Activision Blizzard shares rocketed Tuesday after a federal court allowed Microsoft to proceed with its $69 billion acquisition of the video game publisher. Activision stock surged to a two-year high on the news.
U.S. District Court Judge Jacqueline Scott Corley in San Francisco rejected a request from the Federal Trade Commission for a preliminary injunction to block the deal.
"The Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition," Corley wrote in her opinion. "To the contrary, the record evidence points to more consumer access to 'Call of Duty' and other Activision content."
On Dec. 8, the FTC filed an antitrust lawsuit to stop Microsoft's purchase of Activision. The agency later filed for a preliminary injunction to prevent Microsoft from preceding with the acquisition before a full hearing.
The deal still faces a regulatory challenge from the U.K.'s Competition and Markets Authority. However, after the U.S. District Court ruling, Microsoft and the U.K. regulatory body agreed to pause their legal battle in order to negotiate a settlement.
Activision Stock Surges After Ruling
On the stock market today, Activision stock jumped 10% to close at 90.99. Microsoft stock rose 0.2% to 332.47.
Microsoft announced its plan to buy Activision for $95 per share in January 2022. Activision owns such video game franchises as "Warcraft," "Diablo," "Overwatch," "Call of Duty" and "Candy Crush." Microsoft makes video games for Windows PCs and its Xbox consoles. Microsoft's game franchises include "Halo," "Minecraft," "Gears of War" and "Fallout."
Wedbush Securities analyst Nick McKay said the Activision deal closing is now imminent.
"With the injunction denied, Microsoft has a green light to close the deal before July 18," McKay said in a note to clients. "That date is important because should the deal extend past then, Microsoft would owe Activision $3 billion, and would be required to renegotiate the deal and seek the Activision board's approval for a new deal price."
McKay rates Activision stock as outperform with a price target of 95.
Embarrassing Setback For FTC
The ruling in favor of Microsoft and Activision is another embarrassing setback for the Federal Trade Commission under Big Tech critic FTC Chair Lina Khan. In February, the FTC failed in its effort to stop Meta Platforms from acquiring virtual-reality startup Within Unlimited.
The court ruling lifted shares of other companies being acquired that are facing FTC reviews. They include iRobot, Seagen and Horizon Therapeutics. Amazon is attempting to buy iRobot. Pfizer is seeking to acquire Seagen. And Amgen wants to buy Horizon.
On Tuesday, iRobot stock increased 2.2% to 46.74. Seagen advanced 1.5% to 195. Horizon inched 0.4% higher to close at 103.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
