Microsoft buys video game maker Activision Blizzard for $68.7bn

The deal is tech giant's largest acquisition to date and will give it a strong foothold in the gaming market

When the Activision Blizzard transaction closes, Microsoft will become the world’s third-largest gaming company by revenue, behind China’s Tencent and Japan’s Sony. Reuters

Microsoft said it agreed to buy video game company Activision Blizzard in a $68.7 billion all-cash deal, making it the third-largest gaming company in the world.

This will be Redmond, Washington-based technology manufacturer’s largest acquisition to date, exceeding its $26.2bn purchase of professional networking platform LinkedIn in 2016.

Microsoft will acquire California-based Activision Blizzard at $95 a share.

The deal, which is expected to close in the fiscal year 2023, will accelerate the growth in Microsoft’s gaming business across mobile, personal computer, console and cloud, and “will provide building blocks for the metaverse”, the company said.

Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms, Microsoft’s chairman and chief executive Satya Nadella said.

“We are investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all,” Mr Nadella said.

Activision Blizzard’s stock jumped following the deal announcement. The company was trading 27.1 per cent up at $83.1 a share at 11.40am New York time. Microsoft was down nearly 1.5 per cent at $305.6 a share.

Microsoft will become the world’s third-largest gaming company by revenue, behind China’s Tencent and Japan’s Sony upon the close of the transaction.

“For more than 30 years our incredibly talented teams have created some of the most successful games,” said Bobby Kotick, chief executive of Activision Blizzard, who will continue to serve at the same position.

“The combination of Activision Blizzard’s world-class talent and extraordinary franchises with Microsoft’s technology, distribution, access to talent, ambitious vision and shared commitment to gaming and inclusion will help ensure our continued success in an increasingly competitive industry.”

The planned acquisition includes franchises from the Activision Blizzard and King studios such as Warcraft, Diablo, Overwatch, Call of Duty and Candy Crush, in addition to global esports activities through Major League Gaming. The company employs nearly 10,000 workers.

Once the deal closes, the Activision Blizzard business will be under Microsoft Gaming chief executive Phil Spencer.

“Players everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them,” said Mr Spencer.

“Together we will build a future where people can play the games they want, virtually anywhere they want.”

The acquisition will bolster Microsoft’s Xbox Game Pass as it will be able to integrate Activision Blizzard games into the portfolio.

Game Pass service – a catalogue of downloadable games or the Netflix for video games – now has more than 25 million subscribers, up from 18 million in January last year.

With Activision Blizzard’s nearly 400 million monthly active players in 190 countries and $3bn franchises, the deal will make Game Pass one of the most diverse in terms of gaming content in the industry. Following the deal, Microsoft will have 30 internal game development studios, along with additional publishing and esports production capabilities, the company said.

Microsoft has been beefing up its gaming portfolio as it seeks to diversify its business into the fast growing billion-dollar segment. It bought Minecraft maker Mojang for $2.5bn in 2014 and last year, completed a $7.5bn acquisition of game maker Bethesda.

“The last two years in particular have shown how critical games are to helping people maintain a sense of community and belonging, even when they are apart,” said Mr Nadella on a conference call following the announcement of the deal.

Nearly three billion people around the world play video games, he said.