Microsoft said Tuesday that it plans to buy the scandal-ridden developer behind Call of Duty and World of Warcraft for $68.7 billion in cash, marking what would be the biggest gaming deal in history.
The deal would make Microsoft the world’s third-largest gaming company by revenue, just behind Chinese tech giant Tencent and Playstation maker Sony, the companies said. It would eclipse the previous record for largest gaming deal, which was set just last week when Take-Two Interactive said it would buy mobile game maker Zynga for $11 billion.
Shares of Activision-Blizzard, which also created the Candy Crush and Guitar Hero franchises, closed up nearly 26 percent on Tuesday after the deal was announced, rising to $82.31 each. Microsoft shares, meanwhile, closed down more than 2.4 percent.
The Microsoft-Activision deal has been approved by the boards of directors of both companies and is expected to close in 2023, the firms said. If the deal doesn’t go through, Microsoft will pay Activision a “break-up fee” of $3 billion, according to Wedbush Securities managing director Dan Ives.
“This is the biggest tech M&A deal ever,” Ives told The Post. “Microsoft is not messing around.”
Microsoft CEO Satya Nadella said the deal would “usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all.”
The news comes as Activision-Blizzard reels from a far-reaching sexual misconduct scandal that saw California authorities accuse the company of fostering a culture of “constant sexual harassment” that even drove one employee to suicide. The suit and other reports of issues at the company led to widespread employee protests and walkouts in 2021.
Activision-Blizzard CEO Bobby Kotick allegedly helped hide sexual misconduct and once threatened to have his own assistant killed, according to the Wall Street Journal.
The stream of revelations caused Activision-Blizzard’s share price to tank from more than $100 per share at some points in early 2021 to less than $60 in December. Microsoft is now paying $95 per share.
The deal with Microsoft isn’t one Kotick would have planned on doing even a year ago, people close to him told The Post. Conversations about a possible deal between Microsoft and Activision began after news first broke of allegations against Kotick, according to people close to the matter.
“Bobby sold at this time because he has unbelievable pressure to step down,” a person with knowledge told The Post. Kotick didn’t respond to a request for comment from The Post and Activision also didn’t respond to a request.
As for the tie-up, a person familiar with the matter said: “Of course, from a Microsoft standpoint it makes perfect sense: They need content to compete in the metaverse and Activision is a content machine — and Bobby needed to sell.”
Microsoft said Kotick will remain in place as CEO during the acquisition process, but people close to the matter claimed Kotick will likely head for the exits once the deal closes. Kotick, who has spent decades and made billions of dollars shaping Activision into what it is today, has no interest in reporting to someone else, a person close to him said.
To be sure, it’s unusual for a CEO who sells a company to stay on, people close to the deal add.
“He’s not going to report to a division head at Microsoft,” a person close to Kotick said. “He was smart to make it all-cash so he can just walk away.”
Meanwhile, Activision-Blizzard has fired or pushed out more than three dozen lower-level employees and disciplined about 40 others in connection to the sexual misconduct scandal, the Journal reported on Tuesday.
“The combination of Activision Blizzard’s world-class talent and extraordinary franchises with Microsoft’s technology, distribution, access to talent, ambitious vision and shared commitment to gaming and inclusion will help ensure our continued success in an increasingly competitive industry,” Kotick said in the press release.
The deal will give Microsoft ammunition in the escalating war for control over of the so-called “metaverse” — a growing world of virtual reality that has been popularized by Mark Zuckerberg.
“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Nadella said.
The deal is set to be the largest in a series of high-profile acquisitions by Microsoft in recent years.
The company bought social networking site LinkedIn for $26 billion in 2016 and artificial intelligence firm Nuance Communications for $16 billion in 2021. Microsoft has also spent more than $10 billion on smaller game developers, including buying the studio behind Minecraft for $2.5 billion in 2014.