Shares of Activision Blizzard (NASDAQ:ATVI) are trading over 11% lower in pre-market on Wednesday after the United Kingdom's Competition and Markets Authority (CMA) issued an order blocking the pending acquisition of the company by Microsoft (NASDAQ:MSFT) from going through.
In its final ruling issued on Wednesday, the CMA cited "concerns the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come," as reasoning for the block.
The agency ruled that having Activision's content available on Xbox Game Pass, Microsoft's own gaming ecosystem, "while beneficial to some customers, would not outweigh the overall harm to competition arising from this merger, particularly given the incentive for Microsoft to increase the cost of a Game Pass subscription post-merger to reflect the addition of Activision’s valuable games."
Commenting on Microsoft's prior efforts to address the CMA's complaints, the agency added: "Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector... (and) had significant shortcomings and would require regulatory oversight by CMA," with the Panel Chair Martin Coleman saying: "Cloud gaming needs a free, competitive market to drive innovation and choice."
The $68.7B deal, announced back in January 2022, has long faced roadblocks in the UK, with an in-depth review of the proposed merger launched in September 2022.
Shares of ATVI are losing around 11% following the news. Trading around $78, the stock is still far above the $65 area, where it was prior to the initial merger announcement.
MSFT, by contrast, is gaining over 7%.