The stock market’s love of mergers and acquisitions has slowed in the past year, amid rising interest rates and declining stock prices. But there have been a few deals announced. Mergers can make companies bigger overall by providing an immediate and established source of revenue.
Some deals will end up garnering regulatory scrutiny. Regulators want to ensure that a company doesn’t come to dominate the market it’s in via acquisitions.
The FTC has come out against Microsoft’s (MSFT) proposed acquisition of gaming studio Activision Blizzard (ATVI).
Valued at $69 billion, shares of the company never quite reached their buyout price given the possibility of a halt for regulatory purposes.
But shares still look like a fair value. Video game studios are an oligopoly, and shares look reasonably priced at 20 times forward earnings.
Action to take: Another potential buyer for the company may come along, or it may continue as an independent entity. Either way, ATVI can likely still continue to grow its value over time, if not as part of Microsoft. Investors can get shares now for a 0.6 percent dividend and potential upside.
For traders, shares may move higher on a buyout offer from a company that doesn’t already have a huge presence in the gaming space. The March $85 calls, last going for about $3.25, offer mid-double-digit returns from current prices in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.