The U.S. Federal Trade Commission said Monday it is requesting an emergency court order to block
Microsoft
from closing its $69 billion acquisition of
Activision Blizzard.
FTC spokeswoman Victoria Graham said the regulator filed the request for a temporary restraining order on Monday to prevent the deal from closing while its review continues.
“
Microsoft
and Activision Blizzard have represented in the past that they cannot close their deal due to antitrust reviews of the transaction in other jurisdictions,” Graham said. “But Microsoft and Activision have not provided assurances that they will maintain that position. In light of that, and public reporting that Microsoft and Activision Blizzard are considering closing their deal imminently, we have filed a request for a temporary restraining order to prevent them from closing while review continues.”
The Wall Street Journal earlier reported on the plans to seek the restraining order.
“We welcome the opportunity to present our case in federal court,” said Microsoft President Brad Smith in a statement. “We believe accelerating the legal process in the U.S. will ultimately bring more choice and competition to the market.”
In a memo to staff, Activision CEO Bobby Kotick described the move as a positive development in the merger process, noting that it accelerates the legal process.
“Our excellent legal team has been preparing for this move for more than a year, and we’re ready to present our case to a federal judge who can evaluate the transaction on the merits,” Kotick said. “The facts are on our side, and we will continue to keep you updated throughout the process.”
Activision (ticker: ATVI) makes the Call of Duty games, which are annually among the best-selling titles. The FTC has sued to block the deal, alleging that it would “harm competition in high-performance gaming consoles and subscription services by denying or degrading rivals’ access to its popular content.”
In August, an FTC administrative law judge is scheduled to hold a hearing in connection with the suit. The merger agreement is set to expire on July 18 unless Microsoft (MSFT) and Activision agree to extend it.
If a district court judge decides not to grant a preliminary injunction, the FTC could be forced to abandon its fight, wrote Capital Alpha Partners analyst Robert Kaminski. He pointed out that
Meta Platforms
(META) closed its acquisition of VR firm Within after a U.S. District Court judge denied an FTC request for an injunction.
“Our bottom-line view on the merger is that the FTC case is winnable for the companies if they have the wherewithal to adjudicate the complaint in the face of a potentially long timeline,” Kaminski writes. “Without the district court process, we had forecasted a timeline that ran well into 2024 and beyond (with appeals). If the FTC is asking for a preliminary injunction, the process could potentially be resolved before the end of 2023.”
Shares of Activision dipped 0.7% to $79.80 on the news. If the deal cleared regulatory hurdles, each Activision shareholder would receive $95 a share. The gap between the two numbers signals doubt from Wall Street that it will go through. Microsoft stock was up 1.4%.
Though the transaction has been approved in dozens of other jurisdictions, most notably the European Union and China, the U.K.’s Competitions and Markets Authority blocked the deal due to concerns about how it would affect competition in the cloud gaming market. Microsoft is appealing that decision.
Write to Connor Smith at [email protected]
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