Two months ago, the Wall Street Journal published a bombshell report accusing Activision Blizzard CEO Bobby Kotick of widespread mismanagement surrounding sexual assault and discrimination allegations and lawsuits involving the company. Now, new reports suggest that aftershocks from that November report were key to bringing Microsoft and Activision together for an industry-changing $68.7 billion acquisition deal first announced on Monday.
This timeline is consistent with behind-the-scenes reports from The Wall Street Journal and Bloomberg, both of which suggest the deal closed quickly within two months of the Journal’s November report on Kotick.
According to “a person familiar with the matter” quoted by Bloomberg, Microsoft initially reached out in part to offer support and address “concerns about the treatment of women at Activision” after this report. But Microsoft also wanted to “ensure that if Kotick and the board were willing to sell the company, Microsoft would be in a good position to make an offer,” as Bloomberg put it.
After months of damaging headlines, Activision’s stock price, which peaked at $103.81 in February, had fallen to just $65.39 as of Friday. This may have played a role in what Bloomberg describes as “the appearance of Microsoft[ing] to the Activision situation, given all the negative attention and pressure on Kotick, and I wonder[ing] if the embattled CEO was willing to cut a deal.”
Activision has been looking for other offers after Microsoft’s initial approach, according to Bloomberg’s report, including talks with Facebook’s parent company Meta. But when “no other serious interest materialized,” as Bloomberg put it, Microsoft and Activision reportedly “worked over the holidays” to complete the deal, Kotick and Microsoft Gaming CEO Phil Spencer making the core of high-level negotiations.
“While there were – there are – many other companies that would be interested in a company like ours, Microsoft was clearly the company that made the most sense,” Kotick said in a joint CNBC interview alongside Spencer yesterday.
In that same interview, Spencer admitted that “it’s a deal that happened pretty quickly…I would say we really had some formative discussions about that specific opportunity at the end of the year, and we just felt like it was the right time to add the right resources and capabilities to both companies.”
A graceful exit?
spencer has been quite public on Microsoft’s interest in massive game acquisitions for some time, and the Journal reports that it had discussed a potential deal with Activision in the past. But Kotick was “cool about the idea until Microsoft gave him a gracious exit,” according to the Journal’s sources.
Such an outing could be quite lucrative for Kotick; his share of the company is worth more than $400 million at Microsoft’s proposed cash price of $95 per share. Activision could also owe Kotick up to $300 million if terminated without cause, although it is unclear how the merger agreement might affect this contractual clause.
A separate Bloomberg report cites “someone familiar with the talks” to corroborate that “Kotick initially didn’t want to sell”. But that report also suggests that “Kotick had little influence on his board amid ongoing public scrutiny of his company.”
The Journal’s sources also said Activision board members who had publicly offered their support for Kotick were “individually starting to worry” about his status at the helm of the company after the November report. More than that, “in recent weeks, some directors have realized that the public backlash may continue and that Mr. Kotick may be forced to resign,” according to the Journal.
Bloomberg wrote that Kotick mentioned in an interview that “the deal has nothing to do with the controversy surrounding Activision or calls for its resignation.” An Activision spokesperson also told the Journal that “the board did not consider Mr. Kotick’s status in unanimously approving the Microsoft transaction” and also took issue with the specific timeline cited in the report. .
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