Why Activision Acquisition May Be Shareholders' Best Case Scenario
Despite challenges ahead, some investors see Microsoft's (NASDAQ: MSFT) offer to buy Activision (NASDAQ: ATVI) as a good deal. In this clip from "3 Minute Stocks Updates" on Motley Fool Live, recorded on Feb. 16, Motley Fool contributor Toby Bordelon discusses the deal terms of the acquisition expected to close in 2023 and explains why this outcome might be the best case scenario for investors.
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Toby Bordelon: Here's the major deal terms for Activision: $95 a share, that is all cash, $68.7 billion nominal value, take out Activision's cash, you get closer to about $59 billion in net value. It's supposed to close in fiscal year 2023, which will be June of 2023. That's when Microsoft's (NASDAQ: MSFT) fiscal year ends. Bobby Kotick remains CEO for now, but, afterwards, they're going to be part of Microsoft Gaming. They will be led by this team, by Phil Spencer, the new CEO of Microsoft Gaming, and you will see Bobby is not on this chart. He will probably be exiting post-close. He's been under pressure for his handling of the harassment situation, for allegations directed at him personally. This is probably his swan song here. The stock is still trading well below the $95 buyout price. That indicates some skepticism. I'm not selling my shares. I think this deal is going to close. I'm fairly confident in that. Anti-trust is an issue you see here, but I don't think it's going to be a huge one. I think this is good vertical integration. They're not going to be the largest player in gaming even after this is done. You still have Take Two (NASDAQ: TTWO), which we're going to talk about in a little bit. That's a major player out there. Microsoft does have a demonstrated commitment to open platform operations. I think they can make some concessions if necessary to get this deal done. Bottom line, guys, I think the last quarter results indicated that these cultural issues we all know so much about might have been having a business impact finally, with lower revenue, slowing bookings, and I think if you're a shareholder, maybe a deal at the price Microsoft is willing to pay here might be your best case scenario.
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Toby Bordelon owns Activision Blizzard and Microsoft and has the following options: short March 2022 $165 puts on Take-Two Interactive. The Motley Fool owns and recommends Activision Blizzard, Microsoft, and Take-Two Interactive. The Motley Fool recommends the following options: long January 2023 $115 calls on Take-Two Interactive. The Motley Fool has a disclosure policy.
