The listed company with the second-largest market capitalization in the world plans to use 53% of its book cash to buy a pure game company with one of the highest market capitalization in the world. The information density on this matter is huge. $Microsoft (MSFT.US)$ $TENCENT (00700.HK)$
In reading this deal worth 68.7 billion US dollars, Activision Blizzard's perspective is irrelevant. It's just a pawn in Game of Thrones, to put it bluntly. Microsoft was thrilled to throw a lot of money and decided to start a new game. We'd better be able to anticipate that a new round of clash of kings has begun.
From Microsoft alone to a wide range of industries, let's try to deduce some of the following logic on paper.
01 Is this sale a good deal?
Microsoft is the world's second-largest listed company with cash reserves. It lags behind Buffett Berkshire Hathaway's 149 billion by about 10 billion US dollars. Google and Apple are still behind. The whereabouts of these royal wealth giants have accumulated cash on their books is seen as a weather vane, and the market has always been highly sensitive.
From a financial perspective alone, if Microsoft were to finally eat Activision Blizzard, it would be a good deal.
Activision Blizzard's revenue in 2020 was close to 8.1 billion US dollars, and net profit was around 2.2 billion US dollars; the total revenue for the first 3 quarters of 2021 was about 6.7 billion US dollars, and the total profit was about 2.2 billion US dollars, which is basically the same as the full year of 2020. Maintaining an EPS growth rate of 25% or more in 2021 is quite optimistic.
Judging from financial indicators, the game is still a rare high-growth track. OK...