Microsoft-Activision deal gives merger speculators a new darling
Thu, January 20, 2022, 4:05 AM·2 min read
By Svea Herbst-Bayliss
(Reuters) - Hedge funds that earn returns speculating on precarious acquisitions were handed a gift this week when Microsoft Corp agreed to buy "Call of Duty" maker Activision Blizzard for $68.7 billion in cash.
The transaction will require antitrust approval in the United States as well as other major jurisdictions including the European Union and China. It comes as President Joe Biden's administration is raising its scrutiny of big mergers, blaming some of them for price increases on consumers that fuel inflation.
Activision's shares ended trading at $82.15 on Wednesday, well below the $95 per share deal price, reflecting concerns that regulators may shoot down a combination that would create the third biggest gaming company, after Tencent and Sony Group Corp.
This infers a 57% chance of the deal closing, based on Activision's closing share price of $65.39 before the deal was announced.
The wide spread gives investors willing to bet on whether the deal will be completed the opportunity to score double-digit returns. At a time when so-called merger arbitrage strategies have trailed the broader stock market's returns, it is an attractive but also risky proposition.
Last year, merger arbitrage funds returned nearly 10% according to Hedge Fund Research data, beating returns posted in 2020, 2019 and 2018, but trailing the broader S&P 500 stock market's 27% gain in 2021.
For some investors, Aon's scuttled $30 billion acquisition of Willis Towers Watson as the U.S. Justice Department sued to block the deal hurt returns.
Now they are looking to come back, hoping that this deal will also force competitors into making deals of their own.
"The positive outlook for event-driven and merger-arbitrage oriented firms in 2022 has been accelerated with the Microsoft-Activision deal," said Hedge Fund Research Inc President Ken Heinz.
Microsoft and Activision gave themselves until June 2023 to complete the transaction, giving hedge funds months to handicap how regulators will react to Microsoft bundling its Xbox platform with Activision's popular games, such as World of Warcraft and Diablo.
Investors may get hints on the Biden administration's stance soon as the Federal Trade Commission is expected to weigh in on defense contractor Lockheed Martin's planned $4.4 billion acquisition of Aerojet Rocketdyne and the Justice Department will decide on healthcare insurer UnitedHealth's $13 billion bid for healthcare analytics and technology vendor Change Healthcare.
Hedge funds like Millennium, Tiedemann Advisors and Pentwater Capital spend a chunk of their capital betting on mergers and many have held Microsoft and Activision for some time. Mutual funds The Merger Fund run by Westchester Capital Management and The Arbitrage Funds run by Water Island Capital offer similar strategies.
Representatives for the firms either declined to comment or did not respond to requests for comment.
I'd guess there would be. ATVI is being sued by Wddd for patent infringement as was Microsoft for the same patent. Wddd & Microsoft jointly agreed to stay the case. Suspect Microsoft had since last spring decided to buy ATVI thus agreed to a stay ( agreed delay).FYI...WDDD claim could be in the 1-1/12 B range (what’s a Billion when you’re doing a 87 B buyout less than a1%) if not more (the patents Wddd has go back to 2012 (when the infringement began) Might want to a bit of DD on WDDD. Patents regionally issued mid 90’s.
I don't do options at all, so I always find them fascinating.
I bought 82.5 puts but I'll probably hold for 80. I wouldn't be surprised if it goes down to 75 though. I just don't like holding options long. I prefer quick trades
I had a buy order set for $75 today to add more shares at
So I can see why you bought puts.
What price do YOU think it will drop to, based on your puts? If you don't mind me asking?
I bought puts this morning cause short term I think it's going down. But long term yeah it will go up
I think so too. Gotta close to get that $95 and that means waiting around.
I have numerous stocks so I don't mind waiting for it. Thats a decent spread right now if it goes thru.
But maybe there will be some buying opportunities to add in the meantime? I don't have a very large position because I had just started buying in Dec.
There are some regulatory concerns, especially with this white house. That could bring it down?
I doubt the shareholders will disapprove, but who knows?
It was as high as 104 just last Feb and they currently show a P/E of 17 at today's price - so obviously it's a strong company.
(Aside from the sexual harassment issues)
Shareholders might want more.
ATVI was good for rising and then splitting and then rising. They may think that can continue over time?
Any thoughts on someone else coming in and a bidding war happening? Or is this set-in stone right now? Opinion?
That is interesting. Still over 5 months away but it's closer. I think this will need the deal to be completely closed for it to get to 95 though
This is interesting - From IBD
Microsoft's fiscal 2023 actually starts in July.
Microsoft To Buy Video Game Giant Activision For $69 Billion In Cash
Software behemoth Microsoft (MSFT) on Tuesday announced a blockbuster deal to buy video game publisher Activision Blizzard (ATVI) for $68.7 billion in cash. Microsoft stock dipped while Activision stock rocketed on the news.
Microsoft said the deal will accelerate the growth of its gaming business across mobile, PC, console and cloud and provide building blocks for the metaverse.
When the transaction closes, Microsoft will become the world's third-largest gaming company by revenue, behind Tencent (TCEHY) and Sony (SONY).
Redmond, Wash.-based Microsoft will pay $95 in cash per share for Santa Monica, Calif.-based Activision. The deal is valued at $68.7 billion, inclusive of Activision's net cash.
Microsoft Stock Dips, Activision Stock Rockets
In afternoon trading on the stock market today, Microsoft stock declined 2.1%, near 303.80. Activision stock blasted 26.3% higher, near 82.60.
The deal is Microsoft's largest acquisition ever, topping its purchase of LinkedIn for $26.2 billion in December 2016. It also is the tech industry's largest-ever merger, eclipsing Dell's (DELL) purchase of EMC for $60 billion in September 2016.
Activision owns such video game franchises as "Warcraft," "Diablo," "Overwatch," "Call of Duty" and "Candy Crush." Microsoft makes video games for Windows PCs and its Xbox consoles. Microsoft's game franchises include "Halo," "Minecraft," "Gears of War" and "Fallout."
"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," Microsoft Chief Executive Satya Nadella said in a news release. "We're investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all."
Microsoft expects the acquisition to close in its fiscal 2023, which begins July 1. The transaction is subject to customary closing conditions and completion of regulatory review as well as Activision Blizzard's shareholder approval.
Activision Stock Depressed Amid Workplace Woes
Activision Blizzard Chief Executive Bobby Kotick will continue to lead Activision after the deal closes, Microsoft said. He will report to Phil Spencer, chief executive of Microsoft Gaming. However, the Wall Street Journal reported that Kotick is likely to step down after the merger.
Activision stock has fallen amid reports of a toxic workplace environment at the video game giant. The Wall Street Journal said Monday that Activision has fired or pushed out more than three dozen employees and disciplined about 40 others since July as part of efforts to address allegations of sexual harassment and other misconduct at the company.
Microsoft's purchase of Activision shows that gaming is a "strategic pillar" for the company, Jefferies analyst Brent Thill said in a note to clients. He reiterated his buy rating on Microsoft stock with a price target of 400.
Metaverse Is A Key Reason For The Deal
The emerging metaverse is the likely motivation for the deal, Rupantar Guha, principal analyst at GlobalData's Thematic Team, said in a report to clients.
The acquisition "reflects Microsoft's desire to dominate the metaverse," Guha said. "The company is focused on acquiring both Activision's communities and content — two essential parameters for success in the metaverse."
The metaverse is an immersive, next-generation version of the internet.
"While the metaverse is still largely conceptual, Microsoft's strength in underlying themes such as artificial intelligence, augmented reality, virtual reality, and cloud computing give it a leadership position in this theme," Guha said. "Activision's games will help Microsoft create metaverse experiences and provide an established global consumer base to test and market them."
The issue I just read is the deal is not closing till 2023
Yikes for me ! Been watching retreat cash deal at what ? $95 I’ll have to re-read very busy.. $ATVI thanks!
Microsoft to acquire Activision Blizzard to bring the joy and community of gaming to everyone, across every device
REDMOND, Wash. and SANTA MONICA, Calif., Jan. 18, 2022 /PRNewswire/ -- With three billion people actively playing games today, and fueled by a new generation steeped in the joys of interactive entertainment, gaming is now the largest and fastest-growing form of entertainment. Today, Microsoft Corp. (Nasdaq: MSFT) announced plans to acquire Activision Blizzard Inc. (Nasdaq: ATVI), a leader in game development and interactive entertainment content publisher. This acquisition will accelerate the growth in Microsoft's gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.
Microsoft will acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard's net cash. When the transaction closes, Microsoft will become the world's third-largest gaming company by revenue, behind Tencent and Sony. The planned acquisition includes iconic franchises from the Activision, Blizzard and King studios like "Warcraft," "Diablo," "Overwatch," "Call of Duty" and "Candy Crush," in addition to global eSports activities through Major League Gaming. The company has studios around the word with nearly 10,000 employees.
Bobby Kotick will continue to serve as CEO of Activision Blizzard, and he and his team will maintain their focus on driving efforts to further strengthen the company's culture and accelerate business growth. Once the deal closes, the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming.
"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," said Satya Nadella, chairman and CEO, Microsoft. "We're investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all."
"Players everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them," said Phil Spencer, CEO, Microsoft Gaming. "Together we will build a future where people can play the games they want, virtually anywhere they want."
"For more than 30 years our incredibly talented teams have created some of the most successful games," said Bobby Kotick, CEO, Activision Blizzard. "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."
Mobile is the largest segment in gaming, with nearly 95% of all players globally enjoying games on mobile. Through great teams and great technology, Microsoft and Activision Blizzard will empower players to enjoy the most-immersive franchises, like "Halo" and "Warcraft," virtually anywhere they want. And with games like "Candy Crush," Activision Blizzard´s mobile business represents a significant presence and opportunity for Microsoft in this fast-growing segment.
The acquisition also bolsters Microsoft's Game Pass portfolio with plans to launch Activision Blizzard games into Game Pass, which has reached a new milestone of over 25 million subscribers. With Activision Blizzard's nearly 400 million monthly active players in 190 countries and three billion-dollar franchises, this acquisition will make Game Pass one of the most compelling and diverse lineups of gaming content in the industry. Upon close, Microsoft will have 30 internal game development studios, along with additional publishing and esports production capabilities.
The transaction is subject to customary closing conditions and completion of regulatory review and Activision Blizzard's shareholder approval. The deal is expected to close in fiscal year 2023 and will be accretive to non-GAAP earnings per share upon close. The transaction has been approved by the boards of directors of both Microsoft and Activision Blizzard.
Microsoft to Acquire Activision Blizzard for Nearly $70 Billion
By Sabrina Escobar
Updated Jan. 18, 2022 9:02 am ET / Original Jan. 18, 2022 8:39 am ET
Activision Blizzard shares were surging following Microsoft‘s announcement that it would acquire the gaming company in a nearly $70 billion deal.
Microsoft (ticker: MSFT) will acquire Activision Blizzard (ATVI) for $95 a share in an all-cash transaction valued at $68.7 billion, including Activision Blizzard’s net cash. The acquisition is Microsoft’s largest transaction ever. It’s betting on gaming as a building block into the metaverse.
You didn't really dump it over some politics BS story did you?
*painful wince ensues*
Don't open the chart today.
Berenberg Bank Adjusts Activision Blizzard's Price Target to $100 From $105, Maintains Buy Rating
7:39 AM ET, 01/12/2022 - MT Newswires
07:39 AM EST, 01/12/2022 (MT Newswires) -- Activision Blizzard (ATVI) has an average rating of outperform and price targets ranging from $54 to $125, according to analysts polled by Capital IQ.
Activision Blizzard to Release Fourth Quarter 2021 Financial Results on February 3, 2022
9:00 AM ET, 01/05/2022 - Business Wire
SANTA MONICA, Calif.--(BUSINESS WIRE)--Jan. 5, 2022-- Activision Blizzard, Inc. (Nasdaq: ATVI) intends to release its fourth quarter 2021 results after the close of the market on Thursday, February 3, 2022. In conjunction with this release, Activision Blizzard will host a conference call that will be broadcast over the internet.
Thursday, February 3, 20221:30 p.m. Pacific Time (4:30 p.m. Eastern Time) To listen to the call, please log onto: http://investor.activision.com Or dial: U.S. and Canada: 1-866-777-2509 International: 1-412-317-5413
We encourage participants to pre-register for the conference call using the following linkhttps://dpregister.com/sreg/10162864/f08e2720a0. Callers who pre-register will be given a conference passcode and unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.
A presentation corresponding with the conference call will be available in PDF format at http://investor.activision.com. A replay of the call will also be available after the call's conclusion and archived for one year at https://investor.activision.com/events.cfm.
This company, Blizzard, on order by the communist chinese party, an authoritarian regime, who is being shunned for genocide against the Uyghur people, took a poor kids prize money away. Why?
Because the kid was from hong kong, and said he wanted to be free.
ATVI bowed to communism, and punished a child for wanting freedom.
This company is American? Disgusting.
Dump this trashcan.
Sounds like a buy to me. ;)
Ha! Lowered to $100. She just hit $60..
MoffettNathanson Lowers Activision Blizzard's Price Target to $100 From $108, Citing 'Bookings Forecast, Additional Costs;' Buy Rating Kept
7:56 AM ET, 12/08/2021 - MT Newswires
07:56 AM EST, 12/08/2021 (MT Newswires) -- Activision Blizzard (ATVI) has an average rating of outperform and price targets ranging from $54 to $125, according to analysts polled by Capital IQ.
(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)
Could’ve said the same for EA ten years ago … dipping my toe back In a few atvi under 61
This company is done for
Everyone knows this that has played their games in the past. It is completely over. Most people in the Diablo community do not even expect Diablo 4 will even come out. It was just"delayed". There's absolutely no official support for their newest Diablo release at all, Diablo 2 Resurrected. There are queue times for a 20 year old game. The game is virtually unplayable the way that the old game was played in public games, as players are locked out of consecutive games if the game has not been created by another person yet. Difficult to explain but basically public games are all but unplayable due to Blizzard's ineptness. And for this reason, Even more people have given up on this company. Not many people will be buying anything else they put out -- If they put anything out at all.
The company has been taken over by feminists who respond condescendingly and snidely to customers at every angle. There is no hope for this company.
Activision Blizzard a top pick at Morgan Stanley, seeing 46% upside • 10:42 AM
Activision Blizzard (ATVI +1.1%) has made the list of Morgan Stanley's top ideas (the top ideas that are non-FANG, at any rate) and the firm says they're "aggressive buyers" pursuing at least 45% upside.
Up front the firm takes on the game slate debate: "Is the Blizzard Diablo and Overwatch pipeline intact and still coming in '22/'23? We think it is," pointing to strong development teams at Blizzard (despite some high-profile departures) and the company's recent talk about a "very significant 18-month period for content releases" there.
That increases Morgan Stanley's confidence that either Diablo IV or Overwatch 2 are coming next year. "With Diablo II: Resurrected launching 9/23 and Diablo Immortal coming in 1H:22, we lean towards Diablo IV as the most likely large title to arrive next year," to take advantage of the halo benefits of multiple launches.
But there are also "multiple Warcraft mobile games and brand new IP" under development as well.
Turning to the key Call of Duty franchise, the firm expects "durability" through reopening and competition. At 125 million, it has nearly four times as many monthly active users as it did two years ago and has turned into a "large ecosystem of highly engaged players." Even with economic reopening, there's a path for CoD to generate $4 billion in revenue this year and $3.6 billion next year, it says.
Meanwhile Chinese regulatory risk is manageable, in part because ATVI has a small exposure at less than 5% of bookings, and China seems to be focused on games for minors rather than more mature content.
Next up it's looking to next month for hopefully favorable reviews for Call of Duty: Vanguard and Diablo II: Resurrected.
Its base case price target of $120 implies 46% upside - but a $150 bull case valuation suggests 83% upside in the stock.
Yesterday, Activision Blizzard made the cut of Overweight Media/Entertainment stocks at Wells Fargo, which got bullish on the sector while downgrading Software.
NEWS: $ATVI 3 High-Growth Stocks With Great Margins
Growth stocks are attractive investments to put in your portfolio because their sales are rising, which often attracts a lot of bullishness. But it's all for naught if the company isn't making much money on those sales. A key metric investors should always consider is gross margin: how much...
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