Microsoft eyes move to get €61bn video games deal done

Microsoft and Activision Blizzard are aiming to appease regulators.

Microsoft and Activision Blizzard are considering giving up some control of their cloud-gaming business in the UK as a way to appease regulators so they can complete their $69bn (€61bn) merger by the July 18 deadline, according to people familiar with the matter.

That could involve selling off the cloud-based market rights for games in the UK to a telecommunications, gaming or internet-based computing company, said the sources.

A private equity company might also be interested, said one person.

Both companies still think it’s possible to close the deal, which would be the largest ever in the video-game industry, before next week’s deadline, the people said.

Regulators in the US and UK have come out against the deal, which would combine one of the biggest video game publishers with one of the largest console makers into an industry behemoth.

It’s currently unclear just how Microsoft will legally be able to close the deal by Tuesday without breaching UK laws and incurring large fines from the Competition and Markets Authority.

While the CMA said earlier this week it’s prepared to evaluate proposals from Microsoft, the agency also said the companies would need to resubmit their transaction for the normally multi-month regulatory process to begin anew.

Options

But there are options available, according to Tom Smith, a competition lawyer at Geradin Partners and ex-CMA legal director.

“It’s all quite debatable, but I believe the most likely route to allowing the deal to close by Tuesday is for the CMA to issue a derogation from its interim order,” said Mr Smith, referring to the formal notice the deals watchdog issued in May ordering the companies to remain separate pending a final decision.

“They could allow the deal to close but require the Activision Blizzard business to be held separate pending the final order,” he said. “The CMA would look reasonable while preserving their position.”

The US Federal Trade Commission has asked a California court to pause the deal while the agency’s challenge is pending.

In its earlier findings, the UK regulator had expressed concerns that adding Activision content to Microsoft’s xCloud service would restrict competition in the nascent market for video games that are streamed over the internet rather than downloaded to consoles or devices.

Microsoft offers xCloud as part of a monthly gaming subscription.

Bloomberg