Microsoft Corp is buying “Call of Duty” maker Activision Blizzard for $68.7 billion in the biggest gaming industry deal in history as global technology giants stake their claims to a virtual future.

The deal announced by Microsoft on Tuesday, its biggest-ever and set to be the largest all-cash acquisition on record, will bolster its firepower in the booming videogaming market where it takes on leaders Tencent and Sony.

It also represents the American multinational’s bet on the “metaverse”, virtual online worlds where people can work, play and socialise, as many of its biggest competitors are already doing

“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” Microsoft chief executive Satya Nadella said.

Microsoft’s offer of $95 per share represents a premium of 45 per cent to Activision’s Friday close. Activision’s shares were last up 27 per cent at $83.11, still a steep discount to the offer price, reflecting concerns the deal could get stuck in regulators’ crosshairs.

Microsoft has so far avoided the type of scrutiny faced by Google and Facebook but this deal, which would make it the world’s third largest gaming company, will put the Xbox maker on lawmakers’ radars, said Andre Barlow of the law firm Doyle, Barlow & Mazard PLLC.

“Microsoft is already big in gaming,” he said.

However, a source familiar with the matter said Microsoft would pay a $3 billion break-fee if the deal falls through, suggesting it is confident of winning antitrust approval.

The tech major’s shares were last down 1.3 per cent.

The deal comes at a time of weakness for Activision, maker of games such as “Overwatch” and “Candy Crush”. Before the deal was announced, its shares had slumped more than 37 per cent since reaching a record high last year, hit by allegations of sexual harassment of employees and misconduct by several top managers.

The company is still addressing those allegations and said on Monday it had fired or pushed out more than three dozen employees and disciplined another 40 since July.

CEO Bobby Kotick, who said Microsoft reached out to him for a possible buyout, would continue to be the CEO of Activision following the deal.

In a conference call with analysts, Microsoft boss Nadella did not directly refer to the scandal but talked about the importance of culture in the company.