Microsoft Corporation's (NASDAQ:MSFT) US$68.7bn acquisition of Call of Duty maker Activision Blizzard Inc (NASDAQ:ATVI) is being investigated by Britain's antitrust watchdog.
According to the Competition and Markets Authority (CMA), it will decide by September 1 whether the deal between the US tech colossus and video-game maker Activision would reduce competition in the UK.
The CMA's phase 1 investigation will result in either a clearance or an in-depth phase 2 investigation.
In what would be the largest all-cash acquisition in history, Microsoft in January said it was buying Activision, with the deal expected to close in fiscal 2023.
The US Federal Trade Commission (FTC) is also reviewing the deal, as it is reported to be a special situation merger arbitrage with double-digit returns upon closing.
Reports indicate the FTC is unlikely to stop the purchase, and even if they do, Activision will be reportedly profitable and worth 40% or more by 2024.
As a result of the regulatory uncertainty, investors might be able to take advantage of some easy upside opportunities in the stock of the gaming company.
Activision is one of the biggest videogame publishers, with its Call of Duty titles consistently topping sales charts, yet its US$8.8bn in 2021 revenue represents just a fraction of the estimated US$192.7bn global games market.
Buying Activision would also be a major weapon in the console war, helping Microsoft with its Xbox console arm to become the world’s third-largest gaming company by revenue on completion, behind Tencent Holdings (HKG:0700, OTC:TCEHY) and Playstation maker Sony Group Corp (NYSE:SONY).