Microsoft set to battle with FTC in court over $69B Activision deal (update)

Update 6:55pm: Updates shares, adds Microsoft comment.

Microsoft (NASDAQ:MSFT) will face off against the Federal Trade Commission in a San Francisco court on Thursday as the regulator tries to block the $69 billion planned acquisition of Activision (NASDAQ:ATVI). Activision rose 1.7%.

Thursday marks the first day of a scheduled five-day trial in front of U.S District Judge Jacqueline S. Corley in San Francisco. The trial is scheduled to start at 8:30 a.m. Pacific time.

The FTC last Monday filed for a preliminary injunction to block the $69 billion acquisition of videogame behemoth Activision (ATVI), saying that the regulator feared Microsoft (MSFT) may try to close the purchase even though the FTC had originally challenged it in December.

Microsoft (MSFT) CEO Satya Nadella, Activision (ATVI) CEO Bobby Kotick, and Phil Spencer, who heads Microsoft's Xbox unit, are set to appear in court as they are listed as witnesses in a court filing from Tuesday. Jim Ryan, head of Sony's (SONY) videogame business, is expected to testify through a video deposition. The Japanese electronics giant has voice its opposition to the deal for months.

The trial is crucial for the deal because, often times, a company will walk away from a transaction if a court grants a preliminary injunction. The FTC could also decide to give up its fight if it loses its challenge.

The Activision/Microsoft deal has a termination deadline of July 18, after which the parties can walk away, extend, or renegotiate the deal.

"This is going to decide whether the deal goes forward," Beth Wilkinson, an attorney representing Microsoft (MSFT) said at the court hearing on Thursday. "Because If we can't close by July 18 and the court enjoins the transaction to go through the three year administrative nightmare, nobody could withstand that and we certainly can't."

While the FTC trial is important, M&A investors are also keenly focused on the appeals court in the UK, where the country's antitrust regulator blocked the deal earlier this year. A UK appeals court is set to hear the appeal next month.

Judge Corley is the same judge who last month denied a preliminary injunction in a separate lawsuit from video gamers who were seeking to block the Activision (ATVI) deal. In March, Corley originally granted Microsoft's (MSFT) motion to dismiss the case, though she gave gamers 20 days to amend the lawsuit.

“Today showed Sony has known all along we’ll stand by our promise to keep games on its platform and made clear its work to lobby against the deal is only to protect its dominant position in the market," a Microsoft spokesperson said Thursday in a statement.

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