Microsoft, the world’s second-largest business by market capitalisation, has agreed to buy video game maker Activision Blizzard in an all-cash deal valued at around $70bn. To put that into perspective, that’s over R1trn. The acquisition will expand Microsoft’s video gaming portfolio and makes it one of the largest players in the industry, behind the likes of Tencent and Sony. Interestingly, following the news of the prospective acquisition, Sony’s share price tumbled over 12%, losing $20bn in market value. This is predominately because of the expected increase in market share that Microsoft will gain from the acquisition. The X-box maker is betting on synergies with Activision Blizzard, whose portfolio includes Call of Duty, World of Warcraft and Candy Crush, household names by any standards. Although the deal is large and has more than doubled Microsoft’s almost $30bn acquisition of LinkedIn in 2016, it accounts for a mere 3% of Microsoft’s market value.
Microsoft’s biggest acquisitions:
Activision Blizzard: $68.7 billion
Linkedin: $26.2 billion
Nuance: $19.7 billion
Skype: $8.5 billion
ZeniMax: $7.5 billion
GitHub: $7.5 bilion
Nokia phone unit: $7.2 billion
aQuantive: $6.3 billion
Mojang (Minecraft): $2.5 billion— Jon Erlichman (@JonErlichman) January 18, 2022
The deal is still subject to regulatory and competition commission approvals, but given the growing number of participants in the industry, the consensus is that the deal will be pushed through.
I don't think Activision Blizzard/Microsoft is going to get blocked. Video games competition is not just Sony, Xbox and Nintendo. It's Apple, Google, Facebook, Netflix, Epic Games, Valve, Tencent… it's a super competitive industry at the billion-dollar level.
— Christopher Dring (@Chris_Dring) January 18, 2022
Activision Blizzard has been hamstrung by several governance and misconduct issues that have centred on long-standing chief executive Bobby Kotick’s leadership. There have been allegations of toxic workplace conditions, especially during the latter part of his tenure. Recently, more than 30 employees were dismissed as part of efforts to address sexual misconduct at the video game giant. Although pure speculation, rumours suggest Kotick will see the transition of Activision Blizzard into the Microsoft stable and will be dismissed thereafter.
Microsoft PR: “Bobby Kotick will continue to serve as CEO of Activision Blizzard… Once the deal closes, the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming.”
Not 100% clear yet whether Bobby will stay on after the ink dries.
— Jason Schreier (@jasonschreier) January 18, 2022
Activision’s share price ballooned over 25% while Microsoft traded more than 2% lower following the news. Microsoft’s decline was in line with other counters on the tech-focused Nasdaq, as the index extended its decline to more than 10% since its highs in November last year.
Johann Rupert’s Richemont continues to go from strength to strength; the luxury goods maker had a bumper festive period. Strong growth in its primary operating jurisdictions, Asia and the Americas, were the main drivers of growth. Ironically, since the Covid-19 pandemic, the owner of brands such as Cartier and Montblanc has added more than R700bn in market value, underpinning luxury goods’ defensive nature. Results of international rivals Burberry, Prada and LVMH have ushered in a similar theme: the rich are getting richer.
Luxury goods booming. "Sequential acceleration" in Q3 sales at Richemont, Prada pre-announced better than forecast FY sales last night, Burberry says FY profit likely to be up 35% vs analyst forecasts of 20% growth
— Jonathan Eley (@JonathanEley) January 19, 2022
Richemont’s share price rose by 7% following the trading update, with the business valued at R1.25trn. Richemont is now the second most valuable global luxury goods business behind LVMH.
Aspen Pharmacare released a rather upbeat operational update, but this was overshadowed by the news that the sale of its active pharmaceutical ingredients (API) business had fallen through. The API business has been negatively affected by Covid-19, with sales going backwards during the period and the pharma giant unable to fetch the value it attaches to the business unit.
Aspen Pharmacare says it’s no longer trying to sell its active pharmaceutical ingredients business. The business saw sales go backwards in the six months to end-September due to Covid, so the timing isn’t great, Aspen says.
— Nick Hedley (@nickhedley) January 18, 2022
Aspen’s one-year share price chart makes for interesting reading. Stephen Saad’s brainchild is still a 50-bagger since listing at the beginning of the millennium.
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