Microsoft and Activision Blizzard Merger: UK Competition Authority Pauses Legal Proceedings

The UK’s Competition and Markets Authority and Microsoft Pause Legal Proceedings

The UK’s Competition and Markets Authority (CMA) has agreed to pause legal proceedings with Microsoft and Activision Blizzard with a view to reaching an agreement over the game companies’ proposed merger.

Microsoft Cleared for Activision Blizzard Acquisition in the US

The announcement follows the news that Microsoft has been cleared to acquire Activision Blizzard in the United States after winning its court battle with antirust regulator the Federal Trade Commission.

CMA Ready to Discuss Restructuring of the Transaction

“We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our Final Report,” a CMA spokesperson said.

Litigation Stayed in the UK for Priority Consideration

“In order to be able to prioritise work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of litigation in the UK would be in the public interest and all parties have made a joint submission to the Competition Appeal Tribunal to this effect.”

Microsoft Supports Pausing UK Litigation

In its own statement, Microsoft president Brad Smith confirmed the company had agreed with the CMA that pausing the UK litigation would be the best way to proceed.

Microsoft Considers Modifying the Transaction

“After today’s court decision in the US, our focus now turns back to the UK,” he said. “While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA.”

CMA’s Concerns about Impact on Cloud Gaming Market

In April, the CMA said it was preventing the $69 billion deal from going ahead due to concerns about its impact on the nascent cloud gaming market. It claimed its decision would stop the acquisition from happening globally.

Microsoft’s Appeal and Deadline

Microsoft’s appeal against the competition watchdog’s decision was scheduled to be heard in a court case beginning on July 28. For its part, Microsoft wants to try and push the deal through before the current merger agreement expires on July 18, after which Activision Blizzard could walk away with a $3 billion termination fee if an extension isn’t agreed.

Microsoft Offers Divestiture to Address Concerns

Citing sources, CNBC’s David Faber claimed (via Seeking Alpha) that Microsoft is offering a “small and discrete” divestiture to the CMA that it believes the watchdog will accept.

Analysts Predict Microsoft to Complete the Deal

In a research note to investors, Wedbush Securities analysts Nick McKay and Michael Pachter predicted Microsoft will complete the deal before next week’s deadline.

Carving Out Game Pass in the UK

“We expect Microsoft to move forward to close the deal by next Tuesday, and expect the company to carve out its Game Pass subscription service in the UK in order to comply with the CMA ruling blocking the merger,” they wrote.

Conclusion: Deal Likely to Close by Next Tuesday

“We believe Microsoft can carve out Game Pass UK PLC as a separate operating subsidiary with an independent board charged with keeping Activision content off the Game Pass platform pending the conclusion of Microsoft’s appeal of the CMA decision. This would likely satisfy the CMA, and the deal should close by next Tuesday.”