On January 18, Microsoft shocked the tech and gaming worlds when it announced that it would acquire Activision Blizzard for $68.7 billion, the biggest deal in gaming to date. Activision Blizzard is one of the most storied developers on the planet, but the company has been mired in multiple scandals for months, including a California lawsuit alleging it created a “persistent sexual harassment” culture.
An explosive Wall Street Journal report revealed that CEO Bobby Kotick both knew about the harassment, sexually harassed employees himself, and labor protests by Call of Duty workers.
Microsoft’s Phil Spencer, who was the company’s head of Xbox at the time, reportedly responded to the allegations in the Wall Street Journal article in an email to Xbox employees two days later, saying he was “indicted” by Activision Blizzard. Disturbed and deeply disturbed by the horrific events and actions,” Microsoft is “evaluating all aspects of our relationship with Activision Blizzard and is making positive adjustments.” However, according to Activision Blizzard’s formal merger now proposed to its own shareholders With the acquisition timeline outlined in the proposal, it appears that Spencer’s idea of changing his relationship with Activision Blizzard was to immediately offer to buy the troubled company.
And, according to the documents, he’s not the only one interested in a deal.
“The original conversation took place on November 19 — just three days after the bombshell report in The Wall Street Journal”
The initial conversation about the acquisition happened on Nov. 19, just three days after the Wall Street Journal reported on the Activision Blizzard CEO, and a day after Spencer told Xbox employees he was “deeply disturbed.” It might even come as part of the same conversation.
“During Mr. Spencer’s and Mr. Kotick’s conversation on different topics, Mr. Spencer raised Microsoft’s interest in discussing strategic opportunities between Activision Blizzard and Microsoft, and asked whether it might be possible to have a partnership with Microsoft the next day. Mr. Nadella made the call,” the document reads. The next day (Saturday), Microsoft CEO Satya Nadella’s intentions became clearer, stating that “Microsoft is interested in exploring a strategic partnership with Activision Blizzard.”
This kicked off nearly two months of conversations between Microsoft and Activision Blizzard that led to the acquisition announced on January 18 (if you’re interested, you can find it in Activision Blizzard’s documentation starting on page 31 and on page 10 read the entire procedure during the course).
One of the more interesting points is that in addition to Microsoft, Activision Blizzard has approached four other companies and one person about some kind of deal. Disappointingly, they’re only named companies A, C, D, and E, and the individuals are named “Individual B,” so we still don’t know who else might end up owning Activision Blizzard. None of these deals worked out for a variety of reasons — for example, Company E said it couldn’t make a full acquisition of Activision Blizzard — and Microsoft is moving forward with its deal quickly and aggressively, without some other companies getting in yet. The terms are sorted out.
“Someone has to pay billions if the deal is terminated”
Activision Blizzard’s SEC filing also includes the terms of the merger agreement, which show that Microsoft will be liable if the merger is blocked by government regulators — if the acquisition is halted due to “an injunction arising from antitrust laws,” It will pay Activision Blizzard a breakup fee of $2 billion to $3 billion. In turn, though, if Activision Blizzard’s shareholders don’t vote to approve the merger, it may have to pay Microsoft a $2.27 billion breakup fee.
While it’s rare for a merger like this to be actively blocked, we do have a recent example. NVIDIA’s $40 billion deal to buy Arm from SoftBank fell through due to regulatory challenges.According to CNN, while Microsoft said the Activision Blizzard deal is still in its early stages — “in the process, we haven’t reached the[从联邦贸易委员会]to get any real feedback”, but there’s always the possibility that the Federal Trade Commission and other regulators will intervene.
While Kotick is expected to leave the company after the deal closes, the documents also show he will leave with a huge fortune anyway: He owns 4,317,285 shares of Activision Blizzard, which Microsoft plans to pay $95 per share, according to Microsoft. He’ll get $410,142,075 — and an additional “golden parachute” worth $14,592,302 if he decides to stay and Microsoft then kicks him out anyway. That’s not counting his 2.2 million stock options, which could be worth hundreds of millions of dollars depending on how much they cost to exercise.
The document also shows that Call of Duty: Pioneer, which launched in 2021, has underperformed as its popular franchise, falling short of fourth-quarter expectations.