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How Microsoft Acquired Blizzard

Microsoft's $ 68.7 billion deal to buy Activision Blizzard is a grand bid to transform the technology giant's present and future. If implemented, it will be Microsoft's largest trade ever and the largest cash acquisition in history. For such a significant trade, it came together relatively quickly, we can report.

Microsoft addressed Activision's issues. Last summer, Activision was pursued by accusations that executives ignored sexual harassment and discrimination in its workplace, a controversy that eventually engulfed its CEO, Bobby Kotick. The company faced pressure from all corners - including from Microsoft, which said its gaming division was reviewing its ties to Activision. But the tech giant kept in constant contact with Kotick.

In December, with Activision's share falling sharply, Microsoft reached out to Kotick with a takeover bid. Kotick turned down the offer, but - eager to steer its besieged company to a safe home - asked the software giant to return with a better offer. Microsoft did, and began a week-long sprint to reach an agreement.

As part of its due diligence, Microsoft investigated the allegations in the workplace and determined that they were largely in the past and that the controversy was manageable. That said, Kotick is expected to step down as Activision's CEO once the deal is finalized.

It's a big bet on games and the internet. Almost instantly, the addition of Activision and its nearly 400 million monthly users would strengthen Microsoft's position in the lucrative video game business as it competes with Sony and rising powers like Amazon and Apple. Some players, who were unhappy with Activision in recent years, said the deal could reverse a decline in the quality of the takeover target's play.

But in the long run, Activision is supposed to help Microsoft compete in the so-called metaverse, an association of online and virtual reality on which companies have invested their future. (After all, Facebook's parent company renamed itself Meta.) Right now, the meta verse is mostly a buzzword, but Microsoft hopes Activision's technical know-how and popularity will give it a leg up.

It's also a bet on avoiding antitrust control in Washington. Microsoft has largely escaped the latest rush to crack down on technology giants like Amazon, Alphabet and Meta - until now. The company claims that even after buying Activision, it would still be far smaller in video games than Sony or Tencent. And as a token of its confidence in the deal, Microsoft will pay Activision up to $ 3 billion in breach fees if regulators block the transaction. Microsoft expects the agreement to take up to 18 months to close.

The Biden administration has steadily increased its efforts to enforce antitrust with a focus on the technology industry. (More on that below.) Of particular interest is whether Microsoft will restrict some Activision titles, such as Call of Duty, to the Xbox, which can be considered anti-competitive; shares of Sony fell more than 10 percent on the news of the trade yesterday.

Bank of America and Morgan Stanley beat earnings expectations. Both Bank of America and Morgan Stanley benefited from higher investment banking fees; shares in companies rose in pre-market trading.

AT&T and Verizon are delaying 5G services near some airports. Two of the largest telecommunications companies in the United States will begin a long-delayed expansion of high-speed wireless services today, but they will not implement it near any airports to avoid disrupting airline communications. Some international airlines are still canceling flights to the United States due to security concerns.

New York's Attorney General accuses Trumps of fraud. In a lawsuit, Letitia James said the Trump organization had repeatedly misrepresented property values ​​to bolster profits, though it is unclear whether her lawyers will sue the former president and company.

Puerto Rico will go bankrupt. A federal judge approved the territory's financial restructuring plan, which will reduce its public debt by tens of tens of billions of dollars. The approval comes nearly five years after Puerto Rico declared default, though critics worry that the territory is still facing a fiscal shortfall.

Beijing is reportedly drafting new rules for technology giants. The Cyberspace Administration of China plans to require the country's major Internet companies to get their permission before making investments or raising capital, Reuters reports. If approved, the rules will be Beijing's latest effort to rein in China's technology industry.

Two of the Biden administration's best trustbusters announced a new effort to tighten competition policy in Washington. Lina Khan, the chairman of the FTC, and Jonathan Kanter, the head of antitrust in the Ministry of Justice, said yesterday that they want to rewrite the rules of major mergers to "accurately reflect modern market realities and equip us to vigorously enforce the law against illegal agreements." "

Technical agreements are at the heart of a reconsideration of antitrust rules. The review will focus on how the merger approval process applies to free services like Google and Facebook, where guidelines that focus on whether an agreement increases costs for consumers are difficult to apply. It will also get into "killer acquisitions" where big companies pick up smaller rivals to prevent them from growing into a threat that the FTC has accused Facebook of doing to Instagram in 2012 and WhatsApp in 2014.

The timing is remarkable. The FTC has already reviewed guidelines for "vertical agreements" or acquisitions of a supplier rather than a direct competitor. A prominent example of this approach is the Microsoft Activision mega-agreement, which was announced a few hours before the Khan and Kanter news conference.

Nothing is changing - yet. Deal makers were not surprised by the Khan and Kanter announcement, as the administration has indicated its intention to rein in corporate consolidation, and President Biden has issued a statement to that effect. Khan and Kanter said they hoped to release the final guidelines before the end of the year. Meanwhile, one way their agencies can scrutinize mergers is by taking agreements to court - and they're just given clues as to where they can turn their attention.

Today, at 10 Eastern, Andrew and Kara Swisher will interview Lina Khan on CNBC Capital Exchange and to The Times' "Sway" podcast.

- David Solomon, CEO of Goldman Sachs, on how companies pay more for talent, including in his bank. Goldman's recent earnings did not live up to expectations, in part regarding higher replacement costs, which rose 33 percent last year.

A warning from Jack Dorsey, the former Twitter chief and current Block CEO, that venture capitalists own "web3" has spurred a war over the future of the Internet among crypto enthusiasts. The battle is coming as the industry tries to convince politicians of the benefits of web3, an acronym for a decentralized internet built on blockchain networks.

The feud has unfolded in tweets and memes that can be hard to follow for the uninitiated. DealBooks Ephrat Livni helps decipher the code here. A brief summary:

It's Dorsey vs. Andreessen: Dorseys first tweet late last month triggered a stream of web3 criticism and angered Marc Andreessen of Andreessen Horowitz, one of the world's largest crypto investors. Andreessen blocked Dorsey on Twitter, calling him "bad faith web3 take." Andreessen's scorn, heavy on memes and sarcasm, has continued for weeks.

The bigger problem: What if web3 is not all it has become? Andreessen Horowitz's representatives in Washington tell politicians that a crypto-based Internet can solve the problems of the current web and help Americans "win the future" by giving them more effort in the tools they use. Venture capitalists, however, increasingly have large shares in this revolution and have invested billions in selling this vision, which critics like Dorsey say undermine the democratic ethos of crypto.

More than 100 millionaires and billionaires say they want to pay higher taxes and try to persuade other rich people to do the same. In a letter to attendees at this week's World Economic Forum meeting - traditionally held in Davos, Switzerland, but virtually this year - they argue that higher taxes on the wealthy would address some of the inequalities that the Assembly is trying to address.

"We need to get the rich people to agree that this is not a sustainable system," Morris Pearl, chairman of Patriotic Millionaires, a group that helped organize the letter, told DealBook. Pearl, who also signed the letter, is the former CEO of BlackRock.

The signatories want to disrupt a disrupted Davos and tax status quo. Davos is the place where business and political leaders go to mingle, ski and discuss how to build a better world. But "if you pay attention, you will find that you are part of the problem," the letter reads. "Rich people kill the goose that lays the golden egg," Pearl said.

Wage earners pay proportionately more tax than those with passive income. Pearl said most wealthy people he meets "tend to agree" that the system is unfair, but come up with excuses for not changing it, including that the government is not spending money well. The Biden administration abandoned a proposed wealth tax last year after meeting opposition. Such a tax could lift billions out of poverty, according to estimates by Pearl's group and others.

"To put it simply, restoring trust requires taxing the rich," the letter to Davos participants reads. Noting that they have mostly gotten richer during the pandemic, while many suffered, the signatories predict an unhappy ending if no changes are made: "It's treasures or pitchforks. Let's listen to the story and choose wisely."


  • TikTok's owner, ByteDance, is reportedly cutting its productive investment arm as it expects China to crack down on deals. (Bloomberg)

  • In SPAC news, Steven Mnuchin's investment firm put $ 150 million into a satellite imagery company listed through SPAC; a blank check company sponsored by Chamath Palihapitiya, under fire for his comments about the Uighurs in China, agreed to merge with a healthcare company; and investment firm Acorns terminated its $ 2.2 billion SPAC deal. (Bloomberg, FT, Reuters)


  • Inflation in the UK rose to its highest level in 30 years, putting pressure on the Bank of England to raise interest rates. (FT)

  • In pandemic news: The Biden administration introduced its website for Americans to order corona tests at home, and Pfizer said its Covid pill appeared to be effective in treating the Omicron variant. (NYT, WSJ)

  • A top official of an EU financial regulator said the bloc should ban the most popular method of extracting cryptocurrency over how much energy it uses. (FT)

Best of the rest

  • Vishal Garg has returned as CEO after resigning after his firing of about 900 workers at Zoom. (NEW)

  • A profile of Jonathan Schiller, the co-founder of the law firm Boies Schiller Flexner, who is accused of driving colleagues away with an abrasive leadership style. (Insider)

  • Netflix is ​​rolling out a huge selection of new Korean-language shows to build on the success of "Squid Game". (Bloomberg)

  • "Who burned Pornhub Palace?" (Vanity Fair)

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