Berkshire owns 9.5% of Activision Blizzard shares in merger arbitrage bet

Warren Buffett on Saturday said Berkshire Hathaway has been increasing its stake in Activision Blizzard in a merger arbitrage play, betting that Microsoft’s proposed acquisition of the video game company will close.

Berkshire now owns about 9.5% of Activision shares, Buffett said at the company’s annual shareholder meeting.

“Occasionally I’ll see an arbitrage deal and do it,” Berkshire’s chairman and CEO said. “Occasionally it looks like the odds are in our favor, but absolutely we can lose money on that company, fairly large sums of money, depending on what happened if the deal blows up.”

In January, Microsoft announced intentions to buy Activision for $95 per share. Activision closed at $75.60 per share on Friday.

Buffett said he has been buying more shares of Activision since the deal was announced as the stock is trading way below Microsoft’s offer. Buying at these levels will yield a bigger return if the deal closes.

“If the deal goes through, we make some money, and if the deal doesn’t go through, who knows what happens,” Buffett said.

“We don’t know what the Justice Department will do, we don’t know what the EU will do, we don’t know what 30 other jurisdictions will do. One thing we do know is that Microsoft has the money,” he said.

In the fourth quarter of 2021, Berkshire first purchased about $1 billion worth of Activision Blizzard stock, in a bet the company was undervalued.

Buffett has said Berkshire “had no prior knowledge” of Microsoft’s plan to buy the company when Berkshire made its initial investment.

Check out all of the CNBC Berkshire Hathaway annual meeting coverage here.