The Sex Scandal That Gave Activision To Microsoft (NASDAQ:MSFT)

Sex scandal and coverup

The Wall Street Journal (NWS) (NWSA) was first to offer examples of alleged misconduct in November 2021. Two months later, Microsoft (NASDAQ:MSFT) announced the acquisition of the company, an elegant solution to getting rid of the embattled board and management.

Who?

Activision Blizzard (NASDAQ:ATVI) makes video games from Call of Duty to Candy Crush.

What?

Microsoft is buying them for $95 per share in cash. They need approvals from the US, the EU, UK, China, and Turkey. Shareholders already approved it.

When?

It will probably close by April, 2023 offering a 34% IRR between now and then.

Target	Ticker	Parity	Spread	IRR
Activision	(ATVI)	$95.00	$19.80	34%

Click to enlarge

Where?

They operate in the Americas, Europe, the Middle East, Africa, and Asia.

Why?

I hate the current antitrust climate. It is run by unhinged fanatics who know and care little about antitrust. The Biden administration “whole-of-government strategy” is to use whatever oversight they have to punish their enemies regardless of statutory mandate. If they want to go after Microsoft, this could be their chance to do some real harm. But that has driven the spread out to about $20 and there’s a lot I’d put up with for $20.

Caveat

This could lead to a vertical foreclosure lawsuit. There is real deal risk as well as timing risk on this one, due to the large and controversial buyer. They have had their antitrust issues before. While regulators are supposed to look at deal-specific concerns in their HSR review, these regulators don’t care. But it would be easier for the government to bring a suit than to win it and the spread is so wide that this is a great opportunity if the deal doesn’t get challenged and will probably be at least okay even if it does.

Conclusion

For the most part, I’m waiting on deals with antitrust issues to set up if and when they get antitrust challenges. Things go from political to serious in front of a judge. But this one got so wide that I couldn’t resist at least some, with plans to add if the government tries to block it.

TL;DR

Buy ATVI.