If Microsoft’s acquisition of Activision Blizzard fails, $2 billion to $3 billion to be paid

Yesterday, Microsoft suddenly announced the acquisition of the gaming giant Activision Blizzard for $95 per share. The total transaction amount reached a staggering $68.7 billion, which is also the most expensive acquisition in Microsoft’s history. After the acquisition, Microsoft will become the world’s third-largest game company after Tencent and Sony.

The acquisition shook the gaming industry and proved once again that Microsoft is “money and willful”, and there are still many issues worth discussing around the deal itself. In a public filing with the U.S. Securities and Exchange Commission (SEC), new details of the deal between Microsoft and Activision Blizzard were disclosed, such as some of the conditions set by the two parties on the exchange, including the termination clause.

According to the terms of the deal, if Microsoft fails to acquire Activision Blizzard under certain circumstances, Microsoft needs to pay Activision Blizzard $2 billion; $2.5 billion if the deal is terminated between January 18, 2023, and April 18, 2023; if it is after April 18, 2023, the amount will increase to $3 billion. In the document, specific requirements for terminating the transaction and paying fees are described.

The Merger Agreement also contains customary termination provisions for each of Parent and the Company. Upon termination of the Merger Agreement, (A) the Parent, under specified circumstances, including termination pursuant to an injunction arising from Antitrust Laws when the Company is not then in material breach of any provision of the Merger Agreement, will be requiered to pay the Company a termination fee.

[…] and (B) the Company, under specified circumstances, including termination of the Merger Agreement by the Company to accept and enter into a definitive agreement with respect to a Superior Proposal (as defined in the Merger Agreement) or by Parent upon a Company Board Recommendation Change (as defined in the Merger Agreement), will be required to pay Parent a termination fee of $2,270,100,000. The Company Board has unanimously approved and adopted the Merger Agreement and recommended that the Company’s stockholders vote in favor of adoption of the Merger Agreement.

To complete the acquisition, Microsoft will also need shareholder support, as well as regulatory approvals, which may encounter some skepticism or scrutiny. As for the transaction itself, it is likely to go smoothly in normal terms. Due to the large sums involved and a considerable period of time, there could still be other things happening before April 2023.