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By Subrat Patnaik and Supantha Mukherjee Jan 18 (Reuters) - Microsoft Corp is buying "Call of Duty" maker Activision Blizzard for $68.7 billion in the biggest https://www.reuters.com/markets/deals/biggest-deals-consolidating-videogame-market-2022-01-10 gaming industry deal in history as global technology giants stake their claims to a virtual future. Microsoft announced on Tuesday that it has signed its biggest deal, and it will be the largest all cash acquisition ever. This will help it increase its influence in the videogaming industry, which is booming, where it is challenging the top players Tencent and Sony. It also represents the American multinational's bet on the "metaverse," virtual online worlds where people can work, play and socialize, as many of its biggest competitors are already doing https://www.reuters.com/technology/whos-building-metaverse-2021-11-01. Satya Nadella, Microsoft Chief Executive, stated that gaming is the most exciting and dynamic type of entertainment across all platforms, and that it will play a key part in the development and expansion of metaverse platforms. Microsoft is one of the largest companies in the world, largely due to its corporate software such as its Azure cloud computing platform and Outlook franchise It is offering $95 per share , which is a 45% premium to Activision's Friday close. Activision shares last traded up 26% to $82.10 This is a huge discount from the price of the offer. This reflects concerns that the deal could get caught in the crosshairs of regulators. Although Microsoft has escaped the scrutiny of Google and Facebook the deal, which will make Microsoft the third-largest gaming corporation in the world, will bring the Xbox maker to the attention of lawmakers, said Andre Barlow, of Doyle, Barlow & Mazard PLLC. "Microsoft is already big in gaming," he said. However, a source familiar with the matter said Microsoft would pay a $3 billion break-fee if the deal falls through, suggesting it is confident of winning antitrust approval. The tech company's shares dropped 1.9 percent in the most recent quarter. The deal comes at a time of weakness for Activision, maker of games like "Overwatch" and "Candy Crush". Before the announcement the shares of the company had plummeted more than 37% since hitting a record high last year after being hit by allegations of sexual harassment of employees and misconduct by several top managers. The company is still investigating the allegations. It announced on Monday that it has fired or exiled more than three dozen employees since July and that it had disciplined another 40 employees. According to a source familiar, Bobby Kotick, Activision's CEO, said that Microsoft approached him about a possible purchase. However, he is likely to leave the company when the deal is concluded. In a conference call with analysts, Microsoft boss Nadella did not directly refer to the scandal, but instead spoke about the importance of culture within the company. "It's crucial for Activision Blizzard to drive forward with its renewed commitment to culture," he said, adding that "the success of this acquisition will depend on it." "METAVERSE RACE FORARMS" Newzoo, a data analytics firm, estimates that the global gaming industry generated $180.3 trillion in revenues in 2021 and expects this to increase to $218.8 million by 2024. Microsoft is already a major player in the industry and is among the three main console manufacturers. It has been making investments including buying "Minecraft" maker Mojang Studios and Zenimax in multibillion-dollar deals in recent years. It also launched a well-known cloud gaming platform that has more than 25 million users. According to Newzoo Microsoft's gaming market share was 6.5% in 2020 and the addition of Activision would have taken it up to 10.7%. Executives praised the company's 400,000,000 monthly active players as a major draw and the role that these communities could play within Microsoft's various metaverse games. Microsoft's Xbox gaming platform might be able to make use of Activision's huge collection of games which could give it a major advantage over Sony's Playstation. Playstation has enjoyed an unending stream of exclusive games for years. "The likes of Netflix have already indicated that they'd like to try gaming However, Microsoft has come through with a very generous offer," said Sophie Lund-Yates Equity analyst at Hargreaves Lansdown. Microsoft's offer is equivalent to 18 times Activision 2021's earnings before interest tax depreciation, amortization, and amortisation (EBITDA). This compares to the 16 times EBITDA estimation of "Grand Theft Auto" maker Take-Two Interactive's cash and shares deal with Zynga last week. https://www.reuters.com/markets/deals/take-two-acquire-zynga-an-enterprise-value-127-billion-2022-01-10 Refinitiv data suggests that the Microsoft-Activision acquisition will be the biggest cash acquisition ever surpassing Bayer's $63.9B offer for Monsanto in 2016 and the $60.4B InBev bid for Anheuser-Busch in 2008. Nvidia and Microsoft have made big bets on this metaverse. RUNESCAPE The excitement surrounding it has gotten more intense since the end of last year, when Facebook changed its name to Meta Platforms to reflect its emphasis on virtual reality. "This is a significant deal for the consumer aspect of the business, and more importantly, Microsoft acquiring Activision really begins the arms race in the metaverse," David Wagner, equity analyst and portfolio manager at Aptus Capital Advisors, said. He added that he believes the deal will be done however he warned that there will be many regulatory eyes on it.