Published - December 05, 2022 @ 5:29 PM (EET)
Following a Bloomberg News report that merger partner Microsoft (NASDAQ:MSFT) is "ready to fight" to complete its acquisition of the video game maker, shares of Activision Blizzard (NASDAQ:ATVI) gained 3% in pre-open trading Monday.
Even if the US Federal Trade Commission sues to block the deal, Microsoft is gearing up to contest the decision in court, according to a person familiar with the matter, who asked not to be identified speaking about internal strategy.
Since it was first announced back in January, Microsoft's nearly $69 billion cash offer to buy the video game giant has been under tremendous scrutiny.
But while Wall Street is still worried about antitrust regulators, some research analysts voiced a bullish view, with Wedbush analyst Michael Pachter expecting the deal to go through in the next several months.
"The crux of the regulatory review is whether consumers will be disadvantaged by the acquisition," Pachter wrote last week. "Our belief is that the transaction actually has the potential to benefit consumers through more widespread access to high-quality video game content that leverages a diverse array of monetization models."
Antitrust analyst Jennifer Rie at Bloomberg Intelligence wouldn't be surprised if the FTC files a lawsuit blocking the deal, but also noted a court battle would be hard for enforcers to win.
A court fight will likely mean a delay in the deal closing, which Microsoft currently expects to be by June 30, 2023.
WHY IT MATTERS
Assuming Microsoft manages to close the deal without lawsuits or successfully fights off any additional legal challenges, Activision investors will receive $95 per share, roughly 25% above Activision's current stock price.
But unless worldwide regulatory agencies allow the merger agreement to pass without a fight, investors might have to wait a while.
Still, a 25% gain in the next seven months is pretty good and while Activision's stock will almost certainly decline temporarily if the deal gets shut down, Activision will receive a reverse termination fee between $2 billion and $3 billion.
