Activision Blizzard (ATVI) is giving Microsoft (MSFT) an extra three months to close its $69 billion purchase of the video game giant, despite missing an earlier deadline.

But the new deadline of Oct. 18 comes with a catch: increased breakup fees if the deal fails to go through.

Microsoft was originally set to finalize its purchase of the "Call of Duty" maker on July 18, but regulatory actions in the UK and US slowed the ability to get the deal done.

Under the terms of the new agreement, the prior $3 billion breakup fee now increases to $3.5 billion if Microsoft fails to close the purchase by Aug. 29, and $4.5 billion if it can't get it done by Sept. 15.

“The recent decision in the US and approvals in 40 countries all validate that the deal is good for competition, players, and the future of gaming,” a spokesperson for Activision Blizzard said in an email to Yahoo Finance.

“We’re confident in our next steps and that our deal will quickly close.”

Microsoft is currently negotiating approval to close the deal through the UK's Competition and Markets Authority (CMA). The CMA initially moved to block the acquisition saying that it would hurt competition in the gaming market. Microsoft subsequently appealed the move.

A court in London, which is handling the appeal, agreed to put the matter on hold for two months, giving Microsoft and the CMA time to address any lingering concerns. Regulators in the European Union and Japan have already given the merger agreement the green light.

In an email to Microsoft employees, Xbox chief Phil Spencer said that the companies are optimistic that the deal will get done.

"While we can technically close in the United States due to recent legal developments, this extension gives us additional time to resolve the remaining regulatory concerns in the UK."

The deal isn't a surefire win for Microsoft, though.

The Federal Trade Commission (FTC) is still challenging the merger in a lawsuit filed in the agency's in-house court even after its case was weakened when a federal appellate court denied its request to pause the tie-up. The FTC has alleged that combining the two companies would hurt competition in three gaming markets: game consoles, subscription content, and cloud gaming.

Activision Blizzard is the largest game publisher in North America. In addition to the hit “Call of Duty” franchise, the company also offers “World of Warcraft,” “Diablo,” and “Overwatch.” The firm, however, also owns mobile game publisher King, the company behind “Candy Crush.”

Adding those franchises to Microsoft’s existing first-party titles including “Halo” and “Forza” would catapult Microsoft past Nintendo (NTDOY) to make the company the second-largest home console maker by revenue behind Sony (SONY). It would also put Microsoft behind Tencent and Sony as the third-largest gaming company by global revenue.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

Daniel Howley is the tech editor at Yahoo Finance. You can follow him on Twitter @DanielHowley.

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