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Investors Are Getting Increasingly Nervous About Microsoft’s Activision Deal

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Shares of videogame maker Activision Blizzard, the publisher of Call of Duty, are now trading 17% below Microsoft’s offer price to buy the company.
Michael Ciaglo/Bloomberg

Microsoft ‘s ability to close its recently announced deal for Activision Blizzard is facing growing skepticism from investors. The deal spread—the difference between Microsoft’s $95-per-share offer price and Activision’s current price—has continued to widen this week.

On Wednesday, Activision (ticker: ATVI) shares fell for a sixth consecutive session, closing at $78.78 per share. That’s 17% below Microsoft’s (MSFT) offer price.

Microsoft’s deal for Activision will likely get close antitrust scrutiny, according to Aviv Nevo, a professor at the Wharton School of Business, who previously was the chief economist in the Antitrust Division of the Justice Department. The Biden administration has signaled that it’s looking to crack down on big technology mergers. Nevo told Barron’s that with a deal of this size, even past administrations would have given it a serious look.

One question, according to Nevo, is whether certain promises about future behavior, such as a pledge to release Activision’s Call of Duty games on rival Sony (SONY) PlayStation videogame consoles, will be enough to win over regulators. He notes that antitrust enforcement agencies have been reluctant to approve deals based on such behavioral remedies in the past.

Microsoft reportedly plans to release at least the next three upcoming Call of Duty titles on Sony ‘s consoles if its deal to acquire game publisher Activision Blizzard is approved.

Bloomberg reported this week, citing four people with knowledge of the deal, that Activision Blizzard had committed to release the next two mainline Call of Duty games and a new version of its free-to-play Call of Duty: Warzone title on Sony’s console over the next two years, at least. The commitment was made prior to Activision Blizzards’ $68.7 billion deal to be acquired by Microsoft was announced, the report added.

Nevo told Barron’s such a pledge may not be enough to satisfy regulators.

“For whatever reason, if they say, ‘OK, we’ll be open to a behavioral remedy,’ I doubt that a promise for two years would be satisfying,” Nevo said.

Representatives from Activision Blizzard and Microsoft didn’t return requests from Barron’s seeking comment on the company’s Call of Duty release plans.

Last week, Microsoft’s head of Xbox, Phil Spencer, said on Twitter that he spoke to leaders with Sony. He said he confirmed Microsoft’s intent to honor existing agreements upon completion of the Activision deal, as well as the company’s desire to keep Call of Duty on PlayStation.

While the current gap between Activision shares and Microsoft’s deal price could offer an opportunity for traders, Barron’s wrote last week that Microsoft stock is a less speculative and safer way to play the deal.

Write to Connor Smith at [email protected]

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