Microsoft (NASDAQ:MSFT) and Activision Blizzard (NASDAQ:ATVI) are considering the sale of some of their U.K. cloud-gaming rights to ensure that regulators approve their $69 billion merger by the July 18 deadline, Bloomberg reported. Shares of Microsoft and Activision were up 2.1% and 1.6%, respectively, in Friday’s pre-market trading.
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Efforts to Gain U.K. Regulatory Approval
Microsoft and Activision are contemplating giving up some of their cloud-based market rights for games in the U.K. to a telecommunications, gaming, or internet-based computing company.
The U.K. had earlier opposed the merger, citing concerns that the largest deal in the video game industry could hurt competition in the emerging cloud gaming market. However, earlier this week, U.K.’s Competition and Markets Authority (CMA) said that a restructured deal could address its concerns, subject to a new investigation.
On Friday, the CMA extended its final deadline for the review of the deal to August 29 after Microsoft submitted a new “detailed and complex” proposal. That said, the regulator said that it would aim to make a final decision as soon as possible and before its new deadline.
Updates on the FTC Front
On Friday, a U.S. appeals court rejected the Federal Trade Commission’s (FTC) request to temporarily pause Microsoft’s acquisition of Activision. This is the second disappointment this week for the FTC, as earlier this week District Judge Jacqueline Scott Corley denied FTC’s preliminary injunction to block the deal, saying that the FTC did not provide enough evidence to prove that the acquisition would impact competition. On Wednesday, the FTC said that it was appealing Corley’s ruling in the 9th U.S. Circuit Court of Appeals.
Microsoft and Activision first announced their proposed deal in January 2022. If the two companies do not close the merger by the July 18 deadline, either company will have the option to walk away from the deal or negotiate an extension.
What is the Target Price for Microsoft?
Wall Street’s Strong Buy consensus rating on Microsoft stock is based on 31 Buys, three Holds, and one Sell. The average price target of $354.26 implies 3.4% upside. MSFT shares have rallied 43% year-to-date amid growing interest in generative artificial intelligence (AI).
On Friday, UBS analyst Karl Keirstead upgraded Microsoft to Buy from Hold and raised the price target to $400 from $345. The analyst thinks that a more positive stance on MSFT seems justified, given AI catalysts and the stock’s significant underperformance compared to its peer group.
Moreover, the analyst’s latest round of checks on Azure cloud infrastructure spend revealed that while the backdrop remains challenging, it is not deteriorating, indicating that “the worst may be behind us.”
