Microsoft acquired Activision Blizzard King for $69 Billion on 2023-10-13

[Jay]

No, they can't. Not until the CMA approve the acquisition. Both companies have too many holdings in the UK.

True.
But it's easy to forget that the contract between MS & ABK stipulates that it needs to be passed by FTC, EU, CMA I believe.
So would need some kind of renegotiation, change in contract anyway.
There has been movement like ABK possibly being taken off the exchange today, so

 

[eastmen]

True.
But it's easy to forget that the contract between MS & ABK stipulates that it needs to be passed by FTC, EU, CMA I believe.
So would need some kind of renegotiation, change in contract anyway.
There has been movement like ABK possibly being taken off the exchange today, so

Apparently a short delay wouldn't need renegotiation it would just require the board to sign off on it

 

[Jay]

Apparently a short delay wouldn't need renegotiation it would just require the board to sign off on it

I mean probably couldn't 'simply' ignore the CMA and close. That would be more than just extending deadline.
But for me at this point, I consider this a done deal until it goes belly up which don't see happening. Just a matter of when.

 

[Deleted member 11852]

There has been movement like ABK possibly being taken off the exchange today, so

Microsoft agreed to buy Activision-Blizzard stock at a $95 dollar a share by 18 July, it was below that last week and there was some late market activity where people were buying stock knowing Microsoft were committed to buy it at a higher price. That resulted in the company being delisted last week. Tomorrow Microsoft are liable for the $3b penalty which is there to compensate Activision-Blizzard shareholders, at the same time Microsoft and Activision-Blizzard can decide whether to walk away from the deal or kick the can down the road - which is probably what will happen.

 

[arandomguy]

True.
But it's easy to forget that the contract between MS & ABK stipulates that it needs to be passed by FTC, EU, CMA I believe.
So would need some kind of renegotiation, change in contract anyway.
There has been movement like ABK possibly being taken off the exchange today, so

I would think those types of clauses are put in by the buyer to protect themselves. If the buyer, in this case MS, wants to go ahead I'm not sure why the seller would realistically care as long as the compensation isn't altered. I believe the deal is all cash, so I'm not sure in practice why Activision's end as the seller would even care if nothing gets approved. That seems like it would be Microsoft's fallout to deal with.

 

[Deleted member 11852]

I would think those types of clauses are put in by the buyer to protect themselves. If the buyer, in this case MS, wants to go ahead I'm not sure why the seller would realistically care as long as the compensation isn't altered.

These clauses exist to protect the seller, not the buyer. As a company under acquisition you are massively limited in how you can operate, trade, or acquire and expand yourself. The clauses provide protection that the buyer isn't going to jerk your company around and you're not left in regulatory purgatory for months/years, which is why the $3b delay penalty kicks in at midnight is Microsoft don't close, which they can't.

These clauses are common in large acquisitions, you may remember Elon Musk tried to back out of his Twitter acquisition but the cost was going to be so massive, he was forced into buying it. He is now trying to sue the lawyers who enforced that clause because despite his genius, he's also a moron.

This delay works well for Activision-Blizzard shareholders because they'll effectively get an extra $3.2 dollar increase per share as a result. But let's not foregt that the CMA are not the last regulator needing to provide approval; New Zealand is still assessing, as are Australia, and the Canadian regulator said they were "monitoring it" given some revelations in the FTC case seeming contradiction evidence provided to them, although they've said nothing since.

Microsoft keep saying it's only the CMA holding up the close, but it's not.

Perhaps Microsoft don't care about Australia and New Zealand ¯\_(ツ)_/¯

 

[AlphaWolf]

These clauses exist to protect the seller, not the buyer. As a company under acquisition you are massively limited in how you can operate, trade, or acquire and expand yourself. The clauses provide protection that the buyer isn't going to jerk your company around and you're not left in regulatory purgatory for months/years, which is why the $3b delay penalty kicks in at midnight is Microsoft don't close, which they can't.

These clauses are common in large acquisitions, you may remember Elon Musk tried to back out of his Twitter acquisition but the cost was going to be so massive, he was forced into buying it. He is now trying to sue the lawyers who enforced that clause because despite his genius, he's also a moron.

This delay works well for Activision-Blizzard shareholders because they'll effectively get an extra $3.2 dollar increase per share as a result. But let's not foregt that the CMA are not the last regulator needing to provide approval; New Zealand is still assessing, as are Australia, and the Canadian regulator said they were "monitoring it" given some revelations in the FTC case seeming contradiction evidence provided to them, although they've said nothing since.

Microsoft keep saying it's only the CMA holding up the close, but it's not.

Perhaps Microsoft don't care about Australia and New Zealand ¯\_(ツ)_/¯

Canada didn't block a $30b merger of the two largest cable providers they aren't gonna do anything.

 

[eastmen]

Canada didn't block a $30b merger of the two largest cable providers they aren't gonna do anything.

not only that but they aren't required for the deal to go through. The UK is the last one that is contractually required.

 

[Deleted member 11852]

Canada didn't block a $30b merger of the two largest cable providers they aren't gonna do anything.

Because they didn't the last time? Yet a quick google shows they've blocked previous mergers, which suggests you can't base anything on what a regulator has done before.

 

[Shifty Geezer]

Can you please link to examples rather than a rather rude LMGTFY link? For one, your link requires me to type in the search query. Secondly, it doesn't work and nothing is revealed. Third, I need to type it into Google as a result - you could have just provided the Google results link. Fourth, nothing screams out "Canada blocked the merger" on those results. The only actual case mentioned is the Rogers-Shaw telecoms merger where they did nothing and screwed over the Canadian's telecoms industry.

My own googling throws up articles like this one (2022) saying Canada's regulation is indeed impotent : https://globalnews.ca/news/9169363/merger-laws-canada-competition/

However, since the introduction of the Competition Act in 1986, the Competition Bureau has only ever challenged 18 mergers. And what’s especially alarming, the report says, is that the bureau has never won a challenge on final judgement.

 

[Deleted member 11852]

Can you please link to examples rather than a rather rude LMGTFY link?

My bad, LMGTFY has been a bit flakey lately, but since there isn't a reliable way to link google searches, it's what I use. I've never heard it called rude before ¯\_(ツ)_/¯

The regulator site itself is the best resource, this link takes you to a full of all concluded cases, where [JD] (judicial decision indicates opposition). When AlphaWolf says the Canadian Regulator didn't stop the the cable acquisition, they attempted to but overruled by the Competition Tribunal, then when they tried to take it to Canada's Court of Appeal, it was decisively rules they were incorrect. You can read the general gist of it here but the reason that acquisition was ultimately approved was, citing Justice David Stratas, "I would say, on the evidence rather decisively that there was no substantial lessening of competition.". So.. right outcome.

So whilst some may chalk this up to the Canada Regulator not blocking the deal, under scrutiny against Canada's law the conclusion was was there was no substantial reduction in competition which is kind of where we are with Microsoft and Activision in most territories. Regulators aren't supposed to try to block all mergers, only those was demonstrably lessen competition and rejecections are generally a small percentage of cases - at least in Europe.

The article you linked shows that Canada's regulator is not opposed to preventing blocking, but ultimately that have been proven over cautious when challenged on adherence with Canada's law.

 

[AlphaWolf]

Canada's regulator will make a decision and then Champlagne will come in and say we'll allow it if you promise not to fire everyone for 2 years and then claim he exacted a high price to allow it.

 

[eastmen]

Canada's regulator will make a decision and then Champlagne will come in and say we'll allow it if you promise not to fire everyone for 2 years and then claim he exacted a high price to allow it.

I thought based on Canada saying they learned stuff in the FTC trial that wasn't disclosed, that the period for them to block it has already ended

 

[AlphaWolf]

I thought based on Canada saying they learned stuff in the FTC trial that wasn't disclosed, that the period for them to block it has already ended

The minister in Canada can block until it's final.

But like I said before he won't. He wouldn't block the largest telco and cable provider buying the 2nd largest cable provider.

 

[Deleted member 11852]

The minister in Canada can block until its final. But like I said before he won't. He wouldn't block the largest telco and cable provider buying the 2nd largest cable provider.

Isn't the problem in Canada that the regulators - and by extension the Government - keep making decisions not consistent with Canadian law? That's why these decisions keep getting overturned by the courts. The law must be followed by all, including the Government. At least in a democracy.

 

[AlphaWolf]

Isn't the problem in Canada that the regulators - and by extension the Government - keep making decisions not consistent with Canadian law? That's why these decisions keep getting overturned by the courts. The law must be followed by all, including the Government. At least in a democracy.

It's easy to follow the law when the law is vague and says the minister has final authority. Acting in the best interest of Canadians... which ones?

 

[Deleted member 11852]

It's easy to follow the law when the law is vague and says the minister has final authority. Acting in the best interest of Canadians... which ones?

Are you saying the Canadian Government doesn't obey the law? The Canadian Government is above the law?

 

[AlphaWolf]

Are you saying the Canadian Government doesn't obey the law? The Canadian Government is above the law?

No I am saying the law is a vague morass of which the government skirts around the edges.

 

[arandomguy]

These clauses exist to protect the seller, not the buyer. As a company under acquisition you are massively limited in how you can operate, trade, or acquire and expand yourself. The clauses provide protection that the buyer isn't going to jerk your company around and you're not left in regulatory purgatory for months/years, which is why the $3b delay penalty kicks in at midnight is Microsoft don't close, which they can't.

These clauses are common in large acquisitions, you may remember Elon Musk tried to back out of his Twitter acquisition but the cost was going to be so massive, he was forced into buying it. He is now trying to sue the lawyers who enforced that clause because despite his genius, he's also a moron.

This delay works well for Activision-Blizzard shareholders because they'll effectively get an extra $3.2 dollar increase per share as a result. But let's not foregt that the CMA are not the last regulator needing to provide approval; New Zealand is still assessing, as are Australia, and the Canadian regulator said they were "monitoring it" given some revelations in the FTC case seeming contradiction evidence provided to them, although they've said nothing since.

Microsoft keep saying it's only the CMA holding up the close, but it's not.

Perhaps Microsoft don't care about Australia and New Zealand ¯\_(ツ)_/¯

I'm not understanding the reasoning here. I'm not referring to the 3 billion dollar penalty but whether or not the acquisition itself can be completed sans regulatory (CMA in this case) approval should Microsoft not care about it. At least to me it seems like a buyer would have those clauses because obviously it would be problematic if they paid for something they couldn't in practice use essentially. But if the seller is paid, do they care that the left a buyer a mess they have to sort out?

If Microsoft for example is willing to pay the pay Activision Blizzard fully as agreed in cash and deal with the issues stemming from not having CMA approval why would the Activision side hold up the deal? It seems like they would get paid the same regardless which at least I believe is all they want out of the deal. It's not a payment in stock either in which they would have concerns about the value of the MS stock should there be problems.

The Musk/Twitter situation was different in that Musk was trying to back out of the deal and/or negotiate a lower deal while Twitter just wanted to be paid as originally agreed (likely because it was way over valued). This is of course assuming that MS is not planning on using the CMA to back out of the deal or pay a lower amount and the rumor that they are willingly to work around the CMA block in other ways (whatever it might be).

 

[Deleted member 11852]

I'm not understanding the reasoning here. I'm not referring to the 3 billion dollar penalty but whether or not the acquisition itself can be completed sans regulatory (CMA in this case) approval should Microsoft not care about it.

Microsoft cannot not complete without all of the necessary regulators approving - and as I noted above, other regulators including Australian New Zealand are still yet to make a decision.

This would not only be illegal, which could result in forfeiture of assets in the UK and overseas territories in which the UK has jurisdiction, but the acquisition is also a commercial contract under the auspices of US FTC law - this is because both Microsoft and Activision trade on US NASDAQ stock exchanges. You can see the terms of acquisition here, and the $3bn penalty is on page 90 (Reverse Termination Fee).

AS you can see, the agreements makes its Microsoft's responsibility to secure regulator approved before the 18 July 2023, and failure to do so is considered a failure by Microsoft. It's worth remembering how slowly Microsoft began regulator engagement, they announced their intention to buy Activision in January 2022 and the first regulator engagement was six months later June 2022, the UK in July 2022, the EU in September 2022 and China and the US even later.

At least to me it seems like a buyer would have those clauses because obviously it would be problematic if they paid for something they couldn't in practice use essentially. But if the seller is paid, do they care that the left a buyer a mess they have to sort out?

Microsoft haven't paid anything. Their acquisition contract with Activision-Blizzard was to buy all of the shares for $95 per share - which is how the $68.7b figure is derived. Activision-Blizzard cannot sell under the terms the acquisition was disclosed to the FTC, their shareholders would be liable. I can't think of a great analogy, but the principle is like selling stolen goods. Just because you're no longer in possession of them, doesn't mean you outside of the scope of the law.

If Microsoft for example is willing to pay the pay Activision Blizzard fully as agreed in cash and deal with the issues stemming from not having CMA approval why would the Activision side hold up the deal? It seems like they would get paid the same regardless which at least I believe is all they want out of the deal. It's not a payment in stock either in which they would have concerns about the value of the MS stock should there be problems.

Activision aren't holding up the deal, there is a contract in place between the two parties. Activision-Blizzard has met their end of the deal, trading in the company's shares was concluded last week to allow Microsoft to buy them at the agreed price, but the contract was conditional on Microsoft having received regulator approval. Activision-Blizzard are already in lawsuit hell arising from workplace conditions, they received a $35m fine for lying to the SEC over this back in February and there are still a few cases outstanding.

The Musk/Twitter situation was different in that Musk was trying to back out of the deal and/or negotiate a lower deal while Twitter just wanted to be paid as originally agreed (likely because it was way over valued).

Right, the risk is on the acquiring party. Obviously the party who wants to sell wants the deal to go through but they are not in the driving seat. Which leads around back to my question, why should Microsoft get paid and who should pay them?