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ATVI shares are down more than 8% following the news, while Microsoft is up over 6%.
Reacting to the news, Truist analysts said his firm is maintaining a Buy rating on ATVI on the risk-reward into Diablo and buyback or appeal.
They commented on MSFT’s potential appeal: “Cases before the Tribunal often raise complicated issues and may involve a significant number of parties, so it may be difficult to know at the outset how long a particular case will be last. However, the Tribunal does seek to manage the cases tightly and, in general aims, to complete ‘straightforward’ cases in less than nine months.”
“Even if an applicant successfully appeals the CMA’s substantive assessment in a merger, the Tribunal will not make a fresh decision, but will instead remit the case back to the CMA for further review – typically by the same decision makers and case team as previously.”
Meanwhile, Oppenheimer analysts said the firm is taking the opportunity to update its view on ATVI’s stand-alone value.
“We conclude that ATVI will trade in a range of $65-$101 on a stand-alone basis with different sets of multiple assumptions and 2024 EPS estimates. After we ignore the overly conservative and aggressive assumptions, we believe a stand-alone value in the mid-$80s is more appropriate as a base case for investors. We also see upside to that price if Diablo 4 outperforms expectations in 2023 and 2024. Given that the MSFT-ATVI deal is still pending for more regulatory decisions, our rating on ATVI remains Not Rated,” analysts wrote.
