Microsoft announced Tuesday that it will buy video game publisher Activision Blizzard for $68.7 billion, making it the largest acquisition to date in the U.S. tech industry, surpassing Dell’s $67 billion acquisition of EMC Corp in 2016. Activision Blizzard’s shares closed up 25.88% on Tuesday at $82.31, giving the company a market value of $64.11 billion.
The closing price was still about 14% below Microsoft’s $95-a-share takeover offer and more than the typical post-merger announcement spread, which is typically in the single digits until the deal closes. The wide trading spread may have been due to Tuesday’s sell-off in the broader U.S. stock market, with the Nasdaq down about 2.6 percent, and regulatory concerns about increased scrutiny of mergers and acquisitions by big tech companies.
On Tuesday, the Federal Trade Commission (FTC) and the Justice Department’s antitrust division began to rewrite merger guidelines, signaling a rise in skepticism about mergers. If the deal doesn’t get regulatory approval, Microsoft will have to pay Activision Blizzard a breakup fee of up to $3 billion.
However, Dan Ives, a prominent technology analyst at Wedbush Securities, said Microsoft may not face the same level of scrutiny as Alphabet, Apple and Meta, as the software giant also faced in 2001. Antitrust review.
“From a regulatory perspective, Microsoft does not face the same level of scrutiny as other tech companies,” Ives wrote in a report. Ultimately, Nadella sees an opportunity to make a big bet on consumers, Others are under regulatory scrutiny and cannot acquire such an asset.”
But he also cautioned: “While we expect the deal will eventually receive regulatory approval, there are some inherent hurdles in a tech deal of this size in both Washington and Brussels.”
One of the companies that could question the proposed merger is Sony, whose shares fell 7% on Tuesday. If the deal goes through, Sony risks that Microsoft could shut out Sony’s Playstation by making popular games like Call of Duty exclusive to its Xbox video game console.
This isn’t a new strategy for Microsoft, which said it would develop upcoming games like Starfield exclusively for Xbox and PC after acquiring video game developer Bethesda for $7.5 billion last year.
Regulators may try to point the finger at this business practice and use Microsoft’s approach to Bethesda as evidence, which could lead to a failed merger between Microsoft and Activision Blizzard or be forced to make concessions in the deal.