Microsoft Corp MSFT

Wide-moat Microsoft has announced its largest deal ever: the acquisition of Activision Blizzard, one of the biggest video game publishers in the world, in an all-cash transaction valuing the target at $68.7 billion in enterprise value, or $95 per share. Given Microsoft's $2.3 trillion market capitalization, we do not view this deal as transformative, especially since stand-alone Microsoft was already a key player in video games. While Microsoft is paying a 45% premium to Activision Blizzard's previous closing price, the $95 valuation squares with Morningstar's $92 predeal fair value estimate and management expects the deal to be immediately accretive to non-GAAP EPS. We are maintaining our $345 fair value estimate for Microsoft.