U.K. blocks Microsoft-Activision deal: Cramer says ‘they don’t need it’

Activision Blizzard Inc (NASDAQ: ATVI) is down about 10% today after the U.K. Competition and Markets Authority said it will not let Microsoft Corp (NASDAQ: MSFT) acquire this gaming giant.

Cramer reacts to the CMA decision

On Wednesday, the regulator concluded that the Microsoft-Activision merger will be a threat to competition as the former could make the latter’s titles exclusive to its Xbox Game Pass.

The announcement arrives only a day after Microsoft reported a strong third quarter (read more). Reacting to today’s development, famed investor Jim Cramer said:

Last night, MSFT said incredible things about gaming and how they’re doing. It was almost as if they knew they may not get this. I think the Microsoft stock justifiably went up because they don’t need it.

Microsoft shares are up nearly 9.0% this morning.

Cramer is willing to buy Activision stock here

Activision Blizzard is now trading roughly at the same price at which it started the year.

Interestingly, Cramer is convinced that the failure to merge with Microsoft Corp is not a big deal for the gaming company either. On CNBC’s “Squawk Box”, he noted:

They don’t need it. I don’t own Activision but I’d buy it right here. If you listen to Strauss Zelnick (Take-Two CEO), he was saying second half could be good. So, I think Activision Blizzard right now is good.

Also on Wednesday, Activision Blizzard reported its financial results for the first quarter that topped Street estimates. Wall Street currently has a consensus “overweight” rating on “ATVI”.  

Cornell Professor sees it differently

Cramer’s view, though, is in striking contrast to Professor Thomas Jungbauer of Cornell University who sees the regulator’s decision today as a meaningful hurdle for Microsoft in becoming the top name in cloud gaming. In his statement obtained by Invezz, he said:

MSFT has been entertaining the idea of fighting a possible injunction filed by the FTC after completion of the deal. This strategy appeared significantly more promising if Microsoft could have pointed to favourable decisions by the CMA and EC.

Late last year, the Federal Trade Commission sued to block the $69 billion acquisition of Activision Blizzard.

It’s noteworthy, though, that Microsoft is not entirely giving up on the acquisition. The tech behemoth has already disclosed plans of appealing the CMA decision today. But Professor Jungbauer notes:

Most analysts had predicted the acquisition to pass both CMA and EC due to licensing deals. Maybe these authorities concur with FTC that MSFT would still gain an unfair advantage, in terms of pricing, development, or platform compatibility.

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