January 18, 2022. While the media in Spain appeased its appetite, an informative earthquake shook the main news headlines, not only videogames, before a purchase agreement that enters squarely in the history books of the sector: Microsoft will acquire all the shares of Activision Blizzard, one of the largest publishers on the planet, for 68.7 billion dollars. Said agreement, at the expense of being approved by the North American regulatory organisms during the next months, has a principle; a story reminiscent of a game of chess. Let’s find out how it all started.
The beginning of it all: Phil Spencer’s call to Bobby Kotick
The details of this process come from an official report compiled by the SEC (the United States Securities and Exchange Commission) echoed by the North American newspaper CNBC this February 18; however, we have to go back in time exactly three months to know the prologue of this story.
The first call to Activision from Phil Spencer, CEO of Microsoft Gaming, occurs on November 19, 2021, when the Xbox player was enjoying the debut of Forza Horizon 5 in its exotic Mexico. In the offices of Activision Blizzard the atmosphere was known to be tense: accusations of labor abuse, sexual harassment, destruction of evidence, collective strikes, the investigation by the state of California… Three days earlier, The Wall Street Journal uncovered that Bobby Kotick, CEO of the corporation, was aware of all the events that took place in the company, of such a scandal. That same November 19, an email emerged in which Microsoft claimed to be “evaluating Xbox’s relationship with Activision.” Few imagined then how that “evaluation” was going to end.
A week of talks: November 19-29, first bid and start of negotiation
Long week the period from November 19 to 26. The document in the making explains that Phil Spencer, after long conversations, transfers to Bobby Kotick’s company on the 26th an initial figure that values ??the purchase of the entire company at 80 dollars per share; They would pay in cash. Microsoft then showed off its intimidating muscle.
48 valuation hours later, on November 28, 2021, Kotick responds to Spencer in a receptive tone: Activision Blizzard is open to being bought… but not at any price. This is when the negotiation begins, when the first bid does not seem enough for the seduced party. Those responsible for Call of Duty or World of Warcraft believe that its value should be around between 90 and 105 dollars per share. A day later, on November 29, Spencer gives a thumbs up and agrees to the deal.
According to the NASDAQ index, that same November 29, Activision Blizzard closed with a value of 60.31 dollars on the stock market. The operation would clearly be beneficial for the Kotick board, with a premium of 32%.
Microsoft has company; Activision interests more than one
As is usual in negotiations of these terms, the beginning of the agreement does not reach the ears of players or journalistic sources. The discretion was maximum, but the courtship was made heard by fellow investors and possible new interested parties appeared (page 32 of the document). The then codenamed “Company A,” Xbox, is first on the list of interested parties to sit down with Activision Blizzard and its board. On December 6, both sign an NDA (non-disclosure agreement) to share explicit data, presumably financial, and determine the final figure that Microsoft would transfer at the end of the negotiation.
What they may not have expected (or wanted) at the time is that a few days later new interested agents would appear: Company A, Company C, Company D and Company E. Four in all. No details of the other three have emerged, which did not complete their purchase proposal by not defining a price. Neither does the one referred to as Individual B, equally unknown.
And so we come to December 10, while Halo Infinite was the main topic of conversation in the world: Phil Spencer speaks again with Bobby Kotick and the chairman of the board, Brian Kelly , and raises the purchase proposal to 90 dollars per share. $10 more than the initial proposal from last November (page 35). Second negative. Activison continues to believe that it is not enough. Aware that the competition was studying their movements around, Microsoft proposes that the negotiation between the two be exclusive until January 15, 2022, thus preventing others from coming up with even more succulent and tentative figures.
In any case, Microsoft makes it clear that the operation would be in cash, not subject to financing and that, as we have finally seen, Microsoft would be at the top of the hierarchy when making decisions; what has finally been called Microsoft Gaming, which includes Xbox Game Studios, Bethesda Softworks and the sum of Activision, Blizzard and King.
Key figure: $95 per share. They shake hands
To reach this range, we had to wait a little longer and slightly raise the second attempt: 95 dollars per share. During the week of December 10 to 15, Activision finalizes a historic decision for the company, founded in 1979, weighing all the possibilities. Reject, maintain their independence, or find in this purchase an oxygen balloon that is not only cheap, given the delicate situation of many of its members. They chose the latter.
On December 15, after asking Microsoft to increase the offer to $100, Kotick is authorized to negotiate face to face with one goal: to reach a minimum of $95 per share. The CEO of Microsoft, Satya Nadella, ends up accepting the dizzying figure that both Kotick and his board were looking for. On the following days the companies mentioned as C, D and E withdraw. On December 20, just before Christmas, the deal was done: $95 per share (a 46% premium over its value the day before) for a total of $68.7 billion >. End of the match.
Kotick’s company was then experiencing its worst moment, with a share price going downhill and without brake: it had fallen 31% on the NASDAQ during the last twelve months. After learning of the agreement this past January 18, 2022, the day after (after the first full day), the reaction of investors was positive, with an upward correction of 25.95% (82.15 dollars per share; the sale closed for $95 a share).
How much money will Bobby Kotick get for the purchase
Bobby Kotick, as the majority shareholder of Activision Blizzard, and according to documents from the United States Securities and Exchange Commission (SEC), has 3,908,698 shares (with date of August 7, 2021). In the event that the acquisition is closed for those 95 dollars per share, the manager would receive 371,326,310 dollars; which can be many more if it is replaced early. Said clause is estimated at 292.9 million dollars as extra charges and benefits.
Journalistic sources assure that Bobby Kotick will remain in his position until 2023, regardless of this purchase. Regulatory agents are expected to give the green light to the operation around June 2023.