Analysts say ‘Microsoft’s Activision deal is not dead’ ahead of UK appeal

videogameschronicle.com:

The Competition and Markets Authority’s (CMA) decision to block Microsoft’s proposed acquisition of Activision Blizzard could successfully be appealed, two analysts have said.

After months of investigation, on Wednesday the CMA became the first of the three major global regulators to publish its final report on the $69 billion deal.

It said it was preventing the merger of the Xbox and Call of Duty companies over concerns it would “alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come”.

In its report, the CMA argued the merger would give Microsoft “the incentive to increase the price of Game Pass commensurate with the value enhancement of adding Activision’s valuable content to it”, and that “even a modest price increase would significantly reduce or eliminate any potential relevant customer benefits”.

Microsoft and Activision subsequently confirmed their intention to appeal the CMA’s decision, and all hope is not lost, according to Michael Pachter, the managing director of equity research at Wedbush Securities, and Piers Harding-Rolls, research director of games at Ampere Analysis.

In a research note sent to VGC, Pachter said the CMA had thrown “a wrench into the process, but the deal isn’t dead”. He believes Microsoft can win the case on appeal, but even if it doesn’t, he said the Xbox maker could still make concessions that would help clear the deal.

“While successfully appealing a CMA decision is a difficult task for several reasons, we think the CMA is on the wrong side of the law on this ruling, and believe its concerns can be addressed,” he wrote.

“Ultimately, the ruling hinges on the CMA’s belief that Microsoft will have pricing power