EU Sets March Deadline On Microsoft’s $7.5B Deal To Buy ZeniMax

The European Union (EU) regulator has set a March 5 provisional deadline to take a decision on whether to allow Microsoft to buy ZeniMax Media for $7.5 billion.

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Shares of Microsoft (MSFT) were up by 1.4% in pre-market trading on Monday. The company announced the acquisition of ZeniMax Media last year for $7.5 billion in cash. ZeniMax Media is the parent company of Bethesda Softworks, a privately held game developer and publisher. The company had stated during the announcement that with the acquisition, Bethesda’s franchises including The Elder Scrolls and Fallout would be added to Microsoft’s Xbox Game Pass, if the deal would go through.

At the end of the second quarter of FY21, Xbox sales were up 40% from the year-ago period. The company’s gaming business saw revenues in excess of $5 billion during the quarter. Xbox Game Pass had more than 18 million subscribers while Xbox Live had more than 100 million MAUs (Monthly Active Users) at the end of the fiscal second quarter. (See Microsoft stock analysis on TipRanks)

Following the quarterly results on Jan. 26, Wedbush analyst Daniel Ives reiterated a Buy rating and raised the price target from $270 to $285 (22.9% upside potential) on the stock. Ives said, “With a vaccine being deployed globally, the WFH [work from home] shift will clearly moderate as many return to the office during the course of 2021.”

“However, from an IT [information technology] architecture perspective, the cloud shift will continue to gain speed as many CIOs [chief information officers] aggressively go down the digital transformation path with MSFT’s Azure/Office 365 footprint as the main enterprise cloud artery,” the analyst added.

The rest of the Street is firmly bullish about the stock with a Strong Buy consensus rating. That’s based on 24 analysts recommending a Buy. The average analyst price target of $280.73 implies 21% upside potential to current levels.