In anticipation of the conclusion of discussions with UK regulators, Microsoft and Activision Blizzard have agreed to prolong their merger agreement. After missing the initial contract deadline yesterday, both sides now have until October 18 to complete the purchase.
As tweeted by Lulu Cheng Meservey, Activision Blizzard’s CCO, and EVP of corporate affairs. “The recent decision in the US and approvals in 40 countries all validate that the deal is good for competition, players, and the future of gaming.” Meservey added “Given global regulatory approvals and the companies’ confidence that CMA now recognizes there are remedies available to meet their concerns in the UK, the Activision Blizzard and Microsoft boards of directors have authorized the companies not to terminate the deal until after October 18.” According to Microsoft Vice Chair and President Brad Smith also in a tweet confirmed that the three-month extension is intended “to provide ample time to work through the final regulatory issues.”
For the acquisition, both parties have also consented to additional business terms, including a higher termination fee. If the deal doesn’t close by August 29th, a termination cost of $3.5 billion will be due; if September 15th passes without a finalization, a termination fee of $4.5 billion will be due.
In a separate agreement with UK regulators, Activision promised to “hold separate the Company or certain assets of the Company or to implement other lawful alternatives to consummate the Merger.” The UK’s Competition and Markets Authority (CMA) may impose limits on the merger as a result of this crucial component.
Due to ongoing discussions between Microsoft and the CMA, there has been a three-month delay. The deal was initially halted by the UK regulator earlier this year due to worries about cloud gaming. Microsoft has challenged the ruling, but in an effort to finalize the agreement, the corporation is apparently getting ready to present a fresh proposal to sell off its cloud gaming rights in the UK.
The merger extension comes in response to the Competition Appeal Tribunal (CAT)’s decision to permit Microsoft and CMA to seek a method to close the deal and suspend the appeal process at a case management conference in the UK on Monday. Microsoft has not yet provided its final proposal, as the CMA made clear earlier this week. As a result, the regulator has until Thursday at noon to submit all pertinent material to the CAT in order for the tribunal judges to formally suspend the appeal.
Microsoft intended to complete its acquisition of Activision Blizzard by July 18th, but the difficult circumstances in the UK have delayed things. Microsoft is extending the deal deadline to prevent it from falling through if Activision Blizzard decided to back out or if the unlikely scenario of another company trying to offer better terms for an acquisition, even though there is still a lot of regulatory work to be done in the UK to analyze a change to the transaction.
By analyzing the order of things, it appears like Microsoft and Activision Blizzard are aiming for a date far earlier than October 18th. Additionally, the CMA announced last week that a final order would now be issued on August 29th, and Microsoft and Activision Blizzard have agreed to boost the termination fee to $3.5 billion for that date. This means that Microsoft’s proposal to the CMA might be finished by August 29th, but the business has much more time if the agency has to look into its amendments to the conditions of the transaction in further detail.
Finally, Microsoft Gaming CEO Phil Spencer in an internal memo to Xbox staff claims to be “optimistic” about the deal still going through.