Microsoft to gobble up Activision in $69 billion metaverse bet

Activation

(Mike Black, Reuters)

Microsoft Corp (MSFT.O) is buying “Call of Duty” maker Activision Blizzard (ATVI.O) for સૌથી 68.7 billion in the largest gaming industry deal in history as global technology giants unveil their claims for the virtual future.

The deal, announced by Microsoft on Tuesday, is its largest ever and the largest all-cash acquisition on record, it will boost its firepower in the booming video gaming market where it will face leaders Tencent (0700.HK) and Sony (6758). T).

It also represents a bet on American Multinational’s “metavars,” virtual online world where people can work, play, and socialize, as many of its major competitors are already doing.

Satya Nadella, chief executive of Microsoft, said, “Gaming is the most dynamic and exciting category in entertainment today on all platforms and will play a major role in the development of the Metavers platform.”

One of the world’s largest companies, thanks to corporate software such as Microsoft, its Azure cloud computing platform and the Outlook franchise, is offering $ 95 per share – a 45% premium on Activision’s Friday.

Shares of Activision last rose 26% to 82.10, still a huge discount on the offer price, reflecting fears that the deal could get stuck in regulators’ crosshairs.

Microsoft has so far avoided the kind of scrutiny faced by Google and Facebook, but the deal, which would make it the world’s third-largest gaming company, would put the Xbox maker on the radar of legislators, said Andre Barlow of law firm Doyle. Mazard PLLC.

“Microsoft is already big in gaming,” he said.

However, a source familiar with the matter said that if the deal is completed, Microsoft will pay a break-in of 3 billion, indicating that it is confident of winning the no-confidence motion.

Shares of Tech Major were last down 1.9%.

The deal comes at a time of weakness for Activision, the makers of games like “Overwatch” and “Candy Crush.” Before the deal was announced, its shares fell more than 37% after reaching a record high last year due to employee sexual harassment and misconduct by some top managers.

The company is still addressing those people and said Monday that it has fired or fired more than three dozen employees since July and disciplined another 40.

CEO Bobby Kotik, who said he had been approached by Microsoft about a possible purchase, would continue as CEO of Activation following the deal, although he is expected to leave once it closes, a source familiar with the plans said.

In a conference call with analysts, Microsoft boss Nadella did not directly mention the scandal but spoke about the importance of culture in the company.

“It’s important for Activision Blizzard to move forward on its new cultural commitments,” he added. “The success of this acquisition will depend on it.”

Data analytics firm Newsu estimates that the global gaming market generated revenue of $ 180.3 billion in 2021 and is expected to grow to $ 218.8 billion by 2024.

Microsoft already has a significant beachhead in this field as one of the three largest console manufacturers. It has been investing in multibillion-dollar deals in recent years, including the purchase of “Minecraft” makers Mojang Studios and Zenimax.

It has also launched a popular cloud gaming service with over 25 million subscribers.

According to Newsu, Microsoft’s gaming market share was 6.5% in 2020 and adding Activision would increase it to 10.7%.

Executives spoke to Activision’s 400 million monthly active users as a key attraction for the deal and how these communities could play a significant role in Microsoft’s various metaways plays.

Activision’s games library could give Microsoft’s Xbox gaming platform an edge over Sony’s PlayStation, which has enjoyed a more steady stream of exclusive games over the years.

Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown, said: “Netflix’s likes have already stated that they want to enter gaming themselves, but Microsoft has come out swinging with today’s generous offer.”

Microsoft’s offer is 18 times the 2021 earnings of Activision before interest, tax, depreciation and amortization (EBITDA). That compares with the 16-fold EBITDA rating of “Grand Theft Auto” maker Take-to-Interactives (TTWO.O) for Zynga last week.

According to refinitiv data, the Microsoft-Activision deal will be the largest all-cash acquisition on record, surpassing Bayer’s $ 63.9 billion offer for Monsanto in 2016 and InBev’s $ 60.4 billion bid for Anheuser-Busch in 2008.

Tech companies ranging from Microsoft to Nvidia have made big bets on so-called metavars, while the debate surrounding them intensified late last year after Facebook changed its name to meta platforms to reflect its focus on the virtual reality business.

David Wagner, an equity analyst and portfolio manager at Aptus Capital Advisors, said: “This is a significant deal for the consumer side of the business and, more importantly, the acquisition of Microsoft Activation is really the beginning of the Metavers Arms race.”

“We believe the deal will be completed,” he said, but warned: “This will have a lot to do with the regulatory approach.”

This article is a copy paste from Reuters Check out the original article here

Source: Reuters

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