Microsoft is contemplating selling a portion of its UK cloud gaming rights to secure regulatory approval for its $69 billion acquisition of Activision Blizzard. Bloomberg sources suggest that the tech giant is considering offloading the rights to a telecommunications, gaming, or internet-based computing firm, or even a private equity company. This move comes after the UK’s Competition and Markets Authority (CMA) halted the Activision acquisition in April over concerns about its potential impact on the emerging cloud gaming sector.
The court case in which Microsoft was set to challenge the CMA's decision was originally scheduled for July 28th. However, both the Xbox manufacturer and the CMA have recently postponed the legal proceedings in favor of an out-of-court settlement. Microsoft is racing to finalize the deal before the existing merger agreement expires on July 18th. Failing to do so could result in Activision Blizzard walking away with a $3 billion termination fee if no extension is agreed upon.
Wedbush Securities analysts Nick McKay and Michael Pachter, in a note to investors this week, projected that Microsoft would make cloud gaming concessions in the UK to meet the impending deadline. They suggested that "Microsoft can carve out Game Pass UK PLC as a separate operating subsidiary with an independent board charged with keeping Activision content off the Game Pass platform pending the conclusion of Microsoft’s appeal of the CMA decision. This would likely satisfy the CMA, and the deal should close by next Tuesday.”
Although the CMA has stated its willingness to reconsider a restructured deal proposal, it also issued a warning that a new merger investigation might be necessary. This could potentially further delay the finalization of the deal. Despite the challenges in the UK, Microsoft has recently experienced a victory in the US. Earlier this week, the tech giant won a court case against the Federal Trade Commission (FTC), paving the way for the completion of the Activision acquisition on American soil. The FTC, which also has antitrust concerns about the deal, is currently appealing the ruling.
In conclusion, the fate of Microsoft's ambitious acquisition of Activision Blizzard in the UK relies heavily on how the company navigates the regulatory challenges posed by the CMA. The potential sale of some of its UK cloud gaming rights could prove pivotal in securing the deal, although the path to completion remains riddled with hurdles. The outcome of this situation will undoubtedly have significant implications for the cloud gaming landscape and the broader tech industry.