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In today’s edition, we have a scoop on the Gulf country’s increasing interest in the movie business,͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
 
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March 14, 2024
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Liz Hoffman
Liz Hoffman

Hi and welcome back to Semafor Business.

Today’s ruling corporate class today came up in a world that was steadily liberalizing. Trade barriers fell. The beautiful, dumb dream of world peace via McDonald’s flourished. The Davos consensus could be both capitalistic and optimistic, and actually be right. That model has dissolved with startling speed.

President Joe Biden came close this morning to saying he’d veto the sale of U.S. Steel, which has been bleeding jobs and increasingly relies on stealth government support in the form of tax cuts and tariffs to turn a profit, to a well-run, well-capitalized competitor from one of America’s closest allies. That’s quite a turn.

Meanwhile, Congress may pass a law forcing TikTok’s Chinese owner to sell the U.S. operations or see its app wiped from smartphones. That’s less of a turn, but a stunning display of bipartisanship and an unusual government cannon aimed at a single company. The British government yesterday made a similar decision to block an Abu Dhabi-backed firm from acquiring The Telegraph.

All to say that geopolitics is driving the global economy in a way it hasn’t since the 1990s. Finance, politics, and power are colliding in ways that can be alarming, and can occasionally feel a bit like Mad Libs — like today’s story about James Bond, Shakespeare, and the Gulf.

Plus, Goldman’s diversity talking points, Bayer’s cancer-lawsuit avoidance strategy, and the entire car industry flunks a major safety check.

Buy/Sell
Justin Tallis/AFP via Getty Images

➚ BUY: Handoffs: London’s leading food-delivery service, Deliveroo, posted its first annual profit. Most rivals are turning (adjusted, naturally) profits, too, proof that their business model — a creation of the free-money years and never a lock to outlast them — “may yet deliver the goods” for investors, FT’s Lex writes.

➘ SELL: Hands off: Eight carmakers, including Tesla and safety pioneer Volvo, saw their driver-assist or autopilot systems flunk a safety review by a key industry watchdog.

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The Tape

U.S. House passes bill to force TikTok sale… Steven Mnuchin might buy it… Senior women are leaving Goldman Sachs… Hilton bets on college towns… Toyota pay raise augurs Japan rate hike… Dollar Tree to close 1,000 stores… Kevin Plank is back at Under Armour… Stripe still in “no rush” to go public… Rolls-Royce gets its blue chip back… What killed the Apple car?...Calvin Klein ad isn’t obscene, U.K. rules

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Liz Hoffman and Ben Smith

Bond seeks Gulf backers

THE SCOOP

Daniel Craig is looking for money in the desert; the financiers in the desert want Bond.

It sounds like a half-baked pitch for the next 007 film. In fact, it’s the reality of the present-day film industry: The British movie star is trying to secure financing for a passion project, a version of Shakespeare’s Othello, set in an American barracks in Iraq, from Middle Eastern governments including Qatar, according to people briefed on discussions.

In the background, though, is a more tantalizing prize for the Gulf, and in particular Qatar, which has been investing heavily in the movie business and pushing Doha as a destination for Hollywood productions. Craig has secured backing for Othello from Barbara Broccoli, whose family controls the James Bond franchise that made him a star. Regardless of who plays Bond — it likely won’t be Craig, who has said he would “rather break this glass and slash my wrists” than reprise the role — the Qatari government has expressed quiet interest in a connection to upcoming films, the people said.

The talks, which may see Craig travel to the region later this spring, involve the combination of celebrity, ego, unconventional value exchanges, and big money that have always defined Hollywood. The Othello deal leads with star power, and dangles a commercial prize in exchange for supporting Craig’s creative labor of love. Spokespeople for Craig, the studio MGM’s owner, Amazon, and the Qatari Embassy in Washington didn’t respond to inquiries about the plans.

Broccoli, whose father Albert was the British producer who made the early Bond films, exercised legendarily tight personal control over the franchise. Amazon’s MGM has distribution rights to the franchise — but still cannot do much without Broccoli’s approval. The last Bond movie was released in 2021, and the next is not in production, and the identity of the new Bond is subject to endless speculation.

Craig has another role in mind. He has dreamed for years, people familiar with the project say, of bringing to the screen the version of Othello that opened for a limited run and rave reviews off Broadway in 2016. “You can practically smell the man-sweat,” Variety wrote of the production, which was also produced by Broccoli.

Mike Marsland/Getty Images

LIZ AND BEN’S VIEW

Hollywood is a key part of Gulf governments’ soft-power play, attractive for the same reasons that the World Cup, the PGA Tour, and a local Louvre are attractive to Qatar, Saudi Arabia, and the UAE, respectively. “We have an Oscar, we have Harrods!” Dodi al-Fayed’s father says in The Crown, after the Egyptian immigrant financed Chariots of Fire and bought the famous department store in his bid to be accepted by London’s upper crust.

Eight of the 21 films included in the Cannes film festival’s official selection last year were financed by the Saudi government, which blanketed the event with advertisements pushing the kingdom as a filming location. Abu Dhabi is building a giant studio complex, which it began shortly after Saudi Arabia built its own.

Qatar has been courting the movie industry since at least 2009, when it launched an offshoot of the Tribeca Film Festival, and has ramped up its efforts to make itself into a Hollywood of the global south. It invested $150 million last year in Peter Chernin’s production company, put former Universal executive Ron Meyer on its payroll in 2021, and released its first big-budget film, the Guy Ritchie spy comedy Operation Fortune last year. (It bombed, though the press release announcing the start of filming praised Doha as “a growing market in the entertainment and media space.“)

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Evidence

Shares of U.S. Steel fell sharply yesterday after Bloomberg reported that President Joe Biden planned to publicly criticize its planned sale to Japan’s Nippon Steel. His comments this morning stopped just short of saying he’ll block it: “U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated.”

Investors were never convinced the deal would win the necessary political approvals, and shares have traded well below Nippon’s $55 offer price for weeks. But they’re now trading below their pre-announcement price; the entire M&A bump is gone.

Critics say election-year politics are twisting U.S. national-security policy, and could damage America’s relationship with a key ally and counterweight to China in the region. “There is no remotely plausible national-security rationale for questioning [this deal],” former Treasury Secretary Larry Summers said. “The result will be the infusion of more capital into the U.S. steel industry… This should be a layup for policymakers who have the right motivations.”

But Biden has been a strong supporter of unions, and the United Steelworkers have sharply criticized the deal, worried about job losses in the key electoral state of Pennsylvania. His hawkish turn has roiled allies and, critics say, complicated industrial priorities like the infrastructure bill by adding protectionist provisions.

If national-security regulators do block the deal, then what? U.S. Steel has cut 8,000 jobs, about a quarter of its workforce, since 2017 and is straining under pension obligations to 60,000 retirees. Its profit margins have grown, but largely due to President Donald Trump’s tax cuts and steel tariffs. And it would be a strange outcome if the Biden administration took a break from zealous antitrust enforcement to allow U.S. Steel to be sold to an American rival like Cleveland-Cliffs, which had bid early in the process.

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Ahem

After a WSJ story about a string of senior women leaving Goldman Sachs, employees received talking points to share with clients who might be questioning the firm’s commitment to diversity. Among them: a 2% increase since 2018 in the number of women promoted to vice president, a confusingly named mid-level position. “We are not defensive,” Solomon said in a company-wide voicemail this morning. “We take it to heart and commit to doing better.”

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Obsessions
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“The strangest thing I’ve ever sort of worked on.” That was Microsoft CEO Satya Nadella back in 2021, still obviously flummoxed by the political complications that had scuttled his deal to buy TikTok’s U.S. assets.

Fast forward to today, with the U.S Senate now mulling a bill to force TikTok parent ByteDance to sell the viral video app or risk it being banned in app stores. Even if the plan becomes law, TikTok plans to challenge it in the courts, where it successfully defeated similar efforts under President Donald Trump.

But let’s say there is a forced sale. Potential buyers crave the eyeballs TikTok delivers; its 170 million American users spend 90 minutes a day on the app. Microsoft lacks a consumer platform (gaming might serve, but the jury is still out), and Walmart saw e-commerce potential. But any buyer likely wouldn’t get TikTok’s most valuable asset: the secret algorithm that makes the app so addictive, and which also underpins the Chinese version of the platform, Douyin.

In a world dominated by algorithms, TikTok’s has proven to be better than anyone else’s, and recreating it from scratch is harder than it sounds. (Otherwise, we’d all be on Instagram’s Reels.) Even if an acquirer thought it could recreate it, separating TikTok’s technical backend is complicated. And any buyer would be subject to the whims of Beijing, which has already criticized the congressional push.

TikTok is obviously a prize. Former Activision CEO Bobby Kotick, ex-Treasury Secretary Steven Mnuchin, and others are circling. But they may find themselves on stage in a year, shaking their heads.

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What We’re Tracking
Flickr/UN Tourism

Sands of dime: Saudi Arabia is learning the difference between net worth and walking-around money. Heavy spending on new cities, global sports franchises, and other pillars of its Vision 2030 plan to tilt its economy away from oil is “all getting rather expensive,” WSJ wrote last month, and Riyadh is projecting budget deficits through at least 2026. It is closing the gap by borrowing: So far this year, the state’s Public Investment Fund, whose cash on hand has fallen by 80% since 2020, has sold $7 billion of bonds already this year and is said to be selling another slug of stock in its national oil company, Saudi Aramco. Oil is trading below the kingdom’s break-even price of $81 a barrel.

The Dusseldorf Two-Step: Bayer is considering a contentious legal maneuver to resolve tens of thousands of lawsuits alleging that its popular weed killer causes cancer. Bloomberg reports the German industrial giant may split its liabilities into a separate entity that immediately files for bankruptcy to force plaintiffs to settle. The strategy worked for Georgia Pacific when it was trying to duck asbestos claims, but not for 3M, when it was sued for selling defective earplugs to military service members, or Johnson & Johnson, when it faced health claims over its baby powder.

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