Microsoft buys video game maker Activision Blizzard for $75 billion

Microsoft has agreed to buy video game maker Activision Blizzard for $75 billion in the tech company’s biggest ever deal.

Under the terms of the cash agreement, Microsoft will pay the shareholders of the company behind Call of Duty and World of Warcraft $95 per share, a 45% premium over last week’s closing price.

The purchase price includes Activision’s $6.37 billion in net cash, valuing the company at $68.7 billion.

It’s the latest in a wave of deals in the gaming industry. Take-Two Interactive, the creator of the popular Grand Theft Auto game series, agreed last week to buy rival Zynga, the maker of FarmCity and Words between friends, for $12.7 billion.

The video game industry has taken center stage in the latest rush to digital entertainment dominance. Microsoft said buying Activision would fuel its move into the Metaverse, the name given to the immersive virtual worlds big tech companies strive to build.

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“Gaming is the fastest growing and most exciting entertainment category on any platform today and will play a key role in the development of metaverse platforms,” said Satya Nadella, president and CEO of Microsoft.

The move is Nadella’s biggest bet since his appointment in 2014. Microsoft is the world’s biggest software group, but the deal with Activision will make it the third-biggest games company by revenue, behind China’s Tencent. and Sony in Japan.

Nadella said the vast online reach of Activision and Microsoft would give the combined group a head start in building online gaming communities that would eventually reach billions of people.

The 400 million monthly users of Activision games like candy Crush, along with the 25 million subscribers to Microsoft’s Game Pass subscription gaming service, would give the company “one of the largest and most engaged communities in all of entertainment,” he said. .

The news sent shares of other major video game publishers higher on expectations of more deals in the industry. Electronic Arts, whose games include the Fifa and crazy sports franchises, grew more than 5%, while Ubisoft, maker of Assassin’s Creed, increased by 8%.

Microsoft has fallen with Activision shares down nearly 30% since a lawsuit was filed against the company in July alleging widespread sexual harassment and gender pay issues within the company. business.

As Microsoft shares soared under Nadella’s tenure, filings show he built a stake that is now worth around $255 million, even after selling about half of his shares in late November, raising 285 millions of dollars.

Bobby Kotick, chief executive of Activision Blizzard, owns shares in the games company worth more than $370 million at Microsoft’s proposed takeover price.

Kotick’s $155 million salary package for 2020, which made him one of the highest-paid executives in the United States, sparked protests from some investors in June.

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Kotick has admitted that the company’s initial responses to the harassment allegations were “tone-deaf”.

Kotick is unlikely to remain the company’s chief executive for very long after the deal closes. Microsoft said its head of games would take responsibility for the company once the deal is approved, and sources familiar with the deal noted that it would be highly unusual for a longtime chief executive to remain at the combined company. beyond an interim period.

“We, like many companies, have had opportunities for culture improvement,” Kotick told the FT on Tuesday. “We have moved with speed and unlimited resources to change the workplace culture,” he said, adding, “It’s ongoing work.”

The company laid off 20 employees in October as part of an effort to clean up its culture following allegations of harassment and gender discrimination.

Kotick said Activision was no longer big enough to compete with top game companies such as Tencent and Sony and a slew of potential deep-pocketed competitors including Apple, Google, Amazon and Netflix.

Activision Blizzard's deal is the largest in Microsoft history.  Chart showing Microsoft's five largest acquisitions (in billions of dollars).  Activision Blizzard's deal, valued at $68.7 billion, eclipses LinkedIn's former biggest ($28.1 billion)

“We realized there were many categories of technology and talent that we needed to access that we didn’t and couldn’t develop fast enough,” he said, naming platforms. -Specially designed cloud forms for streaming games or cyber security software to protect. player data.

Activision shares rose 37% in premarket trading after the deal was announced. The company said that with parties seeking regulatory approval, a deal is expected to be completed after June.

Regarding the potential antitrust scrutiny of a deal that will combine two top gaming companies, Kotick said there has “never been more competition than there is today. . . this is a big motivating factor behind this transaction.

This article has been amended from first publication to reflect the net worth of Microsoft’s acquisition of Activision.

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