Microsoft could renegotiate Activision buyout at higher share premium to extend deadline

The Microsoft-Activision merger has a deadline of July 18, but the termination date can be extended and the parties can renegotiate a deal.

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Microsoft gave itself 18 months to close its proposed merger with games publisher Activision Blizzard King in the largest-ever video games acquisition in the history of the industry. The deal sees Microsoft buying out Activision shares at a $95 per share premium, culminating in a deal worth $68.7 billion. The merger has been tested by regulators both foreign and domestic, and now the FTC's aggressive pursuit could keep the tech firms from closing before the merger's July 18 termination date.

The FTC is currently appealing its loss in federal court with the aim of temporarily blocking Microsoft and Activision from merging until the Appeals Court makes a decision of the Commission's appeal request. This could take months. The Federal Trade Commission's tactic is seen as running out the clock and pushing the companies towards one of two outcomes: The merger dissolving, and Microsoft paying Activision a $3 billion termination fee, or both Microsoft and Activision extending the date through new negotiations.

To keep Microsoft and Activision from combining after a temporary restraining order lifts this Friday, the FTC has filed for an emergency motion to stay in both Judge Corley's district court and the Ninth Circuit Appeals Court. Essentially, the FTC wants to keep Microsoft and Activision from merging even after the termination date expires.

There's a third outcome: The FTC is denied its emergency order request and Microsoft and Activision merge over the weekend.

If the FTC is granted its motion, however, it may be unlikely that the Appeals Courts make a determination in a matter of days, especially given the back-and-forth nature of litigation (the FTC makes a filing, then defendants Microsoft and Activision make a filing, so on and so forth).

If the FTC is granted its motion, then Microsoft and Activision may extend the deadline by negotiating new deal terms. One of these terms could be a higher premium price for Activision's share buyout.

In his recent newsletter (sign up here), video games industry expert Joost van Dreunen outlines a possible scenario:

"And speaking of money, since the ABK/MSFT saga isn't quite over yet, Bobby Kotick would stand to gain from pushing the deal date further out in exchange for a premium. He has the leverage to ask for a higher price for Microsoft to avoid the $2.7 billion termination fee. Some estimates I've heard would put the share price 10 percent higher, at $107. But I'm not convinced that it is money that motivated Kotick at this point. He doesn't want to be richer. He wants to be right. At least, judging by the comments he's made throughout the past year (e.g., the UK is "closed for business."), and Kotick is most likely to cool out and wait for his check to show up."