An Activision Blizzard legal filing details how Microsoft’s Phil Spencer contacted the firm in November 2021 to kick off acquisition talks. It’s a fascinating peek at how quickly the talks escalated.
“For over 20 years, Activision Blizzard and Microsoft have maintained an ongoing commercial relationship,” the filing notes. “This relationship began over 20 years ago, and Bobby Kotick, the chief executive officer of Activision Blizzard, and Phil Spencer, the chief executive officer of Microsoft Gaming, maintain a regular dialogue about the commercial relationship and the gaming industry generally. From time to time, Satya Nadella, the chief executive officer of Microsoft, and Mr. Kotick have also spoken about similar matters.”
On November 16, 2021, The Wall Street Journal published an explosive expose detailing the sexual misconduct problems at Activision Blizzard, alleging among other things that CEO Bobby Kotick had been aware of these problems for several years and had done nothing. At that time, Microsoft’s Phil Spencer tweeted publicly and communicated internally that he was “deeply troubled” by the allegations and was evaluating Microsoft’s relationship with Activision Blizzard.
Three days later, he called Kotick to discuss these issues, and he asked Kotick whether he would be interested in discussing “strategic opportunities” with Microsoft CEO Satya Nadella. Kotick said he was, and then he alerted Activision Blizzard’s legal team.
“In a call on November 20, 2021, between Messrs. Kotick and Nadella, Mr. Nadella indicated that Microsoft was interested in exploring a strategic combination with Activision Blizzard,” the legal filing explains. Further calls, on November 22 and November 26, with Mr. Spencer led to the initial offer: Microsoft was considering making an all-cash acquisition proposal for Activision Blizzard at $80 per share. After consulting with his legal team and researching the possibilities, Kotick returned to Microsoft with a counter-offer: it would be willing to sell at $90 to $105 per share.
Spencer said that would work, but that “Microsoft would be more comfortable at the lower end of the range.” Many meetings ensued, at both companies, and between parties from both companies. At some point, four other entities—three companies and one individual, all unnamed—became involved, offering Activision Blizzard “strategic transaction” offers of their own. Another company expressed interest at a later date as well.
After a meeting of Microsoft’s board of directors in early December, the software giant informed Kotick that he could expect a formal acquisition offer “soon.” That offer arrived the next day, when Spencer told Kotick that “Microsoft would be sending a written non-binding indication of interest to acquire Activision Blizzard later that evening at a purchase price of $90.00 per share in cash. Messrs. Kotick and Kelly expressed their disappointment in the proposed price but stated that they would report the proposal to the Activision Blizzard Board of Directors.” The formal acquisition offer arrived later that day.
By December 14, Spencer was getting antsy for a reply. But Activision Blizzard continued to hold internal meetings, debating Microsoft’s offer and the other possibilities. They finally asked Microsoft to raise its offer to $100 per share. Mr. Nadella called Kotick the next day to see whether he would accept an offer under $100 per share, to which he “suggested to Mr. Nadella that Microsoft should provide its best and final offer and reiterated that Activision Blizzard was focused on taking actions that were in the best interests of its stockholders. Mr. Nadella reiterated Microsoft’s desire to move expeditiously.”
Haggling commenced between Nadella and Kotick. Nadella offered $93 per share, but Kotick said he was not authorized to proceed for anything under $95 per share. Nadella agreed, arriving at the final price per share should Activision Blizzard’s shareholders agree to the sale. There were many, many more meetings, but on December 17, the Activision Blizzard Board of Directors authorized management to enter into exclusive discussions with Microsoft on the basis of the $95 per share price proposed by Microsoft.
Microsoft entered into a period of “due diligence from December 27, 2021 through the execution of the merger agreement on January 18, 2022,” the filing explains. The Activision Blizzard Board of Directors, Activision Blizzard, and Microsoft finalized the merger agreement in January, and, prior to the opening of trading on January 18, 2022, the firms “issued a joint press release announcing the execution of the merger agreement.”
“The Activision Blizzard Board of Directors unanimously determined that the terms of the merger agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Activision Blizzard and its stockholders,” the legal filing explains, recommending that its shareholders vote in favor of the acquisition.
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