Microsoft will become one of the world’s top three publicly traded video game companies after purchasing Activision Blizzard (NASDAQ:ATVI) for $68 billion.
When Microsoft revealed its massive offer to buy Activision Blizzard (NASDAQ:ATVI), one of the biggest publishers of video games, the gaming industry was rocked. If finalized, the $68.7 billion all-cash transaction would be Microsoft’s most giant ever acquisition and the largest all-cash transaction in history. The agreement is noteworthy not only for its magnitude and importance but also for how fast it came together. It also begs the question of why Microsoft would pay a high price for a struggling company.
Activision Blizzard Hasn’t Been Without Controversy
Accusations that senior officials at Activision (NASDAQ:ATVI) disregarded complaints of sexual harassment and discrimination have sparked controversy. This not only prompted an investigation by the U.S. Securities and Exchange Commission (SEC), but it also used up some of its personnel resources. Executives resigned in shame as a result of employee protests and walkouts. CEO Bobby Kotick developed a reputation as a hot topic. Microsoft might have to cut ties with him after the deal is finalized, probably in early 2023. Many observers predict his resignation.
Microsoft is engaging in what many would view as a gamble, but it has multiple strategic reasons for doing so. The corporation bought ZeniMax Media last year, indicating its desire to grow its gaming division. After Tencent (HKG:0700) and Sony (TYO:6758), the acquisition of Activision (NASDAQ:ATVI) would make it the third-largest publisher of video games globally by yearly revenues. Additionally, it would expand Microsoft’s portfolio of popular video game series, including Candy Crush Saga, World of Warcraft, and Call of Duty.
The New York Times says that Microsoft approached Kotick with a takeover offer in December when the stock price of the gaming company had fallen precipitously. Kotick initially rejected the offer but refrained from altogether leaving Microsoft. Instead, he demanded a better deal. Within weeks, an agreement was achieved. Microsoft investigated the claims of a toxic workplace and concluded that the issue had been settled and that any residual controversy could be handled.
According to analysts, Microsoft is placing bets on gaming and the internet as a whole in addition to its intended acquisition target. Activision Blizzard (NASDAQ:ATVI) delivers precious intellectual property, despite its image issues. Microsoft would get its almost 400 million monthly users if it bought it. Additionally, it would propel the IT behemoth into the world’s top three publicly traded video game firms. Activision (NASDAQ:ATVI) might aid Microsoft in its efforts to compete in the metaverse, which is regarded as the upcoming central computing platform, as part of a longer-term strategy. However, it must first defeat rivals on the regulatory playing field.
Featured Image: Megapixl © Selagin
