If no approval is given by July 18, Microsoft faces a contractual penalty of three billion dollars.
(Photo: REUTERS)
Frankfort, Washington The tug-of-war over the biggest takeover in the video game industry is entering its crucial phase. On Thursday, the two merger partners Microsoft and Activision Blizzard as well as the US antitrust regulator FTC will meet in court. A five-day hearing will determine whether the $69 billion deal will be held under an injunction pending a decision on the FTC’s main lawsuit.
According to court documents, the CEOs of Microsoft and Activision, Satya Nadella and Bobby Kotick, are among those to be questioned as witnesses. The head of Sony’s Interactive Entertainment division and the former product manager of Stadia, Google’s cloud video game service that has since been discontinued, were also invited.
The two merger partners want a decision in the main proceedings that is as quick as possible. They point out that the deadline for a merger is July 18th. If no approval is given by then, Microsoft faces a contractual penalty of three billion dollars. However, such deadlines can be extended, if necessary several times. In this case, Microsoft would have to increase the offer, says analyst Eric Handler from the investment bank Roth. “Activision undoubtedly has much better prospects than it did in January 2022.” At that time, the takeover plans became public.
If Judge Jacqueline Scott Corley grants the injunction, Microsoft and Activision can extend the deadline and fight their dispute with the FTC in the main trial. However, in similar cases, most companies have abandoned their merger plans. However, analyst Handler sees the extension of the hearing, which was originally scheduled for two days, as a sign of a decision in favor of Microsoft and Activision. The two companies had asked for it.
If a temporary hold on the deal is denied, the FTC faces the question of whether to drop the main complaint. In February, she decided to take such a step in the dispute over the takeover of the software company Within by Facebook’s parent company Meta. In the main proceedings, the losing party can appeal.
Shortly after the takeover plans for a good year and a half became known, criticism was pouring down from many quarters. In addition to the FTC, online gamers also see competition in the video games market at risk if Microsoft no longer releases classic games such as “Call of Duty” for competitors such as Sony or Nintendo. The US group’s “Xbox” games console competes with the “PlayStation” and “Switch” from the two Japanese companies.
>> Read here: Court temporarily blocks Microsoft’s Activision takeover
According to Jefferies analyst Andrew Uerkwitz, Sony’s “PlayStation” is the undisputed market leader. On the other hand, without the takeover of Activision, the “Xbox” would have a hard time.
Microsoft is also encountering resistance from the British antitrust authority CMA. Despite planned concessions, it banned the acquisition because it would transform the growing market for cloud games. Here, the graphics chip specialist NVidia is one of the major providers with its platform.
When appealing against the CMA decision, the outcome of the proceedings in the USA is important, says Roth analyst Handler. If this goes in favor of Microsoft, the pressure on Great Britain to overturn the blockade will increase. EU regulators handed the offered long-term licensing deals to give the Activision deal the green light.
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