Microsoft’s $69bn (£54bn) deal to buy Activision Blizzard, the maker of games including Call of Duty and World of Warcraft, looks set to be cleared after the UK competition regulator said a revised deal had addressed its concerns.
The Competition and Markets Authority (CMA) moved to block the biggest tech deal in history in April, citing concerns that Microsoft would dominate the nascent cloud gaming market.
While the move angered Microsoft – the company called it the darkest day in its four decades operating in the UK – a revised proposal was submitted that included selling cloud gaming rights outside Europe to the French rival Ubisoft.
On Friday, the CMA said the sale of the rights “substantially addresses previous concerns and opens the door to the deal being cleared”.
The watchdog added that it still had “limited residual concerns” that certain aspects of the sale of Activision’s cloud streaming rights could be “circumvented, terminated or not enforced”.
However, to address these concerns, Microsoft has said that the CMA can enforce the terms of the sale of the rights, which the UK regulator has provisionally concluded will resolve its final concerns.
“This is a new and substantially different deal, which keeps the cloud distribution of these important games in the hands of a strong independent supplier, Ubisoft, rather than under the control of Microsoft,” said Colin Raftery, the senior director of mergers at the CMA.
“With additional protections to make sure that the deal is properly implemented, this will maintain the structure of the market, enabling open competition to continue to shape the development of cloud gaming in the years to come, and giving UK gamers the opportunity to access Activision’s games in many different ways, including through cloud-based multigame subscription services.”
The CMA has now opened a consultation on the remedies, which closes on 6 October, before it makes a final decision on whether to clear the deal.
The UK regulator had appeared increasingly isolated in its position blocking the takeover after its EU counterparts passed the deal and the US competition regulator lost a court request to stop it.
On Friday, the CMA criticised Microsoft for dragging its feet in not offering a workable solution to competition issues much earlier in the investigation process.
“Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns,” said Sarah Cardell, the chief executive of the CMA. “It would have been far better, though, if Microsoft had put forward this restructure during our original investigation. This case illustrates the costs, uncertainty and delay that parties can incur if a credible and effective remedy option exists but is not put on the table at the right time.”
Microsoft has said that it hopes the CMA review of its new deal could be completed before the acquisition agreement with Activision Blizzard expires on 18 October.
The company had extended the timeline to complete the deal – which dwarfs its previous biggest – the $26bn takeover of LinkedIn in 2016 – from 18 July to try to resolve regulatory issues.
“We are encouraged by this positive development in the CMA’s review process,” said Brad Smith, the vice-chair and president of Microsoft. “We presented solutions that we believe fully address the CMA’s remaining concerns related to cloud game streaming, and we will continue to work toward earning approval to close prior to the 18 October deadline.”
Under the revised deal, Microsoft will not acquire cloud rights outside Europe for existing Activision desktop computer and console games, or for new games released by the developer during the next 15 years.
“The loss of the cloud gaming rights is not an ideal concession for Microsoft to have to make but is necessary collateral if the deal is to be waved through,” said Sophie Lund-Yates, the lead equity analyst at Hargreaves Lansdown. “This looks to be the final bump in the road, and approval should be just around the corner in what is ultimately a win for Microsoft.”
