Microsoft is acquiring Call of Duty videogame maker Activision Blizzard for $68.7 billion in cash, the biggest deal in the sector that would help the Xbox maker become the third-largest gaming company by revenue.
Microsoft’s offer of $95 per share is at a premium of 45 percent to Activision’s Friday close. Shares of Activision were trading at $89.55 in trading before the bell, Reuters news agency reported.
“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Microsoft Chief Executive Officer Satya Nadella said in a media statement.
Microsoft has been making big investments in gaming, scooping up Minecraft maker Mojang Studios and Zenimax in multi-billion dollar deals in recent years.
Activision’s library of games such as Call of Duty and Overwatch gives Microsoft’s Xbox gaming platform an edge over Sony’s Playstation, which has for years enjoyed a more steady stream of exclusive games.
Bobby Kotick will continue to serve as CEO of Activision Blizzard.
The sector is consolidating with larger firms buying up smaller players in recent years.
Last week, Grand Theft Auto video game maker Take-Two Interactive said it would buy Zynga for $11.04 billion in a cash-and-stock deal that will add popular mobile titles such as FarmVille under its umbrella as demand surges for on-the-go gaming.
“Taking part in what is the biggest tech merger & acquisition (M&A) ever reflects Microsoft’s desire to dominate the metaverse. The company is focused on acquiring both Activision’s communities and content—two essential parameters for success in the metaverse. Activision’s popular games franchises Call of Duty and Overwatch, and the communities it commands, will position Microsoft as a leader in the metaverse,” Rupantar Guha, Principal Analyst at GlobalData’s Thematic Team, said in a statement.
Microsoft is formidable competition for Meta, Epic Games, Tencent, and Roblox, all of which are scrambling for dominance in this emerging theme.
While the metaverse is still largely conceptual, Microsoft’s strength in underlying themes such as artificial intelligence (AI), augmented reality (AR), virtual reality (VR), and cloud computing give it a leadership position in this theme. Activision’s games will help Microsoft create metaverse experiences and provide an established global consumer base to test and market them.
Microsoft ranks second out of 44 companies in GlobalData’s gaming thematic sector scorecard, which ranks companies based on their leadership in the 10 themes that matter most to the gaming industry—generating a leading indicator of future performance. Microsoft is second only to Tencent, while Activision Blizzard ranks 13th on the scorecard.
Following the acquisition, Microsoft will gain a dominant position in esports, a growing theme where it has struggled to make a mark in the past. Activision is a mobile gaming leader with plans to launch more mobile titles in the future. The takeover will strengthen Microsoft’s position in the mobile gaming market, which will be worth $272 billion by 2030, according to GlobalData forecasts.