In $69 billion metaverse bet, Microsoft will buy Activision Blizzard

Microsoft is staking its claim to a future dominated by virtual and augmented reality by acquiring "Call of Duty" company Activision Blizzard for $68.7 billion.

In $69 billion metaverse bet, Microsoft will buy Activision Blizzard

Microsoft is staking its claim to a future dominated by virtual and augmented reality by acquiring "Call of Duty" company Activision Blizzard for $68.7 billion.

On Tuesday, Microsoft announced its largest-ever deal and the largest all-cash acquisition on record. The move will bolster the company's position in the booming video gaming market, where it will compete against Tencent and Sony.

The move also represents the multinational corporation's attempt to get a leg up on the burgeoning metaverse, a virtual world where people can play, work, and socialize. Many of its biggest competitors are already doing this.

"Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms," Microsoft Chief Executive Satya Nadella said.

The company decided to pay Activision investors in cash rather than using its increased stock value. Microsoft is able to handle the load, even though it is substantial.

Approximately 85% of the company's $130 billion in cash and equivalents came from short-term investments at the end of September 2021.

Microsoft is offering $95 per share–a 45% premium to Activision's Friday share price.

Activision's shares last rose 26% at $82.10, which is still a significant discount to the offer price, signaling some to worry that the deal could get tangled up in regulators' crosshairs.

Microsoft is confident that it will win antitrust approval, as a source familiar with the matter said it will pay a $3 billion break-fee if the deal falls through.

On Tuesday, Microsoft shares fell nearly 2%.

The deal comes at a difficult time for Activision, which makes games like Overwatch and Candy Crush. Several top managers of the gaming company have been accused of misconduct and allegations of sexual harassment of employees, leading to a more than 37% slump in the shares since the company reached a record high last year.

Over three dozen workers have been terminated or pushed out since July, as well as another  40 being disciplined.

According to a source familiar with the plans, CEO Bobby Kotick will remain at Activision following the deal, although he is expected to leave after the deal closes.