Proactive Investors - Microsoft Corporation's (NASDAQ:MSFT) apparent defeat of US regulators over its acquisition of Activision Blizzard (NASDAQ:ATVI) will "open the floodgates" to more tech mergers and acquisitions, according to investment bank Wedbush.
The district court judge in the Federal Trade Commission case seeking to block the acquisition of the Call of Duty video game maker ruled in favour of the Redmond, Washington company, rejecting the FTC's request for a preliminary injunction as the antitrust regulator was found to have not demonstrated a likelihood that the merger would substantially lessen competition.
UK competition regulators had also blocked the deal, but a deal to carve out its Game Pass subscription service in the UK is thought to be close.
Microsoft is expected to close the deal next week, said Wedbush analyst Dan Ives.
"Redmond was in a fight tooth and nail style versus the FTC," he said. "We also believe this is a major black eye for the FTC and anti-tech chair Lina Khan as this case in the eyes of many in the industry and the Street never had merit to block the deal."
What's more, Ives said he believes "the floodgates now could open for Big Tech to do more M&A looking ahead as this ruling was also an important victory for the broader tech industry that will be felt in the Beltway for years to come."
With the injunction denied, Microsoft should be able to close the deal before the July 18 deadline which would require it to pay Activision US$3bn, renegotiate the deal and seek the Activision board’s approval for a new deal price.
On the objections of the UK's Competition & Markets Authority (CMA) ruling, which blocked the merger, Wedbush believe Microsoft can carve out Game Pass UK PLC as a separate operating subsidiary with an independent board charged with keeping Activision content off the Game Pass platform.
"This would likely satisfy the CMA, and the deal should close by next Tuesday."