The Times - UK (2022-01-19)

36 2GM Wednesday January 19 2022 | the times

Business

Big Tech has the

ammunition to

get what it wants

Behind the story

The Biden administration has threat-

ened to take a tougher stand on big

corporate takeovers after moving to re-

write America’s merger rulebook.

Lina Khan, head of the Federal Trade

Commission, said that guidelines must

“accurately reflect the realities of the

modern economy... While the

merger boom has delivered

massive fees for banks,

evidence suggests

many Americans

have lost out, with

diminished opp-

ortunity, higher

prices, lower

wages and lagging

innovation.”

Jonathan Kan-

ter, the assistant at-

torney-general and

leader of the US De-

partment of Justice’s

antitrust division, high-

America to review mergers rulebook

lighted how “so many industries” had

“too few” competitors, adding that

careful thought was required to ensure

that merger enforcement tools were “fit

for purpose” in 2022.

The trade commission and the justice

department’s announcement of the

review of existing guidelines is de-

signed to “address mounting concerns”

around antitrust issues. Amid height-

ened scrutiny of large techno-

logy companies in Wash-

ington and beyond, par-

ticipants in the review

are to consider the

“unique character-

istics of digital

markets” and

whether their fea-

tures are ade-

quately handled

by existing regula-

tions.

Mergers and ac-

quisitions hit a record high last year,

leading to bumper fees for Wall Street.

In 2021, merger filings were double the

annual average of the previous five

years.

“This review of merger guidelines is

especially timely,” Khan, 32, said.

“Technological and economic changes

have led to shifts in how businesses

compete and grow. For us to accurately

detect and analyse potentially illegal

transactions, ensuring that our merger

guidelines reflect these new realities is

critical.”

Officials recently have adopted a

robust stance against anti-competitive

activity and the FTC has sought to stop

several blockbuster deals, including

Nvidia’s $40 billion acquisition of Arm,

the British chip designer.

Kanter, 48, said: “Think about what

happens when you check a weather

forecast or buy a coffee: in seconds, you

interact with dozens of services that

share complex business relationships.

Many present an opportunity to create

or exploit market power.”

Callum Jones

US Business Correspondent

Unilever boss

tries to halt

slide in shares

Louisa Clarence-Smith

Efforts by Unilever to halt a decline in

its share price failed to have the desired

effect yesterday, with the stock sliding

for a second day.

Alan Jope, its chief executive, began

talks with shareholders in an attempt to

soothe nerves after a negative reaction

to the company’s rejected £50 billion

takeover approach for GlaxoSmith-

Kline’s consumer healthcare business,

which was revealed in The Sunday

Times at the weekend.

Jope, 57, brought forward a planned

strategic update for the maker of Mar-

mite spread and Dove soap to Monday,

when he said that the FTSE 100 com-

pany was accelerating efforts to offload

lower-growth brands. He also insisted

that Unilever “will not overpay for any

1

Penny Mordaunt, a trade

minister and former defence

secretary, has said that a

£1.2 billion project to connect the

British and French power grids via

a power and communications

cable under the Channel must not

go ahead. The government is due

this week to decide whether to

approve the scheme based on

plans from Aquind Limited.

France has previously threatened

to interrupt supplies in disputes

over fishing. Two men behind

Aquind have links to Russia.

Page 4

2

Water companies have

illegally spilled sewage from

treatment works into rivers

more than 3,000 times in the past

five years, analysis of industry data

by Peter Hammond, of the

Windrush Against Sewage

Pollution group, reveals. Page 10

3

Ministers are to crack down

on misleading adverts for

cryptocurrencies such as

bitcoin amid concern that some

investors have a limited

understanding of what they are

buying. Adverts promoting the

currencies will have to adhere to

the same standards as other

financial products, the

government has said. Page 22

4

Microsoft is to buy the video

games group behind Call of

Duty for $68.7 billion in the

largest takeover yet by one of the

America’s technology giants. The

company has swept up Activision

Blizzard, a prolific developer that

has been ensnared by controversy,

in an all-cash deal that surprised

markets. Page 35

5

Matthew Moulding, the

billionaire co-founder and

boss of THG, came under

renewed pressure as the

ecommerce group told investors

that profit margins would fall short

of market forecasts and revenue

growth would slow. Page 35

6

Oil prices hit their highest

level since 2014 amid fears of

supply disruptions as analysts

forecast a return to $100 a barrel

this year. Brent crude briefly

touched more than $88 a barrel

after Saudi Arabia launched air

raids overnight on Sanaa, the

Yemeni capital. Page 35

7

A rising expectation that the

Federal Reserve will increase

interest rates in the United

States has driven ten-year US

Treasury yields to their highest

level since January 2020. Page 38

8

A sharp slowdown in trading

revenue and a jump in costs

left fourth-quarter results at

Goldman Sachs, the American

investment bank, short of

expectations. Page 40

9

Rio Tinto, the world’s biggest

iron ore producer, has warned

that its output could fall again

this year if it is hit by Covid-

related disruption, labour and

supply chain shortages or

measures to protect Aboriginal

sites in Australia. Page 41

10

A luxury penthouse flat

on the edge of Regent’s

Park in London is at the

centre of a $131 million legal battle

between Barclays and Bavaguthu

Raghuram Shetty, the founder of

NMC Health and Finablr. Page 42

Need to know

Microsoft takes $70bn shot at

Microsoft has made a near-$70 billion

bet that the internet of the future will

resemble the multiplayer games being

played on its Xbox console.

Satya Nadella, its chief executive,

said that the record-breaking takeover

of Activision Blizzard would help

Microsoft to “play a key role” in the

growth of the metaverse.

The deal for the Call of Duty

developer is by far the boldest by the

company since Nadella, 54, took charge

in 2014. Back then, Microsoft looked to

be drifting into irrelevance, but by

betting big on cloud computing he has

turned it into the world’s second most

valuable company, after Apple.

Now his attention has switched to

the future face of the digital economy:

the metaverse. The swoop on Acti-

vision throws down the gauntlet to his

Big Tech rivals, including the owner of

Facebook, which last year renamed

itself Meta to underline its ambitions

for this next phase of the internet. All

are vying to define — and ultimately

dominate — the metaverse, a digital

space where the existing online world

will be enhanced by virtual and aug-

mented reality.

In Silicon Valley, the metaverse is

expected to become the gateway to the

internet for billions of people. The con-

cept remains hazy, but the outlines

have been sketched ou already: with the

aid of VR headsets or smart glasses,

users will be able to move through dif-

ferent worlds with their own avatars,

doing anything from shopping to at-

tending virtual gigs, visiting art galler-

ies and hanging out with friends.

Mark Zuckerberg, the Facebook

founder, believes that his social net-

works can be the foundation of the

metaverse, but many observers believe

that games makers could have a bigger

say in how this new realm evolves.

Immersive multiplayer titles such as

Fortnite already host virtual concerts

and players can interact without being

physically in the same space.

Microsoft will hope to gain an early

advantage in the metaverse by harness-

ing Activision’s content to its consoles

and cloud computing platform. “The

acquisition gives the company a 3D

gaming experience layer that comple-

ments their Xbox hardware,” Mike

Proulx, a director at Forrester, a re-

search firm, said.

The deal is not simply about the

future; it also will augment one of

Microsoft’s most lucrative business

lines. Since launching its first Xbox two

decades ago, the company has become

a progressively more powerful force in

video games. With gaming revenues

already exceeding $10 billion a year, the

takeover will make it the world’s third

largest games company, after Tencent,

Chinese internet giant, and Sony. The

deal also could persuade more gamers

to sign up to subscription packages by

beefing up its library of content.

Nadella’s raid on the Nasdaq-listed

Activision is a show of brute power. The

$68.7 billion price is by far the largest

any games company has commanded.

It underlines the frantic pace of deal-

making in the sector: last week Take-

Two, maker of the Grand Theft Auto

series, agreed to buy Zynga, the devel-

oper behind the FarmVille smartphone

game, for a then record $12.7 billion.

The gaming industry has boomed

during the pandemic, which created

millions of captive customers. The

surge pumped up the cash reserves of

the sector’s large players, which been

busy buying up smaller rivals. Last year,

Microsoft splashed out $7.5 billion on

Bethesda Softworks, a publisher

behind games including The Elder

Scrolls, Doom and Fallout. Electronic

Arts, a Take-Two rival, completed the

$1.2 billion takeover of the UK-listed

Codemasters for $1.2 billion and bought

two mobile gaming specialists for

nearly $4 billion.

Valuations have fallen since the sum-

mer as people regained their freedoms

after lockdowns. Activision’s share

price has dropped even more sharply

than that of its peers because of allega-

tions that senior executives ignored

reports of sexual harassment and dis-

crimination. It has lost more than a

quarter of its value since California filed

a lawsuit against it in July.

Bobby Kotick, 59, who has run Activi-

sion since 1991, will retain his role. Nad-

ella said yesterday that the “culture of

our organisation is my No 1 priority”,

adding that it was “critical for Activi-

sion to drive forward” on its promise to

clean up workplace practices.

Regulators in America and Europe

could have the final say. Nadella has

largely been spared the attacks meted

out to rival technology bosses, yet with

critics growing more vocal over Big

Tech takeovers, he will have to work

hard to convince policymakers that this

deal is in consumers’ interests.

Simon Duke

Real firepower

Biggest tech deals

by Microsoft by Dell by Salesforce by Microsoft

$68.7bn

$67bn

$27.77. 7bnbn

$26.2bn

A

t $19.7 billion including

debt, Microsoft’s

takeover of Nuance

Communications made

clear that the technology

giant was not deterred by a steep

price-tag (Callum Jones writes). The

deal for the artificial intelligence

specialist was, after all, the second

largest in its history when it was

revealed last April.

Microsoft’s purchase of Activision

Blizzard — announced before its

deal for Nuance has even been

completed — is more than three

times the size. An eye-watering

$68.7 billion acquisition of the video

games group will be the biggest ever

for Microsoft, not to mention the

wider technology industry,

.Whilethe

livered

anks,

sts

s

d

De-

tice’s

high-

ened scrutiny

logy com

ington

ticipa

are

“un

ist

m

w

tu

qu

by

tio

M

Lina Khan: banks boom,

but the public “lose out”