Microsoft Is Getting More Than Just Games With Its Activision Buyout

Microsoft (MSFT -2.45%) is buying Activision Blizzard (ATVI) in a deal valued at over $70 billion. The purchase isn't just delivering a bigger gaming catalog for the software titan, though.

In this video from "The Virtual Opportunities Show," recorded on Jan. 18, Fool contributor Demitri Kalogeropoulos digs into the details that investors need to understand about this planned acquisition.

Demitri Kalogeropoulos: I'm going to mention the news that I'm sure everyone's heard about today. [It] was the biggest news in the virtual space, but also probably in the entire stock market, I would say, today: Activision's announcement that they struck a deal with Microsoft to be acquired at a price of around $70 billion. Microsoft -- this is by far its biggest acquisition in its almost 50-year history.

They are buying Activision Blizzard -- it's a leading developer and publisher of video games. We've talked about it on this show a couple of times: It's got over 400 million or so in gamer base. It's got a whole bunch -- dozens -- of really big global brands. Some of the biggest you've heard of. Call of Duty is its single biggest brand. That's the perennial leader, the top-selling video game on the sales charts in consoles, basically every year for the last 10 years running. But it also owns, like I said, dozens of others. It's got World of Warcraft, Diablo. It's got a bunch of casual games because they bought King Digital a few years back, so they own Candy Crush. Just a huge content catalog that Microsoft is getting here.

The deal values Activision at about 45% above its closing price just before this news struck. But ... I'm a shareholder myself, so I also know that's below where Activision was trading less than a year ago. It's not even bringing it up to its 52-week high. It was in the almost $100 range about a year ago, late February of last year. But its stock has been pummeled lately because they've had some challenges in their workplace environment. They've had some turnover, and some regulatory issues, [and] they are trying to fix the culture.

But also, there are business issues there, too. They had to delay two of their biggest releases out of this fiscal year 2022, and they're not going to be happening until next year. I thought it's interesting in a lot of ways for what we talk about in the digital space. Because Microsoft CEO Satya Nadella said that the deal is basically aimed at positioning Microsoft better as a bigger metaverse platform. [They] actually used that phrase in the press release, and I think Microsoft is really excited about what they're getting for this $70 billion.

They get, like I mentioned, that 400 million gamer base, and all that intellectual property that they can use. But I think there's a lot to be said about gaming as being people's introduction into the metaverse. I think that's going to be one of the first and easiest, most successful ways that people are going to experience that. It makes sense, I think, for Microsoft to try to really put its flag in the ground there, and have a really big platform to do it.

The other thing to mention here, I think it's pretty interesting, is that Activision stock only rose to about $82 a share today, and the purchase price is $95 a share in cash. There's a pretty big gap there that's telling me that a lot of investors don't believe that this deal is going to actually happen, which is a significant possibility. It's a massive purchase, and there could be some anti-competitive challenges and stuff like that. So there's a significant possibility that it's not going to happen. That's what Wall Street's telling you when they don't push the price anywhere near that actual acquisition price.