The Xbox purchase of Activision did include Toys for Bob, but unfortunately the terms of the separation are currently unknown. MS could've simply let them go for all we know lol. 

They're a small studio, less than 100 people now, with no owned IPs. It wouldn't cost much to just let them go. 

I appreciate the response. It helps me reconcile that a bit better.

I think Bungie had to buy themselves back but Twisted Pixel were just let go for free? It probably depends on the size of the studio.

Some XGS limited integrated studios (Obsidian/Double Fine) have in the past strongly hinted that their contracts with Microsoft allow for them to leave too, if they want to, due to the fact that they're limited integrated it's a simple process.

ABK is limited integrated, by extension so would Toys for Bob, they'd be a small studio now (~80) and own no IPs so Microsoft may have just let them go for free. Plus they may get a publishing agreement out of it, so it may end up more financially beneficial to them.

I'm guessing Xbox just let them go, much like Twisted Pixel back in 2015. With no IP and only around 80 devs after the layoffs, they really aren't worth much. Rather than forcing them to buy their independence, better to keep them happy by letting them leave, in the hopes that they will still work with Xbox as a 2nd party developer. Considering they said they are negotiating with Microsoft for 2nd party development on Xbox's platformer IP's, it was probably the right call, forcing them to stay with so many unhappy in the wake of the layoffs would have just resulted in alot of the remaining talent leaving for new studios. Now that they are independent they can rehire some of the 89 people that got laid off at Toys for Bob earlier this month, if they can afford to at least. Maybe re-lease their headquarters as well, since Activision made them leave their headquarters to go work-from-home alongside the layoffs.

This. Also MS is free to sets whatever they see fits as compensation for them to go independent it doesn't have to be $. My guess is Toys for bobs traded their independence with promise to work closely with MS hence the "may in fact even partner with Microsoft ".

IMO, it is possible that Xbox reserve the right to be pitched projects and choose to match any publishing offer. This is quite a common clause in contracts, it's called right of first refusal.

Yeah...Them having first rights of refusal makes a lot of sense and is likely what they have, hence the "may partner with Microsoft" it could be that Microsoft has first rights of refusal but that doesn't mean they've signed the dots on the game though, so there's technically no partnership yet but Microsoft has first dibs at signing their ideas, like Epic said, it's really common in the industry.

Step 1: claim to not make any ABK IP exclusive to get the deal passed
Step 2: let a studio “go”
Step 3: let them work on an established IP
Step 4: make it exclusive
Step 5: checkmate

I really hope XGSP will publish their IP if they make a deal.

I think Spyro/Crash fit better under the XGS banner anyway.

Activision is more associated with pew pew, dudebro, mature rated games.

Plus what does Activision even publish? Sekiro? Anything else? Lol.

There's also the question of who owns Toys for Bobs now. Is it the Current CEO (ms is unlikely to just give someone a company so here there should have been monetary compensation even if it's a symbolic amount), a renouncement made by toys for bobs own workers and/or directors (unlikely that would be the case without mention), was it a spin-off which made ms shareholders also the shareholder of Toys for Bobs(unlikely, too many shareholder it would be known by now).