Industry events
On January 18, Microsoft Corporation (MSFT. O) announced that it would acquire game developer ATVi. O in full cash at the price of US $95 per share, with a total transaction value of US $68.7 billion and an equity value of US $75 billion. It is the largest acquisition in Microsoft’s history. The acquisition has been approved by the board of directors of Microsoft and Activision Blizzard.
Activision Blizzard encountered a crisis of trust, and Microsoft’s acquisition price was reasonable, making it the third largest game company
Activision Blizzard, the world’s largest game developer and publisher, changed its name after the merger of Activision, an American video game publisher, with Vivendi games in 2008. However, since 2021, the company has encountered allegations of workplace harassment, which has triggered a crisis of trust among the management and a wave of resignation. Spencer, head of Xbox department, once said that it needs to reassess its cooperation relationship with the company, The prospect of Activision Blizzard’s development and M & a transaction is not clear.
In this transaction, according to the calculation of all equity prices, the purchase price corresponds to the consistent expectation of pe23x for 22 years. The implied valuation is below the historical PE valuation center, and the purchase price is reasonable. After the completion of this acquisition, Microsoft will obtain the iconic franchise rights of Activision, Blizzard, King studio and its games, covering many global IPS such as Warcraft, Diablo, watchman, call of duty and candycrush. It will have 30 internal game development studios and publishing and sports production capabilities, Microsoft has become the third largest game company in the world after Tencent and Sony.
Microsoft continues to scale up its game business and build a meta universe based on content, community and cloud
Before this acquisition, Microsoft continued to layout its game business. In September 2014, Microsoft spent $2.5 billion to acquire game manufacturer mojang, and in September 2020, it spent $7.5 billion to acquire game manufacturer zenimax. Since 16 years ago, it has acquired more than 10 game and content enterprises. This acquisition once again demonstrates Microsoft’s determination to overweight games and content layout.
In this acquisition, the CEO of Activision Blizzard proposed that the game has been transformed into an important social experience and will become an important part of building a metauniverse. Microsoft is committed to investing in world-class content, community and cloud. It believes that games have become the largest and fastest-growing form of entertainment in the world driven by the new generation of immersive experience. This acquisition will accelerate the growth of Microsoft’s game business in the fields of mobile, PC, host and cloud. Xbox platform will also cooperate with Activision Blizzard games and new works in the future, Lay the foundation for its meta universe layout.
Investment advice
In the 2022 strategy report, we stressed that metauniverse benefits from the maturity of equipment and technology, the accelerated arrival of capital and talents, and games and social networking are the most clear application scenarios. The entry of global technology giants led by Microsoft through games and social networking is fully confirmed. China’s social and game leaders with leading layout and sufficient technical reserves are expected to usher in valuation repair, It is suggested to pay attention to Tencent holdings, Netease, Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) , Perfect World Co.Ltd(002624) , etc.
Risk tips
Repeated overseas outbreaks; The acquisition is less than expected; Long term suspension of Chinese version number, etc
