Microsoft is paying Â£50.4 billion for Activision Blizzard â€“ the maker of Candy Crush and Call Of Duty â€“ as it enters the fiercely competitive businesses of mobile gaming and virtual-reality technology.
The all-cash deal will turn Microsoft, makers of the Xbox, into one of the worldâ€™s largest video game companies.
It will compete with tech rivals such as Meta â€“ formerly known as Facebook- in creating immersive virtual worlds for work and play.
If the deal survives scrutiny from US and European regulators in the coming months, it could be one of the most expensive tech acquisitions in history since Dell bought data storage company EMC in 2016 for around Â£44 billion.
Activision has been buffeted for months by allegations of misconduct and unequal pay, which was addressed yesterday by Microsoft chief executive Satya Nadella in a conference call with investors.
â€˜The culture of our organisation is my number one priority,â€™ he said, adding â€˜itâ€™s critical for Activision Blizzard to drive forwardâ€™ on commitments to improve its workplace culture.
Activision disclosed last year that it was being investigated by the US Securities and Exchange Commission over complaints of workplace discrimination.
Chief executive Bobby Kotick, who has been in his role since 1991, will retain his role in spite of pressure to resign after a report into the behaviour.
Kotick and his team will reportedly maintain their focus on driving efforts to strengthen the California companyâ€™s culture and accelerate business growth.
Wall Street saw the acquisition as a big win for Activision Blizzard and shares soared in early trading on Tuesday.
Microsoft spent Â£5.5 billion to acquire ZeniMax Media last year. It is the parent company of video game publisher Bethesda Softworks, which is behind popular video games The Elder Scrolls, Doom and Fallout.
Microsoft said both acquisitions will help beef up its Xbox Game Pass subscription service.
Started in 1979 by former Atari employees, Activision has been behind games such as Guitar Hero and the World Of Warcraft franchise.
Microsoft said it expects the deal to close in the 2023 fiscal year, which starts in July.
The Activision business unit would then report to Phil Spencer, who has led Microsoftâ€™s Xbox division and will serve as chief executive of Microsoft Gaming.