Microsoft Corp. and British regulators have held “productive” talks on potential remedies the tech giant can offer as it seeks to clear the final hurdle to its US$69 billion Activision Blizzard Inc. deal, a lawyer for the U.K. watchdog said.

Microsoft, Activision and the Competition and Markets Authority are seeking to persuade the tribunal to pause a court challenge after the regulator opened the door to new negotiations. The offer for talks came after a legal breakthrough for Microsoft in the US that pushed the companies ever closer to clinching the deal.

Activision rose 2.9 per cent to $92.64 at 10:53 a.m. in New York, just under the $95 a share Microsoft offered when the deal was announced in 2022. Microsoft was little changed. 

The CMA is the only regulator that’s standing in the way of Microsoft getting the deal over the finish line after a week of drama that saw the Federal Trade Commission lose a U.S. court battle and a truce with rival Sony Group Corp. to license the Call of Duty franchise for 10 years. The tribunal now needs to agree to halt its proceedings which will allow talks between the parties to formally begin. 

The U.K. judge at London’s Competition Appeal Tribunal is set to consider whether Microsoft’s proposed restructuring of the biggest gaming deal offers a way to sidestep the U.K.’s original veto decision. The regulator’s lawyers said that Microsoft’s offer gives the parties “real confidence” that its concerns can be addressed. The companies are considering giving up some control of their cloud-gaming business in the U.K. as a way to clinch the deal, Bloomberg has reported.

“The application is intended to allow the CMA and the parties to engage swiftly and constructively in relation to Microsoft’s proposals,” lawyers for the regulator said in written arguments for the hearing.

Meanwhile, in a procedural move that nonetheless adds further momentum to pushing the deal through, the CMA said Friday it had extended its deadline for issuing a final order on the deal until Aug. 29.

The CMA negotiations are going to the wire with Microsoft facing a July 18 deadline to avoid paying a $3 billion breakup fee to Activision. Pushing the deal to completion without the sign-off of the CMA is risky, as it would breach U.K. laws and could lead to a fine of 5 per cent of the companies’ combined global revenue.

“Microsoft is very concerned to minimize the period of uncertainty faced by the deal,” the company’s lawyers said in their written submission. “Arrangements to ensure that a restructured arrangement could pass through Phase I rapidly can be put in place,” they said, referring to the first stage CMA’s merger process.

Microsoft’s proposals will likely mean the acquisition is “modified in materially relevant respects,” the CMA’s lawyers said.

“The CMA is unable to take a final view on which route is appropriate until it has seen Microsoft’s proposals for a restructured acquisition,” they said.

The CMA is seeking a pause of as long as two months, the regulator’s lawyer David Bailey said.