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WEEKLY MARKET ROUND-UP – 25/09/20

Microsoft adds to its gaming stable with ZeniMax deal

The US software giant Microsoft is to acquire ZeniMax Media, parent company of Bethesda Softworks, for $7.5bn in a deal that helps strengthen its games platform ahead of the release of the next generation of its Xbox console.

The deal would be the second-largest gaming acquisition ever, behind Tencent’s purchase of a majority stake in Supercell in 2016 for $8.6bn, and will see Microsoft gain control of gaming franchises from eight studios with titles including FalloutThe Elder Scrolls and Doom.

Having recently lost out in its bid for TikTok, the acquisition of ZeniMax marks Microsoft’s third-largest purchase ever behind LinkedIn and Skype. It also highlights the company’s focus on the gaming market, estimated to be worth $200bn in 2021.

Microsoft is currently slated to release its Xbox Series S and Series X in November in direct competition with Sony’s Playstation 5, and last week launched cloud gaming through the Xbox Game Pass Ultimate.

Once the deal is concluded Microsoft will own 23 games studios, with titles including MinecraftHaloAge of EmpiresWolfensteinBattletoads, and Dishonoured.

Satya Nadella, chief executive of Microsoft, noted: “Gaming is the most expansive category in the entertainment industry, as people everywhere turn to gaming to connect, socialise and play with their friends.

“Bethesda has seen success across every category of games, and together, we will further our ambition to empower the more than three billion gamers worldwide.”

Kingfisher profits rise on lockdown DIY

An increase in home improvements and DIY projects during lockdown saw Kingfisher’s adjusted pre-tax profits increase 23.1% in the first half of 2020 to £415m.

The parent company of B&Q and Screwfix in the UK, and Castorama in France, said the impact of the coronavirus in the first three months of the year had been offset by a “strong recovery” in the second quarter. This had continued into the third quarter with like-for-like sales rising 16.6% to 19 September.

In particular the company benefited from a 164% increase in online sales, with e-commerce now accounting for 19% of total group sales compared with just 7% at the same time last year.

Kingfisher attributed the improvement to the crisis prompting more people to “rediscover their homes” as well as creating new home improvement needs, “as people seek new ways to use space or adjust to working from home”.

However, it highlighted the continued uncertainty and concerns around coronavirus and the wider economic outlook, which limits the visibility on sales for the rest of the financial year.

Rolls-Royce shares skid to 17-year low

The UK aerospace engineering firm Rolls-Royce saw its share price tumble on Monday (21 Sept) to its lowest level since 2003, after it confirmed it was considering a fund raising of up to £2.5bn.

The company has struggled during the coronavirus pandemic in line with the travel industry, as airlines pay Rolls-Royce based on the number of hours its engines fly.

In its 2020 half-year results the company noted flying hours fell by 75% in the second quarter alone.

It had already announced plans to restructure the Civil Aerospace business as well as dispose of assets, but with its share price having fallen around 75% since the start of the year from 680p to 160p on 21 September, it has been suggested the company would need to raise more cash.

Rolls-Royce admitted it was “evaluating the merits of raising equity of up to £2.5bn, through a variety of structures”, including equity rights issues, and debt issuance. But added that “no final decisions have been taken” on the methods or precise amount to be raised.