CitiBank (via SeekingAlpha) has reported that the chances of Microsoft acquiring Activision Blizzard have increased from 50 to 70% following the UK CMA’s provisional findings. Last week, the UK CMA reported that its provisional findings concluded that the deal would “not result in a substantial lessening of competition in relation to console gaming in the UK”. The UK CMA will report its final report on April 26, 2023.
In addition to increasing its likelihood of the acquisition being successful, CitiBank has also increased its price target from $88 to $91.
“For investors willing to own Activision through into 2024, we see $11 of upside ($95 less $84) and $2 of downside ($82 less $84),” analyst Jason Bazinet wrote. “In effect, Activision is akin to a very low-cost call option on the Microsoft transaction gaining approval.”
According to Bazinet, Activision is worth $82 a share under a no-deal scenario, but said, “If the deal gets rejected by any one of the regulators, we would not be surprised if the equity first trades to $68”. He continued, “However, we would expect shares to eventually recover to $82 ($68 + $14 of cash), as we suspect fundamental investors will ascribe value to Activision’s net cash.”
Activision (ATVI) shares gained 6% following the CMA’s provisional findings on Friday, closing at $84.39.
For more from Insider Gaming, check out the news that Microsoft has officially ended its $1 Game Pass deal.
