Microsoft to buy Activision Blizzard in $68.7bn deal; UK real wages fall in cost of living crunch – as it happened

Time to wrap up... here are today’s main stories:

Goodnight. GW

Shares in Goldman Sachs have tumbled by 7% this morning, after net profits were hit by a jump in pay and bonus payments to its bankers.

Wealth correspondent Rupert Neate explains:

Goldman Sachs paid its 43,900 bankers more than $17bn (£12.5bn) last year, a 33% increase on 2020 as the investment bank celebrated a more than doubling of pre-tax profits to $27bn thanks to frenzied dealmaking on both sides of the Atlantic.

The pay and bonuses hike works out at about $403,000 for each employee on average, up from about $328,000 a year ago. It is the most the bank has paid out in wages and bonuses since 2007 at the height of the banking boom leading up to the financial crisis.

Goldman’s bankers will find out exactly how much they will personally collect for 2021 on Wednesday when the firm reveals annual bonuses on so-called “comp day”.

About 400 leading bosses – or the top 1% of the firm – are expected to receive a special one-off pandemic bonus in recognition of the bank’s success during the coronavirus crisis. The bonuses for this elite group are expected to range from the low single digit million to tens of millions of dollars, according to Bloomberg sources. Goldman declined to comment.

Stocks have closed lower in London, as anxiety over looming US interest rate rises dampen the mood.

The FTSE 100 index closed 48 points lower at 7563.5 points, 0.6% down on Monday’s two-year high.

Industrial equipment hire firm Ashtead was the top faller, down 5%, followed online home sale portal Rightmove (-4.6%).

Unilever fell another 4%, with ratings agency Fitch warning that its ambitions to buy GlaxoSmithKline’s consumer health assets would put its ‘A’ credit rating at risk because of the huge debt it would have to swallow.

European markets had a weak day too, with Germany’s DAX dropping 1%.

18 Jan 202211.57 EST

Hilary Osborne

Five payment companies including Mastercard have been fined a total of more than £33m for operating illegal cartels when providing prepaid cards for local authorities to distribute to vulnerable people.

The companies were found by the Payment Systems Regulator to have broken competition law by agreeing not to compete with each other for the authorities’ custom.

The regulator said that by acting in this way, the providers may have denied the councils access to cheaper products, and vulnerable people may have missed out on better quality services.

The cards in question were used to distribute welfare payments to vulnerable members of society, such as the homeless, victims of domestic violence and asylum seekers.

Back in the UK, yet another energy firm has collapsed.

The owner of Bristol Energy has gone bust weeks after the struggling council-owned supplier assured its customers that the business was stable despite record-high gas market prices.

The energy regulator, Ofgem, will appoint a new supplier to take on the 176,000 households affected by the collapse of its parent company, Together Energy, which is part-owned by Warrington borough council.

The energy company was forced to deny press reports earlier this year that it was on the brink of calling in administrators and told customers that the company was “stable” and operating on a “business as usual” basis.

Bristol Energy said it was “saddened” to announce its exit from the UK’s energy market but it was “untenable for us to continue”. It also denied press reports that suggested it had not bought enough gas and electricity to meet its customers’ needs.

Together’s collapse makes it the 27th energy supplier to go bust since gas market prices began a steep ascent to record highs in August last year, leaving more than 2m households in need of a new supplier.

Microsoft is acquiring Activision Blizzard in an attempt to dominate the metaverse, says Rupantar Guha, Principal Analyst at GlobalData’s Thematic Team:

“Taking part in what is the biggest tech merger & acquisition (M&A) ever reflects Microsoft’s desire to dominate the metaverse. The company is focused on acquiring both Activision’s communities and content—two essential parameters for success in the metaverse. Activision’s popular games franchises Call of Duty and Overwatch, and the communities it commands, will position Microsoft as a leader in the metaverse.

“Microsoft is formidable competition for Meta, Epic Games, Tencent, and Roblox, all of which are scrambling for dominance in this emerging theme. While the metaverse is still largely conceptual, Microsoft’s strength in underlying themes such as artificial intelligence (AI), augmented reality (AR), virtual reality (VR), and cloud computing give it a leadership position in this theme.

Activision’s games will help Microsoft create metaverse experiences and provide an established global consumer base to test and market them.

Factories in the New York region have reported that business conditions worsened sharply this month, as the omicron virus and ongoing supply-chain bottlenecks hit the sector.

The Empire State survey of business conditions tumbled to -0. 7 in January, a fall of 32.6 points to a reading of -0.7 this month. This was the first negative reading since June 2020 - anything below zero shows New York’s manufacturing sector contracted.

This is an early signal of the damage that Omicron has caused to the US economy.

The deal kicks off the metaverse ‘arms race’, says David Wagner, equity analyst and Portfolio Manager at Aptus Capital Advisors (via Reuters):

“This is a significant deal for the consumer side of the business and more importantly, Microsoft acquiring Activision really starts the metaverse arms race,”

“We believe the deal will get done,” Wagner said, but cautioned:

“This will get a lot of looks from a regulatory standpoint.”

18 Jan 202210.45 EST

Full story: Microsoft to buy Call of Duty maker Activision Blizzard for nearly $70bn

Mark Sweney

Microsoft is to pay almost $70bn to buy Activision Blizzard, the publisher of mega franchises including Call of Duty, World of Warcraft and Candy Crush, in the biggest ever takeover in the tech and gaming sectors.

Microsoft said that the $68.7bn (£50.6bn) all-cash deal – which dwarfs its previous biggest, the $26bn takeover of LinkedIn in 2016 – will “provide the building blocks for the metaverse”.

It is the biggest deal in tech history, eclipsing the $67bn paid by Dell to buy the digital storage giant EMC in 2015.

The deal will see the Xbox maker become the world’s third-biggest gaming company by revenue behind China’s Tencent and Japan’s Sony, maker of PlayStation games consoles.

“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” said Satya Nadella, the chairman and chief executive of Microsoft.

“We’re investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and make gaming safe, inclusive and accessible to all.”

The deal comes after a tumultuous time for Activision Blizzard, which has 10,000 staff globally a market value of about $50bn and three $1bn gaming franchises, which has been affected by a string of allegations of sexual misconduct and discrimination involving senior executives.

More here:

Victoria Scholar, head of investment at interactive investor, agrees that the deal will face antitrust scrutiny:

Shares in Activision Blizzard have jumped nearly 30% after Microsoft announced plans to acquire the Call of Duty maker for almost $70bn in an all-cash deal. This is the largest M&A deal in tech history and Microsoft’s biggest deal, sending a strong signal about Microsoft’s ambitions in gaming and the metaverse.

The announcement is an exciting development for Activision Blizzard investors who have faced a 40% slump in its share price between February’s peak and Friday’s close on the back of a series of controversies surrounding the company’s CEO and management team.

While shares in Activision have staged an impressive rally today, the stock has not yet rallied to the offer price. There are undoubtedly set to be antitrust concerns, which could scupper the deal given the sheer size of the transaction and worries that Microsoft is already too big to fail.

Plus rising yields are pressurising the wider tech sector in today’s session with Tesla, Meta and Amazon all nursing sharp losses and with the Nasdaq deep in the red.”

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, says Microsoft has ‘come out swinging’ with a rather generous $68.7bn all-cash deal to buy Activision Blizzard:

“Activision Blizzard holds some of the most valuable IP in the world thanks to the likes of Call of Duty and a host of other games with dogmatically loyal customers. However, today’s news isn’t just about people liking gaming, we’ve known that for a long time. It says a lot more about how gaming is viewed as an integral part of our future social and digital lives. The mushrooming popularity of this hobby is why Microsoft has delved into its very well-lined pockets and splashed out on the gaming production giant. From an outside perspective, the logic is fairly flawless.

Microsoft is already the go-to provider of must-have software, so tacking on a gaming arm is a stroke of genius from a cross-selling potential standpoint. The likes of Netflix have already said they’d like to foray into gaming themselves, but Microsoft has come out swinging with today’s rather generous offer, which would make Microsoft the third largest gaming company in the world.

Execution risk is still a factor though. This still marks some new territories for Microsoft and is hardly a small-fry deal, so the time to pop champagne will be when the deal has first been fully approved, and second, showed that Microsoft’s model can stomach this new gaming hoard.”