Activision gains as UK watchdog opens door to Microsoft takeover

Activision Blizzard  (ATVI) - Get Free Report shares moved higher Friday after competition officials in Britain said Microsoft's MSFT proposed $69 billion takeover of the 'Call of Duty' video game maker is likely be approved.

Britain's Competition and Markets Authority said tweaks made to Microsoft's proposal over the summer "opens the door" to approval following a rare decision to re-examine a deal that authorities rejected in April. 

One of the key changes to the deal will see Activision sell the non-European streaming rights to all current and future video game releases to France-based rival Ubisoft Entertainment. 

"While the CMA has identified limited residual concerns with the new deal, Microsoft has put forward remedies which the CMA has provisionally concluded should address these issues," the regulator said.

The CMA, which had originally asked Microsoft to sell the 'Call of Duty' franchise, is conducting a so-called 'phase 1' probe into the restructured takeover and expects to make a formal decision on October 18.

“Assuming that is the end result, both sides will (publicly at least) feel that they have achieved the desired outcome: Microsoft by removing the last major impediment to completing this important deal and the CMA in securing sufficient concessions from the parties to demonstrate that its concerns about any negative impact on competition and consumers have been met," said Alex Haffner, specialist competition lawyer and partner at UK law firm Fladgate.

"Nonetheless, once the dust settles on what has been a tumultuous investigatory process there will be important lessons to be learned by all concerned and the ongoing spotlight on the way that competition regulators such as the CMA deal with 'Big Tech' will continue to attract significant attention,” he added.

Earlier this summer, both Microsoft and Activision agreed to extend their planned merger until October 18 -- now the CMA's revised decision deadline -- with Microsoft also agreed to pay an enhanced $4.5 billion termination fee if the deal is axed after September 15, up from the original breakup fee of $3 billion first agreed last year.

Microsoft's all-cash offer, which values Activision at $95 a share, gives Microsoft access to 30 internal game development studios, as well as e-sports publishing capabilities, while helping build out its XBox console offerings. The deal is set to close later this year.

Activision shares were marked 1.78% higher in pre-market trading to indicate an opening bell price of $94.00 each. Microsoft shares edged 0.21% higher to $320.20 per share.

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