UK watchdog set to clear Microsoft-Activision deal

Microsoft’s proposed acquisition of Activision Blizzard looked set to clear regulatory hurdles on Friday, after the US tech giant changed the structure of the deal.

Microsoft first announced the $69bn acquisition of the Call of Duty and World of Warcraft developer in April. But it was blocked by the UK's Competition and Markets Authority over concerns it would harm competition in cloud gaming.

In response, Microsoft submitted a restructured transaction in August. Under the new terms, Activision’s cloud streaming rights will no longer be acquired by Microsoft and will instead be sold to French rival Ubisoft Entertainment before the deal completes.

Ubisoft will then supply the content to Microsoft as well as its competitors.

The CMA said that the restructured deal, which will see Activision’s cloud gaming rights, “substantially” addressed its previous concerns and “opens the door” to the deal being cleared.

Colin Raftery, senior director of mergers and phase 1 decision maker, said: “This is a new and substantially different deal, which keeps the cloud distribution of those important games in the hands of a strong independent supplier.

“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.”

Sarah Cardell, chief executive of the CMA, added: “Microsoft has now substantially restructured the deal, taking the necessary steps to address our original concerns.

“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.”

The regulator, which noted that it still had “limited residual concerns” with the new deal, will now consult on the proposed remedies before making a final decision.

The consultation will run until 6 October, allowing for approval ahead of the companies’ extended deadline to complete the deal, on 18 October.

Victoria Scholar, head of investment at Interactive Investor, said: “This a major step forward towards getting the dal over the line.

“The tone has certainly turned a lot more positive, a shift from back in April when Microsoft’s president Brad Smith described the period as the tech giant’s ‘darkest days’ of working with the UK.”