San Francisco (AFP) - Microsoft on Tuesday announced a landmark $69 billion deal to buy US gaming giant Activision Blizzard, betting big on the prospects of the video game market by scooping up the scandal-hit "Call of Duty" maker.
Acquiring the troubled but highly successful Activision will make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony, Microsoft said -- a major shift in the booming gaming world.
If the deal is confirmed, it will be the largest acquisition in the industry, far ahead of Take-Two's $12.7 billion purchase of Zynga announced last week.
"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 CEO Satya Nadella said, referring to the virtual reality vision for the internet's future.
Activision, the California-based maker of "Candy Crush," has been hit by employee protests, departures, and a state lawsuit alleging it enabled toxic workplace conditions and sexual harassment against women.
Over the past seven months, the company has received about 700 reports of employee concerns over sexual assault, harassment or other misconduct, The Wall Street Journal has reported.In some cases, separate reports about the same incident have been received.
Nearly 20 percent of Activision Blizzard's 9,500 employees have signed a petition calling for CEO Bobby Kotick to resign.
Kotick will continue to serve as CEO of Activision Blizzard, but is expected to depart after the deal closes, the Journal reported.
The transaction -- which is expected to be finalized by June 2023 -- is subject to customary closing conditions, regulatory review and approval from Activision Blizzard's shareholders.
"Acquiring Activision will help jump start Microsoft's broader gaming endeavors and ultimately its move into the metaverse, with gaming the first monetization piece of the metaverse in our opinion," Wedbush analysts said after the news broke.
"With Activision's stock under heavy pressure (CEO related issues/overhang) over the last few months, Microsoft viewed this as the window of opportunity to acquire a unique asset that can propel its consumer strategy forward."
Troubled Activision
This would be the largest buyout ever for the Redmond, Washington-based giant, well ahead of LinkedIn in 2016 for $26.2 billion.
"This is the largest acquisition in the games industry to date, said Daniel Ahmad, an analyst at Niko Partners."An acquisition of this nature is a clear endorsement of the importance of the games industry globally."
Microsoft has just marked 20 years of the "Halo" video game franchise that turned its Xbox console into a hit.
Xbox remains a key player in a video game industry now thought to be larger than the movie sector, with market research firm Mordor Intelligence valuing it at $173.7 billion in 2020.
The sector is booming with publisher Take-Two announcing a deal last week to acquire "Farmville" creator Zynga for $12.7 billion, in a major mobile gaming push by the maker of "Grand Theft Auto."
Troubles, meanwhile, have stacked up for Activision over its sex harassment and discrimination scandal.
In July, California state regulators accused the company of condoning a culture of harassment, a toxic work environment, and inequality.
In September, the US Securities and Exchange Commission launched a probe into the company over "disclosures regarding employment matters and related issues."
And two months later, the Journal reported that Kotick, accused of mishandling the harassment complaints, had signaled he would consider stepping down if he failed to quicky fix the company culture.He has led Activision for more than three decades.
Late last year, chief operating officer Daniel Alegre pledged a 50 percent increase in the number of female and non-binary staff over the next five years so that they will account for more than a third of Activision's workers.
Nadella spoke of safety and inclusivity in his statement announcing the Activision deal.
"We're 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," he wrote.
