Microsoft to Buy Activision Blizzard for $68.7 Billion in Cash

Xbox maker acquires “Call of Duty” company, becoming world’s third-largest gaming company (by revenue)

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Microsoft, the maker of Xbox, has purchased “Call of Duty” producer Activision Blizzard for $68.7 billion in cash in a megadeal that values the video game producer at $95 per share.

The deal, which has already been approved by both company boards, will make Microsoft the world’s third-largest gaming company by revenue, behind only Tencent and Sony. Microsoft will soon have 30 studios in house. The deal, which is subject to typical regulatory review, is expected to close in fiscal year 2023.

In addition to the popular “Call of Duty” franchise, Activision Blizzard also makes “Warcraft,” “Overwatch” and “Candy Crush,” to name just a few more popular gaming titles. Mobile, where “Candy Crush” plays, is by far the largest segment in gaming, representing nearly 95% of the market. The combined companies will also have a very large footprint in the growing eSports arena.

Early plans call for Activision Blizzard games to be added to the Microsoft Game Pass subscription service, which has 25 million subscribers. Activision Blizzard games have nearly 400 million monthly active players.

Activision shares surged nearly 30% in early trading on Tuesday, while Microsoft’s stock price dipped 1.3%.

Bobby Kotick will continue to serve as CEO of Activision Blizzard, reporting to Phil Spencer, the CEO of Microsoft Gaming.

The decision to keep Kotick on in that role is likely to ruffle some feathers internally. Activision Blizzard has been under fire over internal reports of sexual misconduct and harassment. In July, the studio was hit with a civil lawsuit from California’s Department of Fair Employment and Housing, claiming the company was “akin to working in a frat house.” The alleged sexual harassment included inappropriate comments about women’s bodies, rape jokes and unsolicited touching of female employees.

The company dismissed the claims and said in part in a statement to NPR, “The DFEH includes distorted, and in many cases false, descriptions of Blizzard’s past.”

Activision Blizzard employees later staged a mass walkout at the company’s offices in Irvine, California, a move intended to pressure the company into creating a better work environment for non-male employees as well as equalize pay. And in an open letter to management published via Polygon, nearly 3,100 Activision Blizzard employees urged the company to do better.

On Oct. 27, Kotick announced a “zero-tolerance policy” along with a series of reform policies, including a pledge to increase the number of female and non-binary employees at the company by 50%, waiving arbitration for any employee filing a harassment or discrimination claim, and slashing his pay to the minimum annual salary of $62,500 required by California law.

But the following month, the heat was turned up on Kotick again after a Wall Street Journal report revealed his direct involvement in the harassment of women at Activision Blizzard, specifically threatening in a 2006 voicemail to have a female employee killed and threatening to “destroy” a private jet flight attendant who sued him for sexual harassment committed by his jet’s pilot.

After more than 1,200 employees signed a petition demanding his resignation, Kotick met with executives at Blizzard, saying he will consider leaving if issues of sexual misconduct and harassment are not resolved “with speed,” according to the Wall Street Journal.

In a separate meeting with Activision executives, Kotick said he was “ashamed of some of the incidents that had happened on his watch and apologized for how he has handled the unfolding problems,” but was told by executives that some employees would only be satisfied by his departure.

The deal reflects Microsoft CEO Satya Nadella’s appetite for growth through mergers and acquisitions, though the Activision deal dwarfs his 2016 acquisition of LinkedIn in 2016.

“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,” Satya Nadella, chairman and CEO of Microsoft, said in a Tuesday statement accompanying the acquisition announcement. “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,” Phil Spencer added. “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,” Kotick said in his statement. “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.”