Microsoft-Activision Blizzard Deal Doubt May Yield Big Reward: Tech Watch

tech.hindustantimes.com:

Microsoft Corp. 's purchase of Activision Blizzard Inc. is bogged down, yet some traders are betting the deal ultimately will go through. If they're right, there's serious money to be made, given that the videogame company's shares are still almost 20% below the offer price.

Stricter US antitrust regulators, the series of international approvals needed, a broad slump in technology stocks and the size of the $69 billion deal have all contributed to keep the gap between Activision's price and Microsoft's $95-a-share bid stubbornly wide. That's made it one of the most potentially lucrative opportunities for arbitrageurs who speculate on acquisitions.

The heightened attention that US regulators are paying to big companies, especially in technology, has resulted in a longer period between when a deal is announced and when it finally goes through, raising the risk of a transaction falling apart.

“Given the deal's sheer size and heightened antitrust scrutiny towards big tech players, that's ultimately causing the very large spread,” said Julian Klymochko, chief investment officer at Accelerate Financial Technologies Inc.

Microsoft announced the Activision acquisition in January and has said it expects to complete it in the year ending June 30, 2023. And Broadcom Inc. has said it aims to wrap up its $61 billion takeover of VMware Inc., announced in May, by October 2023.

Averaged annualized US deal spreads, which offer a gauge of the risk of transactions collapsing, have jumped above 15% from about 10% at the beginning of the year, according to data from Susquehanna International Group. That came amid rising fears of deal collapse or repricing, and higher costs to carry risky positions.

To be sure, one of the widest