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Microsoft and Activision Blizzard agreed on Wednesday to extend the deadline of their merger agreement to October 18. Activision said in a statement Wednesday.
The two companies had originally agreed to complete the transaction by July 18, but regulatory pushback from the US and UK delayed the acquisition.
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Had Microsoft not extended the deal deadline, the company may have had to pay a $3 billion breakout fee to Activision Blizzard. By extending the period for the companies to close their transaction, Microsoft and Activision are giving themselves more time to satisfy the concerns of regulators and get through.
A new agreement between Microsoft and Activision, reached on July 18, included a provision to increase the termination fee in increments in certain periods, if the merger is not agreed before the new deadline.
By August 29, the break fee will increase to $3.5 billion if the parties terminate the transaction, while by September 15, the possible break fee will increase to $4.5 billion.
The extension came as the UK Competition and Markets Authority moved to delay its review of the deal until August 29. Microsoft and Activision are now giving each other ample time for the CMA evaluation to finish.
The CMA had initially blocked the transaction in May, citing concerns about the threat to competition in the nascent cloud gaming market. The UK regulator has reversed course and halted all litigation after the Federal Trade Commission’s attempt to block the deal failed in court.
The CMA said it was “ready to consider any proposal from Microsoft to restructure the transaction” in order to meet the regulator’s concerns.
The regulator will now need to open a new review of the agreement based on its previous work. While this could normally take several months, the watchdog is looking to speed up the process to meet its own August 29 deadline.
The CMA will allow Microsoft to file a restructured agreement. When the EU gave the green light to the acquisition, it relied on some concessions from Microsoft, which included royalty-free licenses for cloud gaming platforms for streaming Activision games.
Microsoft offered similar concessions to the CMA, but the remedies were rejected, as the regulator argued they were difficult to enforce and would not address concerns about a concentration of power in the cloud gaming space. Microsoft will have to present a new package of measures beyond its previous offer to allay the concerns of the CMA.