in the development of metaverse platforms,” said Microsoft Chief Executive Satya Nadella.

Microsoft’s offer of $95 per share represents a 45% premium to Activision’s Friday close. Its shares rose 27% to $83.35 in early trading, still a steep discount to the offer price, reflecting fears the deal could remain stuck in the crosshairs of regulators.

Microsoft has so far avoided the kind of scrutiny facing Google and Facebook, but the deal, which would make it the world’s third-largest games company, will put them on lawmakers’ radars, the firm’s Andre Barlow said. of attorneys Doyle, Barlow & Mazard PLLC.

“Microsoft is already big in gaming,” he said.

Shares of the tech major were down 0.7% in early trading.

The deal comes at a time of weakness for Activision, maker of games such as “Overwatch” and “Candy Crush.” Before the deal was announced, its shares had fallen more than 37% since hitting a record high last year, hit by allegations of sexual harassment of employees and misconduct by several senior executives. .

The company is still responding to the allegations and said Monday it has fired or expelled more than three dozen employees and disciplined 40 others since July.

CEO Bobby Kotick, who said Microsoft approached him about a possible buyout, would continue as Activision’s CEO after the deal.

In a conference call with analysts, Microsoft boss Nadella didn’t directly address the scandal, but spoke about the importance of culture in the company.

“It is essential for Activision Blizzard to continue its renewed cultural commitments,” he said, adding that “the success of this acquisition will depend on it.”

“METAVERSE ARMS RACE”

The global gaming market was valued at $173.70 billion in 2021 and is expected to reach $314.40 billion by 2027, according to research firm Mordor Intelligence.

Microsoft can already claim a significant beachhead in the industry as one of the big three console makers. It has made investments, including buying “Minecraft” maker Mojang Studios and Zenimax in multibillion-dollar deals in recent years.

He also launched a popular cloud gaming service, which has over 25 million subscribers.

Executives cited Activision’s 400 million monthly active users as one of the key attractions of the deal and the importance these communities could play in Microsoft’s various metaverse games.

Activision’s library of games could give Microsoft’s Xbox gaming platform an edge over Sony’s Playstation, which has enjoyed a more steady stream of exclusive games for years.

“The likes of Netflix have already said they’d like to foray into gaming themselves, but Microsoft rolled out today’s rather generous offer, which would make Microsoft the third-largest games company in the world. world,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

Tech companies from Microsoft to Nvidia have placed big bets on the so-called Metaverse, with buzz around it intensifying late last year after Facebook renamed itself Meta Platforms to reflect its focus on its business. of virtual reality.

“This is an important deal for the consumer side of the business and, more importantly, Microsoft’s acquisition of Activision really kicks off the metaverse’s arms race,” said David Wagner, equity analyst and portfolio manager at Aptus Capital Advisors.

“We believe the deal will close,” he said, but warned, “It will attract a lot of attention from a regulatory standpoint.”

(Additional reporting by Ankur Banerjee, Eva Mathews and Uday Sampath in Bengaluru, Kenneth Li in New York, Diane Bartz in Washington, Supantha Mukherjee in Stockholm; Writing by Pravin Char; Editing by Anil D’Silva and Carmel Crimmins)

By Subrat Patnaik

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