With the contractual deadline fast approaching, July proved to be a significant month for the deal, with a California judge denying the FTC’s preliminary injunction - a decision which prompted the FTC to launch its own appeal the next day - which it lost on July 17.
The judge’s move opened the door for Microsoft and Activision to close the deal ahead of the contractual deadline, although this in itself was a risky prospect - doing so would essentially be based on the assumption that Microsoft and Activision Blizzard would emerge victorious in its upcoming court cases with the CMA and FTC. While a speedy decision by the CMA could pave the way forward, this failed to happen.
The contractual deadline for the deal passed on July 18, with no movement in sight. As a result, Microsoft and Activision formally extended the deadline until October 18, two months after the court cases are due to be completed.
Highlighting their continued commitment to the deal, Microsoft and Activision agreed on a higher termination fee should either walk away from the table - while the original agreement of $3.5 billion is still the case should the deal be closed prior to August 29 - the day after its court case with the FTC, it will increase to $4.5 billion if it’s not finalised by September 15.
In perhaps the biggest sign yet that the chances of blocking the deal are becoming increasingly slim, the FTC offered no objection when Xbox submitted a motion to withdraw from proceedings - as such, the commission would need to refile or reach a settlement in order to continuously challenge the acquisition, paving the way for progress, at least in the USA.
Activision Blizzard has also agreed to “hold separate the Company or certain assets of the Company or to implement other lawful alternatives to consummate the Merger” with the CMA if necessary. Given its own reluctance to accept a Mexit situation, this points to a positive future for the deal, albeit one where the newly merged entity has to find a potentially expensive workaround to the CMA’s objections in an attempt to conduct business in the UK.
Arguing its case with the CMA, Microsoft asked regulators to consider the strong progress made recently, including the deals struck with competitors and evidence from its case with the FTC. The company is also working on modifying the merger agreement to meet the CMA's concerns, which could include selling its cloud gaming rights in the UK.
For its part, the CMA has taken the unusual step of soliciting additional comments from gaming insiders before it publishes its final opinion on whether the recent changes are enough to warrant an approval. As such, while we're now within touching distance of the deal's closure, we're still not quite there yet.
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