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Activision-Microsoft deal carries a costly breakup fee

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Mar 22, 2022
Illustration of two people shaking hands on a giant stack of money.

Illustration: Aïda Amer/Axios

Microsoft's $68.8 billion takeover of Activision Blizzard carries a hefty termination fee of at least $2 billion on both sides of the proposed deal, the two companies disclosed in an SEC filing on Monday.

Why it matters: This deal is happening or it's gonna leave a mark on someone.

  • While the size of the breakup fees are in line with recent mergers of this size, one company typically has a much higher fee than the other.
  • For example, AT&T would owe Discovery $1.8 billion if it backed out of its $43 billion merger with WarnerMedia. If Discovery were to have backed out, it would have owed AT&T only $720 million.
  • In this case, both are on the hook for about the same amount.

The latest: The companies also disclosed that in early March, the FTC asked for additional information related to its review.

Details: The deal has a termination date of Jan. 18, 2023, but can be extended twice up until July 18, 2023.

  • Activision Blizzard would owe Microsoft $2.3 billion if it accepted a larger takeover bid from someone else, or if the deal has not closed by the termination date because Activision Blizzard failed to satisfy any merger conditions.
  • Microsoft would owe Activision Blizzard between $2 and $3 billion if it's blocked by regulators. The amount is determined by the exact date the merger was terminated.

Flashback: Ask AT&T what can happen when a deal goes south. The telecom giant had to pay T-Mobile a whopping $3 billion (plus an extra $1 billion worth of spectrum) when their 2011 takeover bid fell through under regulatory scrutiny.

What's next: Activision Blizzard shareholders vote on the deal April 28.

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