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Microsoft and Activision Blizzard on Wednesday agreed to extend the deadline for the merger agreement to October 18th. Activision said in a statement on Wednesday.
The two companies originally agreed to complete the transaction by July 18, but regulatory pushback from the US and UK delayed the acquisition.
If Microsoft doesn’t extend the deadline for the deal, the company could be on the hook for a $3 billion breakup fee for Activision Blizzard. By extending the period for companies to close their transactions, Microsoft and Activision are giving themselves more time to satisfy and override regulators’ concerns.
A new agreement between Microsoft and Activision, concluded on July 18, included a clause that the termination fee would increase in increments at certain periods, if the merger was not agreed upon by the new deadline.
By August 29, the breakup fee will be increased to $3.5 billion if the parties finalize the deal, while by September 15, the potential breakup fee will rise to $4.5 billion.
The British regulator is willing to negotiate
The extension came as the UK’s Competition and Markets Authority moved to delay its review of the deal until August 29. Microsoft and Activision are given sufficient time to complete the CMA evaluation.
The CMA had initially halted the deal in May, citing concerns about the threat of competition in the emerging cloud gaming market. The British regulator changed course and halted all lawsuits after the Federal Trade Commission’s attempt to block the deal failed in court.
The CMA said it was “ready to consider any proposals from Microsoft to restructure the deal” in a way that satisfies the regulator’s concerns.
The organizer will now need to open a new deal review based on their previous work. While this could normally take several months, the oversight body is looking to speed up the process to meet its August 29 deadline.
The CMA would allow Microsoft to offer a restructured deal. When the EU greenlighted the acquisition, it was dependent on some concessions from Microsoft, which included royalty-free licenses for cloud gaming platforms to stream Activision games.
Microsoft made similar concessions to the CMA, but the remedies were rejected, with the regulator arguing that they were difficult to enforce and would not address concerns about the concentration of power in the cloud gaming space. Microsoft will have to come up with a new package of measures beyond its previous offer to assuage the CMA’s concerns.
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