UK regulator blocks Microsoft’s Activision acquisition

Microsoft’s video game bet takes a huge hit

Britain’s mergers and acquisitions watchdog rejected Microsoft’s $69 billion bid for Activision Blizzard on Wednesday, ruling that buying the “Call of Duty” maker would give the tech giant too much control over the booming cloud-based video game market.

The decision, which surprised many investors after the Competitive Markets Authority narrowed the focus of its probe earlier this month, poses a serious hurdle to the deal, which already faces opposition from the U.S. Federal Trade Commission and scrutiny from the European Union. Review. Activision’s stock plunged 12% in premarket trading, while Microsoft’s stock rose nearly 8% after a solid earnings report.

The deal has the potential to “disrupt innovation happening in cloud gaming,” By ceding control of popular games to Microsoft, which owns the Xbox platform, the CMA said. (Cloud gaming doesn’t depend on users owning expensive consoles.) Regulators aren’t swayed by promises from Microsoft — which already accounts for 70 percent of cloud gaming — to give access to its top titles to competitors like Sony and Nintendo. opponent.

The regulator concluded that a merger between Microsoft and Activision could result in higher prices and fewer consumer choices, and that “Microsoft already enjoys a strong position in cloud gaming and is ahead of other competitors, and this deal will strengthen that an advantage that gives it the ability to disrupt new and innovative competitors,” Martin Coleman, who chaired a panel conducting the investigation for the CMA, said in a statement.

Microsoft pledges to continue its efforts, Its president, Brad Smith, said the company will appeal. “This decision appears to reflect a misunderstanding of how this market and related cloud technologies actually work,” he said in a statement.

Company executives and investors were encouraged by the CMA’s decision a few weeks ago to focus solely on the cloud gaming issue, rather than the broader issue of console competition.

But the road to getting the deal done has gotten tougher. It will be difficult for Microsoft to complete the acquisition without approval in the UK, which has a huge video game market. Furthermore, there is a high bar to be met in appealing the CMA’s decision, as the process is primarily based on whether the regulator’s actions are reasonable and lawful.

Meanwhile, the European Commission is expected to rule on the takeover by May 22.

Then there’s the matter of timing: Microsoft previously set a July 18 deadline to close the deal, though it may seek to delay that pending an appeal.

this is what happened

Consumer-facing companies are doing just fine despite inflation. Companies such as Nestle and PepsiCo reported largely unchanged quarterly sales results after double-digit price increases last year. But business leaders worry about consumer resistance: Chris Kempczinski, McDonald’s chief executive, said customers are starting to cut back on menu add-ons, such as French fries.

Neil Gorsuch’s sale of real estate raises new ethical questions. News that a Supreme Court judge sold a vacation property to the head of Greenberg Traurig, a large law firm arguing the case in court, raised more concerns about the judge’s financial disputes. Senators are set to introduce a bill requiring the high court to develop an ethics code, but Chief Justice John Roberts has declined to testify before Congress on the matter.

General Motors will stop selling its Bolt electric vehicle. The automaker said it would stop production of the model, which accounted for nearly all of the 20,000 electric vehicles it sold in the U.S. in the first quarter, and instead produce newer electric SUVs and trucks. GM also reported an 18.5% drop in quarterly profit, partly due to lower sales in China; BYD, the Warren Buffett-backed Chinese automaker, just became the best-selling brand there.

A top Citigroup banker is leaving after his relationship with Jeffrey Epstein was revealed. The departure of Paul Barrett, a senior leader at Citi Private Bank, comes after a Wall Street Journal report that he met with the convicted sex offender while working at JPMorgan Chase, even though The bank severed ties with Epstein.

Is Ken Griffin tempering his enthusiasm for Ron DeSantis? According to The Times, the hedge fund billionaire was troubled by recent moves by the Florida governor, including DeSantis’ downplaying of Russia’s invasion of Ukraine and the state’s recent ban on abortion after six weeks.

Freefall of the First Republic

Shares of First Republic closed down nearly 50% on Tuesday as investors digested a poor earnings report that showed customers pulled $102 billion from the bank in the first quarter. The regional bank is weighing options to prop itself up, including selling as much as $100 billion in assets. But the sale comes at a price: First Republic will have to book its unrealized losses onto its balance sheet, which could in turn hit its already shrunken share capital.

Investors worry about banks’ funding costs. It borrows about $92 billion from government-backed lending groups such as the Federal Reserve and the Federal Home Loan Bank. The problem is that loans are more expensive than customer deposits, and banks can’t do business with those funds the way they can with customer deposits.

Advisers to First Republic reportedly plan to push the bank that has given it a $30 billion lifeline to a choice: Buy bonds from lenders at above-market rates, lose billions, or face a $30 billion bond, CNBC reported. Losses If First Republic fails, FDIC charges would increase by $1 billion.

Policymakers are watching closely. “You can rest assured that the regulators are deeply engaged in monitoring the situation and will take necessary action,” White House chief of staff Jeff Zienz told the Wall Street Journal after the earnings release, without naming specific banks. But the government has yet to do what the First Republic wants it to do: push the big banks to come up with a permanent solution.

Things could get worse before they get better. Deposit outflows have stabilized, but analysts say Tuesday’s share price plunge could spark another rally. Ahead of First Republic’s earnings report, “I would say there seems to be a good chance they’ll muddle through,” David Smith of Autonomous Research told DealBook. “I think the concern now is that deposits are much worse than people fear and will that trigger another round of outflows?”

Can McCarthy avoid debt limit ‘chaos’?

House Speaker Kevin McCarthy has vowed to vote on a Republican bill to raise the debt ceiling as early as Wednesday, though Republican support for the measure is far from certain.

time is life. “The debt ceiling is the top priority now. Lawmakers have less time than expected,” Moody’s chief economist Mark Zandi told DealBook. Mr Zandi and other economists expect the US to hit the debt ceiling as early as early June, rather than August as previously estimated. Mr Zandi said this would put more pressure on a swift legislative resolution – otherwise “more confusion” could ensue.

“A default on our debt would lead to economic and financial disaster,” Treasury Secretary Janet Yellen said in a speech on Tuesday. Ms Yellen predicted that a failure to reach a deal would lead to higher borrowing costs, as well as payments on auto loans, mortgages and credit cards. She also said military and Social Security payments would stop and credit markets would deteriorate. She called on Congress to raise or suspend restrictions without conditions. “It shouldn’t be waiting until the last minute,” Ms Yellen said.

Even so, about a dozen Republicans reportedly oppose Mr. McCarthy’s bill because it eliminates the clean energy tax credit, while others want the jobs requirement tied to federal aid.

Even if Mr. McCarthy succeeds in getting the legislation passed, President Biden on Tuesday threatened to veto the bill if it reached his desk. Mr Zandi said the standoff raised the possibility of emergency measures to temporarily suspend the debt ceiling for weeks. “They’re likely to kick the cans down the road and push the day of reckoning until September.”

“Show me the schools I’ve closed, show me the factories I’ve closed. Never. I’ve never done it. I’ve made a public health recommendation that echoes that of the CDC and people are building on it A decision was made.”

— Dr Anthony Fauci. In a lengthy interview with The New York Times Magazine, the former top U.S. public health official opens up about America’s response to the coronavirus pandemic, the backlash he’s received and the lessons to be learned.

Bud Light sees red

When Anheuser-Busch InBev reports its quarterly results next week, the brewer’s CEO Michel Ducris may face his toughest questioning yet about the company’s growing U.S. problems.

Anheuser-Busch InBev said on Tuesday that two executives are Ask for leave, The world’s largest brewer is trying to defuse a controversy that erupted this month over a social media campaign for Bud Light by transgender influencer Dylan Mulvaney.

The backlash was swift. Sales of Bud Light have declined as conservative lawmakers and celebrities have called for a boycott. Florida Gov. Ron DeSantis, who has a habit of attacking companies whose political views he disagrees with, also said: “This is part of a larger story of corporate America trying to change our country.”

Anheuser-Busch InBev is the latest consumer brand to be embroiled in America’s culture wars. DeSantis, a potential Republican presidential nominee, has also been at loggerheads with Disney after the company criticized the state’s so-called “no talking gay” laws.

North American sales have lagged. The region has been AB In Bev’s worst-performing market by beer volume, while Bud Light is also down. “It just makes the downward curve steeper,” said Harry Schuhmacher, The publisher of Beer Business Daily told the Times.

Mr Doukeris remained largely silent. Before the controversy erupted, he told the FT that he was trying to avoid polarizing issues and that there was no need for the company to “talk everything out there”. But on April 14, the company’s North American CEO Brendan Whitworth issued a statement in an attempt to shift the focus from politics to beer.

The company also let go of Alissa Heinerscheid, vice president of marketing for Bud Light, and Daniel Blake, who was in charge of Anheuser-Busch’s mainstream brand marketing.

speed reading

trade

• Getty Images has rejected a $4 billion takeover offer from activist investor Trillium Capital, calling it “not credible enough.” (Bloomberg)

• Binance.US has called off a $1.3 billion deal to acquire the assets of bankrupt cryptocurrency lender Voyager Digital. (Reuters)

• Endeavor agreed to sell IMG Academy, a for-profit boarding school for promising young athletes, to investment firm BPEA EQT at a valuation of $1.25 billion. (Wall Street Journal)

policy

best of the rest

• Hedge fund mogul Ken Griffin has donated $25 million to Success Academy, New York’s largest charter school operator. (Bloomberg)

• “Black-Scholes 50: How option pricing models are changing finance” (Financial Times)

• Xerox donates Parc, birthplace of the modern PC, GUI, and mouse, to the nonprofit SRI International. (quartz)

• The GameStop mania story is being made into a movie, starring Seth Rogen as hedge fund manager Gabe Plotkin and Paul Dano as meme stock influencer Keith Gill. (insider)

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