A big win for Microsoft’s Activision deal

This is an audio transcript of the FT News Briefing podcast episode: ‘A big win for Microsoft’s Activision deal’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, July 12th, and this is your FT News Briefing.

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The UK wants to give the public sector a raise, but it’s got to find the money first. And JPMorgan wants Silicon Valley Bank’s former clients. Plus, Microsoft’s $75bn deal to pick up Activision just got a big boost. I’m Marc Filippino, and here’s the news you need to start your day.

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Nvidia may get another shot to get a piece of the SoftBank-owned chip designer Arm. The world’s most valuable semiconductor company was forced last year to abandon its billion-dollar acquisition of Arm after regulators challenged the deal. Now sources tell the FT, Arm is in talks to bring in Nvidia as an anchor investor for its IPO. Arm is planning a New York listing as soon as September. Prospective investors are still negotiating with Arm over its valuation. One source said Nvidia wanted to come in at a share price that would put Arm’s total value at between $35bn and $40bn, while Arm wants about double that.

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Microsoft is a few steps closer to buying the video game giant Activision Blizzard. Federal judge in the US came out with a ruling yesterday saying that the Federal Trade Commission can’t stop the deal. The UK’s Competition and Markets Authority also said yesterday it was open to discussing the $75bn merger, even though the watchdog had blocked it back in April. Activision investors were happy about this. Shares closed up 10 per cent on Tuesday. Here to discuss is the FT’s US legal and enforcement correspondent Stefania Palma. Hi, Stefania.

Stefania Palma
Hi, Marc.

Marc Filippino
All right. So why did the judge say the FTC can’t block this deal?

Stefania Palma
So the judge argued that the FTC had failed to show that Activision’s blockbuster game Call of Duty would be pulled by PlayStation, which obviously is linked to Sony, a competitor. But in addition to that, the judge also said the FTC had failed to show how the deal would harm competition, both in terms of video gaming subscriptions but also for the cloud gaming industry.

Marc Filippino
And what does this mean for the FTC’s big antitrust mission? I mean, it’s got to do some damage, right?

Stefania Palma
So this is definitely a defeat for them, especially under the leadership of Lina Khan, the FTC chair, who has taken a far more aggressive stance against antitrust violation in the US. But I think it’s also worth noting this whole case is far from over. The FTC has until Friday to appeal the decision that was handed down yesterday. And in addition to that, the FTC is also still pursuing its internal courts. It does become harder to proceed with the in-house case, especially if in the meantime, the deal closes. So it’s definitely in the company’s best interest to try to close the deal as soon as possible.

Marc Filippino
So the UK’s Competition and Markets Authority said it’s open to discussing the deal, even though it blocked it a few months ago. Why the U-turn here?

Stefania Palma
So I wouldn’t say it’s necessarily a full 180. They didn’t completely walk back on their decision. You’re right, they did block it in April, which caused a lot of concern for both companies. But what happened on Tuesday was that shortly after the decision was handed down in the US, the CMA came out with a statement saying that they would be open to considering any new proposals from the companies to actually restructure the deal in a way that would address its own concerns. And in addition to that, they also said that the litigation process in the UK could be frozen while all of this was addressed. And this is definitely a sharp shift from their much more aggressive stance back in April.

Marc Filippino
So we should mention that the European Union cleared Microsoft’s deal for Activision back in May. Stefania, did yesterday’s ruling from the US push the UK to change its mind on the deal?

Stefania Palma
So definitely the decision from the US arguably put the UK in a harder position in terms of making their case against the deal. Nothing is certain still. But what we do know for sure is that as of now, there is a deadline of July 18th that the companies had set to finalise the deal. Now, we still do not know for certain if that is set in stone at this point given everything that is happening from a legal standpoint if the companies would be ready to shift that. But we also do know that regulators, the companies, the lawyers, they’re all sort of scrambling to try and get this sorted, ideally by the 18th. So I think that if a decision as stark as this comes, is handed down in the US, then a regulator in the UK would take that on and address it very quickly also because of the tight timeframe that everyone is facing.

Marc Filippino
Stefania Palma is the US legal and enforcement correspondent. Thanks, Stefania.

Stefania Palma
Thank you.

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Marc Filippino
UK chancellor Jeremy Hunt ordered ministers to find over £2bn of savings to fund pay rises for public sector workers this year. Hunt wants to offer a 6 per cent pay bump, but the chancellor said right off the bat he won’t borrow the money, arguing it would fuel inflation. Some ministers worry that the cuts will come from public services that are already stretched too thin. Hunt is expected to meet tomorrow with Prime Minister Rishi Sunak to agree on a strategy on public sector pay.

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When Silicon Valley Bank collapsed in March, they left behind a bunch of start-up and venture capital clients. Now big banks are trying to scoop them up.

Ivan Levingston
SVB was almost a monopolistic player in this market.

Marc Filippino
That’s the FT’s Ivan Levingston. He says JPMorgan is hiring dozens of bankers around the world to cater to SVB’s former clients. But he says that JPMorgan isn’t the only one trying to get in on the game.

Ivan Levingston
HSBC certainly wants to keep the clients that are coming along with SVB. Notably HSBC, but the UK subsidiary of SVB when it needed to be rescued, they’re now facing competition from other banks that sense a weakness, sense that the big incoming player has suddenly gone, and it’s a bit of a free-for-all.

Marc Filippino
Ivan says that JPMorgan is one of the most aggressive banks when it comes to hiring SVB executives.

Ivan Levingston
JPMorgan is obviously a giant in the industry in the US and expanding abroad. They are the go-to bankers, you know, for things like arranging initial public offering, a merger and acquisition. They also have extensive commercial banking operations around the globe. And so you have to take them seriously and the hiring, especially for this innovation unit in Europe and Israel, represents them trying to expand their reach, not just in the US, but abroad as well.

Marc Filippino
Ivan Levingston is a deals reporter for the FT.

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Frances Haugen became a household name when she blew the whistle on Facebook in 2021. While working there, Haugen secretly gathered thousands of pages of internal corporate documents. She says they showed that the company put profit over the wellbeing of its users.

Frances Haugen
I felt motivated in the moment by things like I had watched my co-workers burn out trying to fight the tide with too little resources.

Marc Filippino
That’s Haugen speaking to Michela Tindera, who hosts our sister podcast Behind the Money. In today’s episode, Haugen talks about what she learned from being a whistleblower and how it changed her life.

Frances Haugen
You know, it’s been really interesting from the perspective of like, I spent a lot of my life trying to avoid attention. You know, I’m a data scientist. Like, I was very content, you know, sitting in the corner and playing with a beautiful data set. But it’s been really transformative of like having to learn how to have a voice, right, or how to show up.

Marc Filippino
Haugen recently published a book on what it means to be a whistleblower. It makes the case for why we need more of them.

Frances Haugen
It’s interesting. I’ve talked to a number of whistleblower lawyers. So there are people who specialise in interfacing between individuals and say, the SEC. They say that like some something like 75 per cent of people who come to them now say, I saw what Frances did right. It was enough of a cultural moment, and I hope this book makes it a slightly bigger cultural moment that it made people realise that in a world where more and more of our economy is run by opaque systems, there will be a larger and larger need and an obligation of individuals to bring the truth to the public because that is the only way the public will get the truth it needs.

Marc Filippino
You can hear the full interview with Haugen in this week’s episode of Behind the Money. We have a link to that in the show notes.

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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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