Microsoft-Activision Deal Spread Widens as Antitrust Fears Mount

Activision Blizzard Inc. shares sank further away from Microsoft Corp.’s proposed takeover price as investors grow concerned that the US antitrust regulators will block the $69 billion deal.

The videogame-maker’s stock fell 4.1% to $73.47 on Friday, while Microsoft Corp is offering $95 a share for the company. After the market closed Wednesday, Politico reported that the US Federal Trade Commission is likely to file an antitrust lawsuit to block the sale.

“An FTC block has been mostly, but not entirely, priced into the spread,” said Aaron Glick, a merger arbitrage specialist at Cowen & Co. “Many investors were holding out hope that Microsoft’s goodwill on the Hill would lead the FTC to clear the deal.”

The market is pricing in roughly 40% odds of the deal successfully closing, based on the assumption that the stock would be trading at $60 should it fail, Glick said.

Since the takeover deal was announced in January, the gap between Activision’s trading price and Microsoft’s all-cash bid has been widening, driven by heightened antitrust scrutiny in the US and Europe, as well as its sheer transaction size and long closing process. A broad slump in the technology industry also pushed investors to price in a greater downside risk if the deal fails.

The companies have said they expect to close the deal in the first half of 2023.

(Updates stock move at close in the second paragraph)

--With assistance from Subrat Patnaik.

To contact the reporter on this story:
Yiqin Shen in New York at yshen358@bloomberg.net

To contact the editors responsible for this story:
Eric J. Weiner at eweiner12@bloomberg.net

Philip Sanders, Stephen Kirkland

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