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Microsoft and Activision Blizzard agreed on Wednesday to extend the deadline for their merger agreement to Oct. 18, Activision said in a statement on Wednesday.
The companies had agreed to close the deal by July 18, but opposition from U.S. and U.K. regulators delayed the acquisition.
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If Microsoft doesn’t extend the deal, the company could pay Activision Blizzard a $3 billion breakup fee. By extending the deadline for the two companies to close the deal, Microsoft and Activision Blizzard are giving themselves more time to satisfy regulators’ concerns and close the deal.
The new agreement between Microsoft and Activision Blizzard, reached on July 18, includes a provision that gradually increases the termination fee over a specified period if a merger is not agreed upon by a new deadline.
By Aug. 29, if the parties terminate the deal, the breakup fee would increase to $3.5 billion, and by Sept. 15, the potential breakup fee would rise to $4.5 billion.
The delay follows the UK Competition and Markets Authority’s decision to postpone the review of the deal until 29 August. Microsoft and Activision are now giving themselves enough time for the CMA assessment to be completed.
The CMA initially blocked the deal in May, citing concerns that competition in the nascent cloud gaming market was threatened. After the FTC’s attempt to block the deal failed in court, the U.K. regulator reversed tack and suspended all proceedings.
The CMA said it was “ready to consider any proposal for a restructuring transaction” by Microsoft to satisfy the regulator’s concerns.
The regulator will now need to conduct a fresh review of the deal based on past work. While that would normally take several months, the regulator is looking to expedite the process to meet the Aug. 29 deadline.
The CMA will allow Microsoft to submit a restructuring transaction. When the European Union gave the green light to the acquisition, Microsoft made some concessions, including a royalty-free license for a cloud gaming platform to stream Activision Blizzard games.
Microsoft offered similar concessions to the CMA, but those remedies were rejected because the regulator found them difficult to enforce and did not address concerns about the concentration of power in the cloud gaming space. Microsoft will have to come up with a package of new measures in addition to previous proposals to allay the CMA’s concerns.
Regulators around the world have been concerned about the nature of the deal, fearing it could limit the distribution of Call of Duty.
Sony and other industry players have expressed concern that Microsoft could remove Call of Duty from its PlayStation platform or lower the quality of the game on competing platforms.