By Anirban Sen

NEW YORK (Reuters) -Microsoft Corp is in talks about an extension of its acquisition contract with video game maker Activision Blizzard, which is set to expire on Tuesday, so the parties can overcome the remaining regulatory hurdles to their $69 billion deal, a person familiar with the matter said on Monday.

The expiration of the contract would not automatically lead to the collapse of the deal, as it simply affords either company the right to walk away from the transaction.

Nonetheless, Microsoft, which makes the Xbox gaming console, has been seeking the contract extension to ensure that Activision is not wooed by another potential acquirer or has a change of heart, the source said.

The terms of the extension under negotiation and whether it would come with more financially advantageous terms for Activision could not immediately be learned.

The companies will continue to negotiate the extension if they do not have an agreement by the end of Tuesday, according to the source, who requested anonymity because the matter is confidential.

Microsoft and Activision did not immediately respond to requests for comment.

An extension would give the companies more time to find a regulatory solution in Britain, the only major jurisdiction that stands in the way of them completing what would be the largest acquisition in the gaming sector.

Microsoft and Activision are negotiating potential remedies with the Competition and Markets Authority (CMA) which they hope will appease its antitrust concerns.

The country’s antitrust regulator has argued that Microsoft’s commitment to offer access to Activision’s multi-billion dollar “Call of Duty” franchise to rival cloud gaming platforms would not effectively protect competition in the market. The CMA has agreed to extend its probe to Aug. 29 to allow for more negotiations with the companies.

Last week, Microsoft signed a pact to keep “Call of Duty” on Sony Group Corp’s PlayStation console. Sony had been one of the deal’s toughest critics, arguing that it could stifle consumer choice.

On Friday, a U.S. appeals court rejected the U.S. Federal Trade Commission’s request to pause Microsoft’s acquisition of “Call of Duty” maker Activision. The decision removed one of the last obstacles to the acquisition closing.

Activision’s shares closed at $93.2 on Monday, a small discount to the $95-per-share deal price, indicating that most investors now viewed the completion of the deal as likely.

(Reporting by Anirban Sen in New York; Editing by Matthew Lewis and Stephen Coates)

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