Game publisher canvassed other would-be bidders, but didn’t receive an offer
Late last year, when Activision Blizzard Inc. Bobby Kotick, employee and CEO of Microsoft Corp., was battling allegations that Kotick had known for years about sexual harassment at the company, Microsoft Corp. A group of senior executives suggested that Xbox chief Phil Spencer check in with the embattled CEO
According to a person familiar with the matter, the goal was to provide support to a key partner and make it clear that Microsoft had concerns about the treatment of women at Activision. Another objective: to ensure that if Kotick and the board are ready to sell the company, Microsoft will be in a good position to make an offer. After a few phone calls over a period of two weeks, discussions developed. Microsoft increased interest in the acquisition.
This led to Tuesday's announcement that Microsoft had struck a $68.7 billion deal to acquire Activision, a well-known game publisher responsible for such franchises as Call of Duty and World of Warcraft. It's a combination that propels Microsoft to the top ranks of game makers, gives the company a mobile audience it hasn't had in years, and adds strength as the software giant and rivals race to push the virtual-reality platform into the metaverse. is referred to as.
Although the events that paved the way for a final settlement began in mid-November, senior Microsoft executives had been indicating for months that they were looking for deals. CEO Satya Nadella has been looking for an acquisition since at least the summer of 2020 that would make the software maker stable for consumer users. In November 2021, in an interview at the Paley International Council Summit, Spencer reiterated his frequently stated position that he was looking for acquisitions, with the Xbox in mind, particularly casual and social games in wanted deals. Included - something that was provided by Activision's mobile titles. "We have a lot of ambition," Spencer said at the summit.
At around the same time in November, pressure mounted on Activision after a Wall Street Journal story detailed allegations of rape at a game publisher's studio saying that Kotick had been informed of the alleged incidents, which took place in 2016 and 2017. , as well as an out-of-court settlement, and failed to report them to the Board. The paper cited interviews, company emails, regulatory requests and other internal documents that informed its reporting that the CEO was aware of employee misconduct at several parts of the company. It also noted settlements that included cases in which Kotick was accused of abuse.
Following the explosive report, Spencer circulated an email inside Microsoft saying he was "evaluating all aspects of our relationship with Activision Blizzard and making ongoing proactive adjustments" in light of the disclosures. The two companies have partnered for nearly two decades since Activision sold games for Microsoft's Xbox console — the first Call of Duty was released for the original Xbox. In an email to employees seen by Bloomberg News, Spencer said he and Microsoft's gaming leadership team at Activision were "disturbed and deeply disturbed by the horrific incidents and actions." Other partners said they were evaluating their relationship with Activision and some investors and employees called for Kotick to step down. Kotick said in an interview with Bloomberg on Tuesday that the deal has nothing to do with Activision's controversy or pressure on him as CEO.
Behind the scenes, Spencer was working on a merger approach. Like its other big gaming deals, Microsoft's pitch drew heavily on Spencer's decades-long industry experience. The executive joined Microsoft as an intern in 1988 after Hawking video games and PC gear at a computer mart in Vancouver, Washington.
Yet as Activision battled with players and investors to salvage its reputation -- the stock fell nearly 15% in the month following the Wall Street Journal article -- and weighed in on a potential takeover, Kotick and the board were forced to put the acquirer on Microsoft. As was not sold, two people familiar with the matter said. Activision called to try to find other interested parties, said the people, who asked not to speak about the private conversation. These included Facebook parent Meta Platforms Inc. and at least one other large company. But there was no other serious interest. In an interview, Spencer declined to discuss how the deal fell through. A Meta spokesperson declined to comment, and a representative for Activision did not return a request for comment.
A look at the pressure build-up on Activision Blizzard CEO Bobby Kotick last year
Picking up on Activision's hesitation, Microsoft backtracked on the game publisher, saying it was happy to remain a partner and work on selling more Activision titles on Xbox. Activision was eventually back on the table and teams from both companies worked over the holidays to complete the deal. Microsoft brought in Dan Dees of Goldman Sachs Group Inc., and Activision hired Nancy Peretsman at Allen & Company. While Nadella was involved when needed, merger talks were held between Spencer and Kotick, the person said.
The companies kept the conversation a secret, though Spencer was grilled over Microsoft's relationship with Activision during a New York Times podcast posted on Jan. publicly," Spencer told interviewer Kara Swisher. "We've changed how we do certain things with them and they know about it. So it's not about us shaming other companies." He also refrained from criticizing Kotick personally. is not who the CEO is." "CEOs are elected by the shareholders and the boards."
Nadella's first acquisition as CEO, a $2.5 billion purchase of Minecraft in 2014, came about thanks to Spencer's relationship with that game's creator, Marcus Persson, known to gamers as Notch. Persson went straight to Spencer when he wanted to sell Minecraft, which was previously privately owned and is considered one of the best-selling games of all time. Spencer hired that company's co-founder Robert A. Along with Altman, ZeniMax Media Inc., owner of storied video-game publisher Bethesda Softworks, in 2020. Personally negotiated a $7.5 billion acquisition of K.
While Microsoft discussed the Activision deal, another large video-game company created its own Mobile Play. Last week, Take-Two Interactive Software Inc. announced an agreement to buy mobile game maker Zynga Inc. for $11 billion. Bankers working on that deal reached out to Microsoft to see if Take-Two was interested in bidding for Zynga before sealing the deal, according to the person. Microsoft deferred.