Call of Duty, Diablo being removed from Sony PlayStation on Activision Blizzard, Microsoft deal?

Activision Blizzard games are expected to remain available on Sony PlayStation even after the sale to Microsoft is finalized.

Sony Group Corp. expects Activision Blizzard Inc. games to remain available on its PlayStation platform even after the completion of the publisher’s proposed sale to Microsoft Corp. “We expect Microsoft to abide by contractual agreements and continue to ensure that Activision games are multiplatform,” a Sony spokesperson told the Wall Street Journal on Thursday. Sony shares plunged 13% in Tokyo on Wednesday after the announcement. from Microsoft of a $69 billion deal to acquire Activision and its portfolio of major franchises such as Call of Duty, Diablo, World of Warcraft and Candy Crush Saga.The blockbuster deal was seen as a major coup to bring exclusive content to the Microsoft Xbox Game Pass subscription service and a threat to Sony’s traditional console business model.

Microsoft has not yet detailed how it plans to use Activision’s content and games in its broader entertainment strategy, although Xbox chief Phil Spencer said as part of the announcement that “Activision Blizzard games will be played on different platforms and we intend to continue to move those communities forward.”

Microsoft-Activision deal gives merger speculators a new darling

(Reuters) Hedge funds that earn returns by speculating on precarious acquisitions got a gift this week when Microsoft Corp. agreed to buy “Call of Duty” maker Activision Blizzard for $68.7 billion in cash.

The transaction requires approval from the competition authorities in the United States and other key jurisdictions, including the European Union and China. It comes as President Joe Biden’s administration is tightening its investigations into major mergers, blaming some of them for price hikes among consumers fueling inflation.

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Activision’s shares ended Wednesday at $82.15, well below the $95 per share deal price, amid concerns that regulators would shoot down a combination that would create the third-largest gaming company, after Tencent and Sony Group Corp.

This leads to a 57% chance of closing the deal, based on Activision’s closing price of $65.39 before the deal was announced.

The wide spread gives investors willing to bet on whether the deal will close the opportunity to earn double-digit returns. At a time when so-called merger arbitrage strategies have lagged the returns of the broader stock market, this is an attractive but also risky proposition.

Last year, merger arbitrage funds returned nearly 10% according to Hedge Fund Research data, outperforming returns recorded in 2020, 2019 and 2018, but lagging behind the broader S&P 500 stock market’s 27% gain in 2021.

For some investors, Aon’s $30 billion acquisition of Willis Towers Watson, while the US Department of Justice filed a lawsuit to block the deal, hurt returns.

Now they want to come back, in the hope that this deal will force competitors to make deals themselves as well.

“The positive outlook for event-driven and merger arbitrage-oriented companies in 2022 has accelerated with the Microsoft-Activision deal,” said Ken Heinz, president of Hedge Fund Research Inc.

Microsoft and Activision gave themselves until June 2023 to complete the transaction, giving hedge funds months to complicate how regulators will react to Microsoft bundling its Xbox platform with Activision’s popular games such as World of Warcraft and Diablo.

Investors may soon get hints about the Biden administration’s stance as the Federal Trade Commission is expected to weigh in on the planned $4.4 billion acquisition of Aerojet Rocketdyne by defense contractor Lockheed Martin and the Justice Department decides on the $13 billion bid from health insurer UnitedHealth for analytics and technology in healthcare provider Change Healthcare.

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Hedge funds such as Millennium, Tiedemann Advisors and Pentwater Capital spend a large portion of their capital on mergers, and many have owned Microsoft and Activision for some time. Mutual funds The Merger Fund by Westchester Capital Management and The Arbitrage Funds by Water Island Capital offer similar strategies.

Representatives of the companies declined to comment or did not respond to requests for comment.

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