Written by Brenda Nakalema

Microsoft to buy ‘Call of Duty’ maker for $68.7 billion

Microsoft (ticker: MSFT) made a daring and bold play into the video game industry with a $68.7 billion takeover bid …

Microsoft (ticker: MSFT) made a daring and bold play into the video game industry with a $68.7 billion takeover bid for Activation Blizzard- the maker of ‘Call of Duty.’ Following the news, Activation Blizzard (ticker: ATVI) shares gained in the latest and biggest deal within the video game industry.

Activision, which also publishes ‘World of Warcraft’, will be valued at $95.00 a share after the deal, the companies said, a premium of 45% to its Friday closing price. Microsoft, which seems to be making heavy plays in this market, also concluded a deal with ZeniMax Media- the world’s third-largest gaming group after Tencent and Sony- which it bought for $7.5 million last March.

Microsoft’s offer equals 18 times Activision’s 2021 EBITDA, which compares with 16 times EBITDA valuation of ‘Grand Theft Auto’ maker Take-Two Interactive’s cash-and-shares deal.

Activision CEO Bobby Kotick will stay on the leadership team, the company said, but will now report to Microsoft gaming CEO Phil Spencer. With the closing of this deal, Microsoft will now access 30 internal game development studios and e-sports publishing capabilities. The deal will also help Microsoft build out its Xbox console offerings.

Microsoft has previously avoided the spotlight that seems to plague Google and Meta; however, following this deal, the company becomes the world’s third-largest gaming company, putting Xbox maker on the radar of potential lawsuits. A source familiar with intricate details pertaining to the deal commented that Microsoft would pay a $3 billion break fee if the deal were to fall through, which means it is confident of winning any antitrust suits.

The deal comes at a strange time for Activision, the maker of games such as ‘Overwatch’ and ‘Candy Crush’, whose shares had fallen more than 37% after being hit by allegations of sexual harassment of employees and misconduct by top management. The company is still battling allegations and on Monday released a statement that it has fired or forced out more than three dozen employees and disciplined another 40. In a conference call with analysts, Microsoft refrained from referring to the scandal directly but instead talked about the significance of culture in a company.

This audacious takeover follows last week’s planned takeover of Farmville maker Zynga (ticker: ZNGA), worth $12.7 billion by Take-Two Interactive (ticker: TTWO).

The New Arms Race: Metaverse

Newzoo, a data analytics firm, estimated that the global gaming market generated roughly $180.3 billion in revenue in 2021, a figure that is expected to grow to $218.8 billion by 2024.

The move highlights Microsoft’s belief in the potential of the Metaverse, a strategic move that most of its competitors have already been making putting in effect. The Metaverse has been touted as a virtual world in which people will be able to live, play and work.

Tech companies like Microsoft and Nvidia are placing huge bets on the potential of the Metaverse, and like a proverbial arms race that kicked off last year when Facebook changed its name to Meta Platforms, no company wants to be left behind.

Microsoft CEO, Satya Nadella commented that gaming is the most dynamic and exciting category in entertainment across all the platforms. She also added that the company is ‘investing deeply’ in world-class content, community and the cloud to create a new era of gaming that places players, creators first and makes gaming safer, more inclusive and accessible for all.