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UK regulators have given Microsoft and Activision Blizzard the opportunity to finalize their $75 billion video games deal in as little as six weeks. The companies are working on restructuring the agreement to address competition concerns raised by the UK’s Competition and Markets Authority (CMA).
The CMA has extended the deadline for blocking the deal from July 18 to August 29 after Microsoft submitted a detailed and complex document requesting a re-examination of the CMA’s conclusions. This could potentially expedite the merger process, contradicting the previous expectation of a several months-long investigation for a restructured deal.
The CMA’s decision to reassess its final verdict, which is atypical at this stage of the regulatory process, allows Microsoft to address the CMA’s concerns regarding competition in the cloud gaming market. The specific details of Microsoft’s submission, made over a month ago, have not been disclosed by the CMA.
In April, the CMA ruled that the combination of Xbox console manufacturer Microsoft and game creator Activision Blizzard would grant Microsoft the power to undermine its competitors, leading to its objections. Overcoming these objections is considered the final major legal challenge for the largest video games deal in the world, especially after US courts recently rejected the Federal Trade Commission’s initial attempt to block the merger.
The merger agreement between Microsoft and Activision Blizzard is set to expire on July 18, allowing either party to withdraw from the deal and pay a $3 billion break fee. However, following the victory in US courts and the potential breakthrough in the UK, sources close to the companies predict an extension to the deal will be agreed upon early next week.
“Things are moving quite quickly,” said an individual involved in the negotiations.
One potential concession Microsoft is considering to address the CMA’s concerns is selling cloud streaming rights to their game catalog to another provider in the UK. This arrangement would either lead to Microsoft effectively exiting the cloud gaming market in the UK or transferring the operations of their Xbox console game streaming platform to a third party.
Microsoft has been in discussions with potential investors and operators regarding this deal, aiming to alleviate the CMA’s fears of Microsoft having excessive control over the emerging cloud gaming market. These discussions were initially reported by Bloomberg, and both Microsoft and Activision Blizzard have declined to comment.
Gareth Sutcliffe, an analyst at Enders Analysis, commented on the potential deal, stating that it may be inconvenient for consumers but could be a way to satisfy the CMA. He said, “Microsoft is exploring various options that will please the CMA. They are considering the least drastic alternatives.”
Additional reporting by Kate Beioley in London and Richard Waters in San Francisco
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