Should Microsoft lose its ongoing efforts to merge with Activision Blizzard, it would have significant financial repercussions for the company. Bobby Kotick, Activision Blizzard’s CEO, has confirmed reports that his company would receive a $3 billion “breakup” penalty from Microsoft if the deal falls through. The news of this fee comes after UK regulators blocked the merger due to concerns over its potential impact on the future of cloud gaming.
In a recent interview with CNBC, Kotick discussed the $3 billion penalty and did not challenge the figure. While he is eager to see the merger go ahead, it is evident that regardless of the outcome, Activision Blizzard will benefit significantly from the arrangement. On the other hand, Microsoft would still have to pay the massive penalty and miss out on the potential benefits of acquiring Activision Blizzard.
Microsoft Has To Pay a $3 Billion Penalty If The Merger Fails
During the interview, Kotick was asked what Activision Blizzard would do if it remained independent and collected the $3 billion breakup fee. He said that the company would have around $18 billion in cash by the end of the year and that it would continue to deploy capital for the benefit of its shareholders; a very vague answer, all things considered. This implies that the company is prioritizing shareholder interests, rather than the interests of its workers.
It remains to be seen how this will impact the people who work at Activision Blizzard, particularly as the $3 billion penalty fee would be a significant downgrade from the almost $69 billion that Microsoft would have paid to acquire the company if the deal were to pass. Plus, if the deal falls through, Kotick would remain CEO, despite ongoing controversies surrounding his leadership, including allegations of mishandling abuse claims within the company. Over 1,500 employees called for his resignation in 2021, yet he seemingly is not going anywhere anytime soon.
While it is unclear if Microsoft intends to replace Kotick if the deal is successful, contradictory reports on the matter suggest that he is on thin ice. Kotick was re-elected to the board of directors last year, indicating that his fellow executives still support him. However, it is unknown if this support will continue if Microsoft decides to push him out after a successful merger.