Microsoft Corporation (NASDAQ:MSFT) has agreed to buy video games maker Activision Blizzard Inc (NASDAQ:ATVI) for just short of US$69bn in a move that puts it at the heart of what it says is the fastest-growing form of entertainment.
“This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse,” the software and cloud giant said in a statement.
The all-cash deal values Activision shares at US$95 each, a 46% premium to the close last night and the Call of Duty maker in total at US$68.7bn including its net cash.
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Other legendary Activision games include Halo, Candy Crush, and Overwatch, but Microsoft added that the deal also bolsters its Game Pass portfolio, which will see its current 25mln subscriber numbers soar.
“With Activision Blizzard’s nearly 400mln monthly active players in 190 countries and three billion-dollar franchises, this acquisition will make Game Pass one of the most compelling and diverse line-ups of gaming content in the industry, said Washington-based Microsoft.
Microsoft, which is already central to the gaming industry through its Xbox console arm, will now become the world’s third-largest gaming company by revenue on completion, behind Tencent and Playstation maker Sony.
The Activision deal is expected to close in the fiscal year 2023, said the statement, and will be accretive to non-GAAP earnings per share upon completion.
“Players everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them,” said Phil Spencer, CEO, Microsoft Gaming.
“Through great teams and great technology, Microsoft and Activision Blizzard will empower players to enjoy the most-immersive franchises, like “Halo” and “Warcraft,” virtually anywhere they want."
Bobby Kotick will remain as CEO of Activision Blizzard after completion of the acquisition, the statement said.
Largest deal in tech history
Broker Wedbush added: “This represents Microsoft's largest acquisition ever and the largest M&A deal (Dell/EMC $67 billion) in tech history.
“Microsoft buying Activision is an aggressive consumer acquisition that includes core franchises such as Call of Duty, Warcraft, and Candy Crush among many others now integrated into the Redmond ecosystem and streaming endeavors.
“Acquiring Activision will help jump start MSFT's broader gaming endeavors and ultimately its move into the metaverse with gaming the first monetization piece of the metaverse in our opinion.
“MSFT needs to give investors comfort around the broader strategic view of Activision and make sure integration and taking its eye off the prize of cloud computing will not come into play.
“Another issue at play will be Activision's relationship with Sony PlayStation console and future streaming efforts.”
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