Microsoft buys video game maker Activision Blizzard in $68.7bn deal

Microsoft has agreed to buy Activision Blizzard, the video game maker, for about $68.7bn, including net cash, in the biggest deal ever for the tech company founded by Bill Gates.

Under the terms of the deal, Microsoft would pay shareholders of the company behind gaming franchises such as Call of Duty, Warcraft and Candy Crush $95 per share, a 45 per cent premium on its closing price last week.

It is the latest in a wave of dealmaking in the gaming sector. Take-Two Interactive, the maker of the popular Grand Theft Auto game series, agreed last week to buy rival Zynga, the maker of FarmVille and Words with Friends, for $12.7bn. 

“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, chair and chief executive of 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.”

The move represents Nadella’s biggest bet since being appointed chief in 2014. It makes Microsoft the world’s third-biggest gaming company in terms of revenues, behind only China’s Tencent and Japan’s Sony, while building on the tech group’s strengths in personal computing and business software.

Microsoft swooped with Activision’s shares down almost 30 per cent since a lawsuit was filed against the company in July, alleging widespread sexual harassment and gender pay issues at the company.

Bobby Kotick, Activision Blizzard’s chief executive, whose $155m pay package for 2020 prompted protests from some investors in June, will continue to run the division.

Kotick, one of the highest-paid chiefs in the US, stands to make hundreds of millions of dollars from Tuesday’s acquisition.

According to Activision’s 2020 proxy statement, Kotick stood to earn $293m in the event that Activision was acquired, mostly from the vesting of his performance-based stock awards.

The decision to keep Kotick comes after he admitted that the company’s initial responses to revelations of cases of harassment were “tone deaf”.

The company fired 20 employees in October as part of an effort to clean up its culture following allegations of widespread gender-based discrimination and harassment.

In an email to staff on Tuesday, Kotick wrote: “No organisation’s culture, including ours, is without need for improvement, and thanks to your input, we are making strides in improving ours. My commitment is to continue evolving our culture so that come closing, Microsoft is acquiring an exemplary workplace.”

Activision shares were up 37 per cent in premarket trading after the deal was announced. The company said that as the parties sought regulator approval, a deal was expected to close some time in Microsoft’s fiscal year ending June 30 2023.