During Berkshire Hathaway’s annual shareholder meeting in Omaha, Nebraska, Warren Buffett, the chairman and CEO, disclosed Berkshire (BRKa.N) has a 9.5% stake in Bobby Kotick’s Activision Blizzard (ATVI.O). According to Buffett, the holding company for various businesses, including Fruit of the Loom and Geico, acquired most of that stake following Microsoft’s public commitment to purchase the video game holding company for $68.7 billion. As a result, its shares almost instantly moved higher, and here’s what we know about it.
During the annual Omaha meeting, Buffett told the attendees, “If the deal goes through, we make some money, and if it doesn’t go through, who knows. But if we do file that report, understand very clearly, it was Warren Buffett’s decision, and he doesn’t know what the Justice Department will do.”
While the acquisition is expected to endure harsh antitrust scrutiny from the United States Department of Justice (DOJ), many see Berkshire Hathaway’s investment as a sign of confidence that Microsoft will successfully finalize the $95-per-share takeover of the Southern California-based video game company. The DOJ is looking into allegations of insider trading, and the United States Trade Commission is also reviewing the proposed acquisition of the video game giant. In addition, Microsoft needs approvals in at least 17 jurisdictions before the deal can be finalized. According to the video game company, the merger is expected to be completed in the second quarter of 2023.
According to Reuters, “Buffett’s investment is a form of merger arbitrage and departs from his usual practice of investing in what he believes are strong companies that the market undervalues. [And] the 9.5% stake is worth approximately $5.6 billion based on recent Activision shares outstanding. Buffett said Berkshire will file a report with regulators if the stake reaches 10%.”
Blizzard Activision Is Just One of the Multibillion-Dollar Berkshire Investments
Reported at the Omaha conference, at the end of March, Berkshire had $106 billion in cash and equivalent, and Buffett pledged to keep at least $30 billion on hand.
Additionally, Warren Buffett’s Berkshire Hathaway has made multiple multibillion-dollar investments in the first quarter of 2022. It offered to buy insurance company Alleghany Corporation (Y.N) for $11.6 billion while also amassing significant stakes in Occidental Petroleum Corporation (OXY.N), Chevron Corporation (CVX.N), and the Hewlett-Packard Company (HPQ.N), the computer and printer manufacturer.
According to the video game company, “In light of the proposed transaction with Microsoft, and as is customary during the pendency of an acquisition, Activision Blizzard will not be hosting a conference call, issuing an earnings presentation, or providing financial guidance in conjunction with its first quarter 2022 earnings release.”
Microsoft’s CEO Satya Nadella has said, “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms. We are investing deeply in world-class content, community, and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive, and accessible to all.”
It will give the tech giant access to 20 internal game development studios, and enhance its Xbox console offerings and esports publishing capabilities if the deal is finalized.
