In today’s newsletter:
Lina Khan goes after her biggest fish yet
If Lina Khan’s recent defeats have got to her, she isn’t showing it.
After setbacks involving deals such as Amgen’s $28bn takeover of fellow drugmaker Horizon Therapeutics and Microsoft’s $75bn acquisition of Activision Blizzard, the Federal Trade Commission chair is going after an even greater force: Amazon.
On Tuesday, the FTC alongside 17 states sued Jeff Bezos’s retail empire, alleging it illegally uses monopoly power to overcharge consumers, hobble competitors and exploit sellers on its marketplace.
The suit accuses the $1.3tn ecommerce giant of increasing fees to sellers on its marketplace to extract nearly half of every dollar of revenue made by many sellers, punishing sellers offering heavy discounts by making them “effectively invisible” in its search results and forcing vendors to use its “costly” logistics network.
Amazon vehemently contests the FTC’s position as it believes consumers value the convenience and affordability of its service and the products it sells.
“The lawsuit filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court,” said David Zapolsky, Amazon’s senior vice-president of global public policy and general counsel.
For Khan, it’s her biggest challenge yet.
The case brings things full circle for the head of the antitrust watchdog, who was an outspoken critic of Amazon before being appointed by President Joe Biden in 2021 to crack down on Big Tech.
In 2017 she penned an article in the Yale Law Journal titled “Amazon’s antitrust paradox”, which quickly popularised her theory that big companies have benefited from lax antitrust scrutiny for decades, making low consumer prices the most powerful decider of competition policy.
“With its missionary zeal for consumers, Amazon has marched towards monopoly by singing the tune of contemporary antitrust,” she wrote.
Amazon has requested Khan be recused from matters involving the company, citing her longstanding criticism, to no avail.
Her egalitarian vision of competition law will now be put to the test in court against the company that helped inspire it all, serving as a major indicator as to how concerned multibillion-dollar players should be about future takeover or merger plans being derailed.
Despite dealmakers’ rejoicing at the FTC’s recent hindrances, there are signs that a new era of antitrust is catching on, DD’s James Fontanella-Khan has written.
Dealmaking volume has fallen significantly in dollar terms since Khan took over the FTC, while the overall number of transactions has remained above average over the past decade.
In other words, there have been fewer mega deals while smaller acquisitions have gone mostly uninterrupted.
Regulators appear to be upholding that trend, as the FTC fights to force Meta to unwind its acquisitions of Instagram and WhatsApp — in addition to its Amazon affront — and the Department of Justice pursues multiple antitrust cases against Google.
Appraising a Hollywood ‘kingmaker’s asset’
Walt Disney and Comcast’s messy relationship over Hulu is coming to an end. The big question is which will make out better in the divorce.
In a matter of days, Disney boss Bob Iger and his team will begin a months-long process with Comcast to determine the value of the cable giant’s 33 per cent stake in streaming service Hulu. That sets the stage for Disney — which owns the other 66 per cent — to purchase full ownership. Comcast chief executive Brian Roberts intends to drive a hard bargain, however.
Disney, stuck with nearly $45bn of debt as its streaming business has haemorrhaged money, will want the Hulu value to be set as close to the $27.5bn “floor value” as possible, analysts say.
Should the valuation go above $29.5bn, according to Citigroup estimates, Disney would need to make a debt offering to drum up the cash. An asset swap in the form of a minority stake in ESPN could be another option, Lex notes.
Roberts, who at a Goldman Sachs conference this month called Hulu a “kingmaker’s asset”, is hoping to get twice that.
Hulu’s value has increased significantly since 2019, Roberts has argued, suggesting that a fair price would be about $60bn citing potential synergies and a reduction in customer “churn” if it is bundled with the Disney+ streaming service.
The long-serving media chiefs’ rivalry goes back to 2004, when Roberts made a failed hostile bid to buy Disney with Iger as president. And in 2018, Roberts topped Iger’s bid for 21st Century Fox, forcing Disney to push up its winning offer to $71bn.
Both companies will appoint an investment bank to act as an appraiser. The lengthy appraisal process — expected to take at least until the end of this year — marks a reverse in sentiment from Iger, who earlier this year declared that “everything is on the table” in terms of Hulu’s future.
After admitting his remarks had been “a little harsh”, the now 72-year-old Iger, who transformed Disney through dealmaking during his first stint as CEO, is keen to seal one more big transaction to cement his legacy.
The next wave of dealmaking may be more about surviving, rather than thriving, in a declining media landscape, as the FT’s Anna Nicolaou writes.
JPMorgan settles its Jeffrey Epstein problem, on paper
Jamie Dimon now has one less headache to manage.
On Tuesday, JPMorgan Chase said it had agreed settlements with the US Virgin Islands and former Barclays chief executive Jes Staley to resolve legal battles over its dealings with Jeffrey Epstein’s human trafficking operation.
The settlements aim to draw a line under damaging lawsuits that have hung over JPMorgan over the past year, unearthing details of JPMorgan’s ties to the late sex offender and shedding more light on its complicated history with Epstein as a client.
The bank continued to manage money for Epstein until 2013, despite his conviction in 2008 of soliciting sex from a minor that resulted in a 13-month prison term. The FT revealed last year that Staley, who left his role as head of JPMorgan’s investment bank in January 2013, had pressed the lender to keep Epstein as a client. Staley declined to comment on the FT’s report at the time.
The bank said that it would pay $75mn to settle the USVI case, and that it had reached a separate agreement with Staley to resolve its claims against him for allegedly failing to fully disclose the extent of his relationship with Epstein.
Staley had denied any wrongdoing and described JPMorgan’s allegations as “slanderous” and “baseless but serious”.
The latest agreements come after a year of highs and lows for Dimon. The long-serving executive emerged as Wall Street’s white knight during the recent banking crisis, helping orchestrate the rescue of First Republic Bank and inheriting its Rolodex of wealthy clients in the process.
Less than a month later, he was deposed for several hours as part of the USVI case, affirming under oath that he never met Epstein or was involved in any decisions to retain him after concerns were raised about his sex crimes.
With a chance to move on from some of its Epstein legal woes, the bank will be eager to shift the narrative towards sunnier headlines, from minting huge fees advising Arm’s recent listing to reaping bumper profits on the Federal Reserve’s interest rate hikes.
Job moves
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General Atlantic has named Martín Escobari, chair of its Latin American operations, as head of its growth equity business and its Emea head Gabriel Caillaux as the new leader of its climate investment operations. Co-president Anton Levy will continue leading investments in “large-scale technology-focused deals globally”, GA said.
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JPMorgan has promoted Jay Horine, currently co-head of energy, power, renewables, metals and mining, as head of investment banking for North America. He will succeed Fernando Rivas, who plans to retire, according to a memo seen by DD.
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Morgan Stanley’s global chair of real estate investment banking Guy Metcalfe has decided to retire after 33 years at the company, according to a memo seen by DD.
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Amazon’s outgoing head of devices Dave Limp will replace Bob Smith as chief executive of Jeff Bezos’s Blue Origin at the end of the year.
Smart reads
Dealmaking gets political Private equity firms are facing competing demands as US investors increasingly avoid exposure to China deals and non-US investors including Middle Eastern sovereign wealth funds are keen for more of it, DD’s Kaye Wiggins writes.
The Splunk effect Cisco’s $28bn Splunk acquisition could spark a software dealmaking frenzy as other technology giants shop for software vendors with steady subscription revenue, Reuters reports.
Leverage overload Hedge funds’ debt-fuelled bets on US Treasuries have begun to spook policymakers, the FT reports.
News round-up
Ken Griffin joins Paul Marshall’s bid for Telegraph Group (FT)
Coty pushes ahead with plans for dual Paris listing (FT)
Liberty Media proposes merger with radio broadcaster Sirius XM (Reuters)
Wells Fargo and Centerbridge team up on $5bn private credit fund
French billionaire Xavier Niel to invest €200mn in artificial intelligence (FT)
Hong Kong fraud probe tests city’s pro-crypto stance (FT)
Meta pays £149mn to break London office lease (FT)
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