Kevin Tynan, Senior Autos Analyst with Bloomberg Intelligence, joins to discuss the autoworkers strike. Navaid Alam, president and CEO at EVelution, joins to discuss electric vehicle battery materials and EV development. Ankur Daga, CEO of Angara.com, discusses the impact of the G-7 banning Russia diamond imports and other stories in the space. Matt Henriksson, Senior Equity Analyst covering medical technology with Bloomberg Intelligence, joins to discuss Boston Scientific (NYSE: BSX) investor day and new med tech products. Jennifer Rie, Senior Analyst: Antitrust with Bloomberg Intelligence, joins to discuss the latest on Microsoft-Activision. Hosted by Paul Sweeney and Matt Miller.
Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven news.
Find the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com Slash podcast.
Let's get back to the strike because we're getting red headlines across the Bloomberg terminal. Now from Sean Fain's Facebook live presentation, he says, the United Autoworkers Union is going to expand its strike, but only against General Motors and Stilantis. They're not going to expand their strike against Ford. Now. I'm not sure what's going to happen to Bronco Production. I'm sure a lot of people want to know about that, so I'll find out and get back to you on it. But they are going to expand their strike against GM. At Silantis, we have Kevin Tyne and standing by on the phone, Bloomberg Intelligence US autos analyst. Wait is he is he there?
Yeah?
Okay, good, he's on camera. He's not him on the phone. Did you hire him?
Probably?
Congratulations, he's very good, Kevin, What do you think about this? So it seems like they're getting along a little better with Bill Ford now and historically they do get along better with the Ford Motor Company because of the Ford family and because of Bill. Really with GM and Stilantis, they still have serious beef. How do you read it?
Yeah, I mean using it as leverage, right, saying by expanding for Stilanthason GM and holding the line on Ford probably motivates, you know, the competitors to get in there and be a little bit more aggressive with with their negotiating in terms of what they're willing to give. But but you know, it's it's not over yet. You know, there's still probably a ways to go, and and you know, things like this, you might mean the biggest issues or the easiest issue, use the low hanging fruit is handled, but it's probably going to be in the details before anything is really agreed to across the board.
Hey, Kevin, is there like you've probably done I'm sure you've done analysis. When does his strike start there hurt them financially? The big three?
It's weeks, not you know, not days obviously, And keep in mind too, there's there was a build up of inventory ahead, so there are units on the ground, and you could think of it of a little bit of a working capital shift from one quarter to the next unless it gets you know, very long. The last one was forty days and twenty nineteen against General Motors, and that's significant, right, so, and historically, even though inventory is above where it was a year ago, it's still very low. Historically. I think I calculated it out to start September was probably about forty three days of inventory for the end Street has a whole and typically fifty five to sixty five days is considered manageable. So it's below what's considered you know, a healthy level. And at the worst, these the domestic automakers, they would have eighty ninety days supply in some months, so significantly off that, but but not as bad as it was prior to the to the pandemic.
In terms of job security, I mean, we know that they're asking for pay rises. Obviously they also want to be pension, which is seems less likely, although I'd love to hear your take a four day work week, which is like nice, there's no way in hell, right, But they want actual job security. So from GM there's a ton of cars coming, you know, new production. Mary Barros say is they won't need fewer workers for electric vehicles. There's just a massive offering there from Stilantis, not so much. I mean, they have a couple brands that seems like they're about to die out.
Yeah, look, and I think it's it's the line of sight is pretty clear, right. So the automakers have made a lot of money in the past couple of years, not even just through the last contract, but probably over the last decade, and it's very easy for the union to point to that and say, we want our share of that. You've been very profitable due to the concessions we've given over the last couple of contracts, all the way through the bankruptcy period, and it's not going to be easy for the manufacturers to hide that, right that you can see that money every day in every filing. But at the same time, the manufacturers can look at the unions and say, but look at our production. Look at our sales volume is way down from the twenty seventeen peak in this country. US sales in twenty seventeen, we're seventeen and a half million. We're running out of fifteen to four. So I think it's going to be the manufacturer's pointing to that and telling the union, we can't give you a whole lot of job security. This market is smaller and it's going to continue to be smaller. Transaction prices will be higher, margins will be better, the money will be there, but we can't guarantee capacity and headcount going forward. We need that flexibility. And then on pensions and healthcare, you know, the manufacturers have a very easy time of directing the eye of the union too. That's what we were bankrupt, remember in twenty two, thousand and nine and twenty ten, and that's the structure we had, right, So two of those three things are a little bit easier for the manufacturer to explain away.
The money is not. So I think when.
All is said and done, the likelihood is that the manufacturers pay up, but they want that flexibility to adjust the cost structure going forward. And I think, you know, the pension and healthcare going back to the way it was in prior to the bankruptcy period is just a non starter. I don't even think that gets discussed in any seriousness.
So I didn't believe you, Kevin A. Couple of years ago when you said the industry was going to go from a mode of seventeen seventeen and a half million production down to you know, something materially less like fifteen and a half or something like that. But once again you were right, and that do you think the union believes that?
Well, here's the thing, right is that is that you have to look at at least one other input. Right, everybody wants to talk about volume and the headline of seventeen and a half versus fifteen four, but revenue per unit matters, right, So while production and sales are down, average transaction price is at a record, right, We're heading to fifty thousand dollars, So when you multiply out just back of the envelope, the revenue pool is actually larger. So you know, you have to understand that not every unit is the same as every other unit. You know, a twenty thousand dollars Toyota Corolla is not a sixty five thousand dollars f one point fifty. And this industry is moving towards the latter to say, we just want to sell as many sixty five thousand dollars things as we can. We're willing to give up the bottom.
Of that market.
It means our volume goes away, but really the revenue pool and the revenue contribution and the profit contribution and your margins are just way better. And I think that's what this industry becomes going forward.
By the way, on that note, I wanted originally I was planning on talking with you about the Jeep Grand Wagoneer Obsidian Series three that I'm driving right now, you know, before this hard news crash the party. But that is an extremely expensive vehicle. It's the biggest vehicle Jeep has ever made. The one I'm driving is one hundred and fourteen hundred and fifteen thousand dollars in this trim. And though I love the new Hurricane five to ten, the Inline six, it's amazing, five hundred and ten horse power, five hundred pound feet of torque. For the same price, you can get a Range Rover or a BMW X seven the M sixty version, or a Cadillac Escalade the Ultra super Luxury Platinum version. Like why are they selling these one hundred and thirteen hundred and fourteen thousand dollars Jeeps?
Yeah, I mean, then look the average on Grand Wagoneer. I just looked it up. Is one hundred and five thousand is the average, you know, sales weighted, you know, but that's right there with Expedition, it's there with Suburban. That's what you know. Those have become the profit centers because you're sharing platform and components with pickup trucks and now you're just adding content that's pure profits. So you know, that's kind of my point is that, look, if you sell one of those how many you know, dodged darts did you have to sell to get.
Anywhere near that?
And you probably lost money on every Dodge Dart, which is why it doesn't exist anymore.
You know.
So the old world the hornet coming out.
Yeah, well the old world would be like, run production on hornet all day long and then figure out how to sell it. And it's like the new model is going to be, Hey, if we can sell one or two Grand Wagoneers, we can cut production of hornet. Which is why I say in this contract negotiation, you know, the manufacturers need to protect that flexibility going forward, saying this is going to be a smaller market because we're selling more expensive things.
Man's if I were an investor, I'd be like, I like this auto industry better than the old auto industry.
Yeah, for sure.
This industry's more, more problem and that's w Kevin has been telling us for years. That's where it's going.
But if you're a UAW were feel that way.
No, absolute opposite, Kevin Tinny, thanks so much for joining us. Kevin is our lead auto analyst for Bloomberg Intelligence.
You're listening to the team Ken's are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
Now. Yesterday, Paul and I were talking with a gentleman who said, you know, one of the big problems in terms of battery production is that a lot of the stuff is mined elsewhere, and then most of it is processed in China. Yep, China, China. So our next guest is hoping to change that a little bit. Nevade Alum joins us. He's president CEO of Evolution and they are working on a I guess cobalt processing plant in Yuma, Arizona, which should supply when it's up to speed about a million batteries? What a year, Nevade? Is that an annual figure that you want to be a cobalt for a million batteries a year?
Yes, that's correct, Matt, one million a year. You know, right now.
There's thirty cobalt processing facilities in China and zero in North America, so you know we need to catch up here. That's and you know, luckily we started this process a few years ago before the IRA and the other laws, and now we're catching a nice ailwind.
So it's going really well.
Well, do you get any financing benefits from that? Tax breaks from that legislation? I mean, are there subsidies that you can take advantage of here?
Yeah?
Absolutely, though I will say we were going to do this plant without those.
Subsidies, but it's a great help for us for sure.
So how much are you going to spend to build this plant? I know that Uma because I read in a local newspaper expects to have a ton of revenue sort of as a job as a knock on effect jobs and everything. But how much youre going to spend to build it? And when are you gonna be done making it all?
A park?
Around three hundred million dollars and it'll be done in twenty twenty six.
We think, all.
Right, so what actually happens at a cobalt processing facility and how does that how's that part of the whole battery situation.
So cobolt is a really important metal, uh for EV batteries, for normal regulation and for energy density and for you know, giving you long range and good cold weather performance. It's also extremely important in aerospace and defense. It's used in hypersonic missiles and stealth bombers. So it's a really critical material for the United States to have self sufficiency in. So what we do is we take cobalt hydroxide, so already processed cobalt that is processed in Africa, and then it'll come here to the United States instead of going to China. And you know what the Chinese do is they just process it there and then send it back to the United States for the cars here such as Tesla and other electric automakers. But we want to skip the China step, just bring it straight here to America, process it into cobalt sulfate, which is the salt that goes into the cathode portion of the EV battery. And sell it to the new plants that have been announced in the United States by General Motors, LG, Samsung Ford. You know, they're spending billions of dollars building these what they call battery precursor plants. They're going to use nickel sulfate, cobalt sulfate, manganese sulfate and put it all together and make a battery pack.
Now I've seen I guess a rendering of the plant in Yuma, and one of the things you immediately notice, Paul, check this out. Yeah, giant colar facility, even bigger than the actual processing plant. So I know, you guys want to be carbon neutral. This is all going to be powered by the sun.
Yes, Indeed, Yuma County is the sunniest county in the United States, so it's it's pretty easy, we think, to do the full on solar power one hundred percent solar, no greenhouse gas, is, no propane, no diesel.
So we also are.
Going to be benefiting the local farmers by selling them back some of our excess solar production at cost. They're losing a lot of hydro power from.
The lower levels on the Colorado.
River, so they're very excited about our coming in and building this facility there.
Well, I heard that you know you like Yuma, not only because I guess apparently your wife is from Yuma for one thing.
That's right.
It's also very sunny, low cost of living, low regulatory kind of hassle there, but it's close to like all the used batteries coming back out of California is what I read. So are you recycling cobalt there?
We will. We intend to recycle as well.
So you know, our first phase is to build a sulfate facility, which is sort of I think the easy, easier thing. It's a very established to tchnology around the world. As I said, there's thirty of these plants in China. And then as more and more batteries are spent and used up, we want to recycle some of those into turning them around and getting the cobalt back out of them. And then lastly we want to add a cobalt metal facility for aerospace and defense.
So that's part of the strategic.
Reserve announced by the President under the Defense Production Act.
How do you think you will be able to compete against the Chinese? They actually have much greater scale, presumably government support to some level. How do you think about the competitive environment.
Well, you know, there is no cobalt mined in China either. They all take it out of Africa, so we're competing with them in Africa. We're going to bring it here instead of taking to China, and so logistically we save money. The other great thing about Yuma County and where we are is right on the border of California and Mexico. So we need to come through the port of Long Beach or the port of Ensenada with our inputs. So and it's only three hours by truck from Ensenada or Long Beach. So I think logistically it's the great spot we're on in State eight. We're on the up railroad, so we we picked it. Also because logistics are important in these in these kinds of deals.
What is it I mean from a competitive perspective? Again, can you will you be competing on price to your customers here? Can you because of the lower presumably the lower logistics costs of nothing else away from China?
Yeah, Well, look, it's it's a combination of price, and we would have been competing on price initially, but more now there's tariffs on Chinese sul faith, there's the IRA regulations about Chinese inputs that come in to the EV battery supply chain. You know, there's a lot of new laws that are sort of helping us compete on price, so we may be able to charge us higher price than we might have ordinarily, you know if there were none of these laws.
All right, it's I think a fascinating story, and we're finally starting to see movement, maybe because it's.
Climate Week and we saw a bunch of these folks this week.
No, I mean, I mean in terms of bringing processing here because Nevade, I don't know how much you talk with other people in the kind of battery supply chain, but I imagine we must be trying to bring a lot more processing of cobalt, lithium and rare earths to the US at some point.
Right, Yes, it's all happening.
It's it's hundreds of billions of dollars of investment, real you know, team effort, Lots of big corporations, as I mentioned, LG, General Motors, Samsung. They've announced billion dollar plants in Georgia, South Carolina, Tennessee, even Arizona. LG is building in a five and a half billion dollar plant just up the road.
In Phoenix, just south of Phoenix.
So that you know, is going to help us sell our product into the United States.
Yeah, so it's moving. Yeah, the infrastructure, the supply chain is moving here.
That's right, all right, Neved, thanks so much for joining us. Nevade Alam he is a president and CEO of Evolution there in getting into the battery business and the processing of all the cobolt and all that kind of stuff.
You're listening to the tape cancer Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
It is United Nations General Assembly Week here in New York. And then we've got lots of unga, lots of stuff happened, lots of terrible traffic. But one of the key areas is Russia and various sanctions on Russia as it relates to the Ukraine War. One area that is going to come up for discussion very soon is going to be banned on Russian diamonds, so we went to get to the bottom of that. We could do that with our next guest on Core Daga, CEO of Ongara and Encore, thanks so much for joining us again here talk to us about just remind us what you do at Angara.
Sure.
So, at Angara we are vertically integrated online jewelers. So we do everything from cutting and polishing gemstones, to designing jewelry, to manufacturing jewelry to retailing over the web in over thirty countries.
All right.
So I all right, So I had a question on a slightly dip before we get into that business, on a slightly different thing. I always kind of wonder, isn't Wharton the grad school? And I see some people who do the undergraduate thing at Wharton, But isn't that Penn.
Yes, so Wharton is one of the schools in Penn. But it is undergrad and grad school.
All right.
So you go to Wharton, you study finance there in entrepreneurship, then you go get your MBA from Harvard. I've heard of it trade school. You decide I'm going to become a jeweler.
Yeah.
So interestingly, I grew up in the jewelry business, so I've kind of played with gemstones a say, age of five. I always thought I would never come into the industry because it is pretty antiquated and old fashioned, as you can imagine. But after work and I went to McKenzie. My largest project was turning around a major jewelry retailer, and that's when I fell in love with the trade again. I saw a lot of opportunities, especially online.
So here we are.
So you could have just gone straight to the jewelry business. You didn't need to stop. You didn't need to stop at McKenzie, You didn't need to stop at Harvard, right, But what did you learn at those places that gave you an edge now in this business?
So, I think the industry is one of the most fragmented industries out there. So when you compare it to any other part of retail. So for example, Signet, which is the number one jeweler in the US, only has less than ten percent market share you compared to something like a best By, which has a much more dominant position. So the idea was, how do we structure the industry in a way that allows us to get to that scale where we can really dominate the industry?
All Right, so one of the news items you and I were talking about it before is Russia. Russia supplies a lot of diamonds. Then they're going to I guess the G seven is gonna put some sanctions on it or something like that. What's what's happening there.
Yeah, So in a couple of weeks there's likely to be a ban announced, and the ban would be for all Russian diamonds. So just as a precursor to this, April twenty twenty two, the Biden administration is issued in executive order to ban Russian diamonds. So this has already been done by the US and UK. The key difference here is twofold. One is instead of two countries, it's seven countries. And second, and I think far more importantly, is the previous band was only on rough. Now the thing is for rough diamonds, those get exported typically from Russia to India, China or Antwerp, and in this case, the cutting and polishing happens in those centers and those are then substantially transformed goods, so they are no longer considered Russian diamonds. So that previous band really had no teeth. This is very different because they're thinking about prohibiting cutting and polished Russian diamonds from entering any of the G seven, which is really sixty five percent of the total market demand.
This is what we do with Russian goods that we want to put sanctions on them, so you know we're serious. But they can send the goods to India or China to get finished and then we'll buy them. Yeah, you know exactly.
Russian terms of how big is Russian terms of being a supplier.
So Russian diamond market is roughly four billion. There was four billion in exports back in twenty twenty one before the war. Just you know, just to compare that to the overall GDP. Overall Russian GDP in twenty twenty one was one point seven trillion, So you're really talking about point two percent of the market. To the previous point, it is more optics than reality because point two percent is a pretty small part of the overall market to change.
All right, So where where do you typically get your diamonds?
So we typically buy from siteholders, which are the customers of Dibber's. So typically Botswan and Sort is our number one source. So we started avoiding Russian diamonds back in twenty twenty two when the ban in the US was announced preemptively. So for US it doesn't really affect us because we don't source Russian diamonds in any case.
How fungible are these stones? I mean, how would you know if a diamond came, you know, cut, polished, finished, out of Russia. It doesn't have any kind of like microchip inside it.
There's no tag, right, It's hard, and that's why this ban is going to be especially difficult to enforce. But the idea behind it is really implementing blockchain technology and ledger systems throughout the supply chain to be able to figure out what's going from Russia versus elsewhere. And honestly, I think it's actually kind of great because all of a sudden traceability becomes enforced in the diamond industry, which is great soul. We can make sure we don't get any conflict diamonds, blood diamonds and the like.
Talk to us about the diamond market today, how's it been over the last year or two or is it? Are diamonds more expensive less expensive?
So natural diamonds have been getting crushed so since their peak in mid twenty twenty two, they are down roughly thirty five to fifty percent.
In wise of value. A few reasons.
One is that there is a natural lack of demand in China as well as the US, which are the two major consumers of diamonds, and people are going out a lot more. They're eating out, traveling, and a lot of that consumption power is going there. But I think the bigger issue is lab grown diamonds.
And you guys do lab grown diamonds, right.
We have launched lab grown and so a few interesting statistics on lab grown Back in twenty eighteen, it was like two percent the market. This last year, thirty six percent of engagement rings sold were labrown engagement rings. Over half of current diamond distribution in the US is lab grown, So really they've taken off it's a perfect substitute chemically, physically, optically, the same discounts ranging anywhere from seventy five to ninety percent of their name.
Wow.
So basically I get my wife a lab grown diamond, Yeah, if I give her a two carrot honker on a platinum ring, she will be just as pleased as if I gave her like a real blood.
Diamond, well, not a blood diamond. Per se, but a natural diamonds call it yes, yeah, so absolutely, and she.
Takes it down to Wilson Jewelers and Scarsdale. They're not going to know the difference.
They will not. The only way you can know the difference is if you send it to the GIA or IGI or another certification lab and there's small traces of nitrogen in natural diamonds that do not exist in lab room. That's really the only way you'll be able to tell the difference.
But it's visually. I'm never buying a real diamond a game.
Yeah, I mean, boy, if I had known that back in the day, they didn't have them that guy, I know, I know, I know, I know. Trust me. Ancor Daga, thanks so much for joining us. Acre Daga, CEO of ANGAA.
You're listening to the team. Ken's are Live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Let's talk med tech Boston Scientific. I have no idea what they do, but it's a big company. It's like eighty billion dollars in market cap stocks up sixteen percent.
Do they make medical hardware?
Medical devices?
Right?
Stuff StuffYeah stuff that you know, so it's medical devices. Matt Hendrickson, he knows what they do. He's a senior equity analyst covering the med tech business with Bloomberg Intelligence Boston Scientific. Just give me the thirty seconds. What did they do and why do we care?
Yeah?
They make stuff okay, like stints, right, So they make stints.
It started off with stints and then it turned into heart vale.
This turns into and what some of the products we'll probably talk about is the Watchmen device, which goes into the heart. They create catheters and then they go into endoscopy, so singles use scopes to help with you know, various endoscopic procedures.
All right, So like splunk splunk, except what the people splunk for people? Okay, now that makes sense, I get it now. During the pandemic, hospitals were overloaded with just dealing with COVID patients, so people weren't doing surgeries and procedures and things like that. And that's not good for a company like uh Post and Scientific or Metronic or something like that.
No, they need procedural volume, especially in the cardiology side to get their organic revenue growth, which is kind of the key driver for their valuation all those aspects.
Once the hospital beds are filled with COVID patients.
They couldn't do heart procedures. That that's mostly in the back mirror.
So now are we back to more normalized.
If anything, we're kind of going still through kind of this backlogs. We're kind of getting an extra tailwind in enitionship.
Operations maybe as opposed to revenge travel, although surely that is happening. I mean it must be happening.
Well someone I mean for Boston, I mean someone who can probably wait a year or two for a procedure. Now they're going back to their doctor like hey, I'm ready now, and you know, the doctor's like, great, we.
Need the volume. We need to make our money, so come on.
In, all right.
So Boston Scientific had an investor day. What was kind of the message they wanted to get across.
Well, the big thing was so we talked about organic growth being kind of the driver for valuation. They were traditionally in the high single digit so they were in six to eight percent. Was kind of their long term project or long term outlook. Or goal, and so this this meeting this week, they bumped it up to eight to ten percent. Okay, so it's and this is a company that's making fourteen expected to make fourteen.
Billion dollars in sales this year.
So we're not talking about some small company making additional like two million dollars to get to that growth. You're talking about very incremental growth to kind of drive that eight to time pent organic growth.
So what did the market. Had the market respond to that?
They were They were up two percent, and so so far this week they're still up.
Well, so what's driving is it? What's driving this growth here?
I mean, is they also make I mean they do M and A right, and they just do a deal yep.
So yeah, they just acquired a company called Relievant, which is the procedure in your vertebrate to ablate the nerves to help.
With that lower back pain essentially.
Wow.
Yeah, that sounds like a good thing, but it hurts to even think about that procedure.
People say back is the worst.
Yeah, can't get it all.
Right, So what's so what's your call on Boston Scientific?
Well?
I think I mean right now it's trading at about you.
Can't read those numbers. The font on his page of his compage, give me, give me this. It is the smallest font. Yeah, it's like, forget about it. You can't read that.
It's my little chie cheek. Yeah, okay exactly, but it's training twenty four times.
Pe got that eight percent growth, the call should be that investor or the analyst, the consensus should be upping their estimates and that should be getting you know, normally, when you say eight to ten percent, you know the street goes at nine percent.
Yeah, r down in the middle.
If you get that nine percent growth, you should be able to see that multiple go up to something that's more like like the twenty eight times range. And so that's kind of the big call, as they kind of you know, during the meeting, they kept saying the next level, the next level, the next level. Right, Well, if they're able to be able to achieve that growth and get too closer to ten percent versus the eight percent, they'll get to that next level in the multiple.
By the wait, I mean, who else is there? If I want a stent, I'm probably going to get it from Boston Scientific, right, Well.
I mean, yeah, a stent is a stent is you're gonna get is either a bit Metronic or Boston, but those are kind of the slower growing side. This is some of their key growth drivers beside the M and A is going to be the Watchman device. Now that's a product that's going from like a two billion dollar market to.
What's the Watchmen device.
Watchmen is for.
Its device that closes the left atrial appendage in the heart, and essentially what it does is that appendage for people with atrial fibrillation, holds blood in that little appendage, it clots and then it turns into a stroke risk. They close that appendage with this device and then therefore essentially removing the risk of blood clotting in that appendage and then.
Going up to the brain for a stroke.
But did we not need that appendage to begin with?
I mean, you know, that's what they found out over time, is that no, they didn't.
It's kind of the same thing as your appendix, you kind of it's kind of just sticking out there and you don't need it, and you can.
Cut it off. They were cutting it off.
Now this is a non surgical procedure for being able to do the same thing.
Yeah, all right, So talk to us just more broadly about the medical device business.
What's thea you mentioned a couple Abbot, Medtronic. I know Striker because I love the name and they make you know, hips and stuff.
Edward's Life Sciences, Yep, they're they're doing heart valves yep. So that's you know, everything.
Everything is trying to minimize kind of the openness of surgery. So it's all minimally invasive procedure. So you know, you're just the last one was Edwards. They have taken an open heart procedure and have created a technology that you take a catheter and.
You don't have to open the heart. You can just go straight up through the or earth.
It's like it looks like a little like spy like in the spy movies, those little like cameras, like those snakes around.
Yeah, it's kind of just.
Like that, and it delivers the valve and there it's done. There it's been but the medtech sector has been hit hard because of kind of the g LP trend that's going on. What's the goop trin the GOLP drugs that are coming out for obesity.
Yes, true, gov we go v and I would sell a medical device company because I think there's gonna be less prestigures, because gonna be you're not gonna you're not gonna be nearly as at risk of a heart attack or stroke if you don't weigh three hundred pounds. So if you used to weigh three hundred pounds and you go it an ozepic shot once a week or I don't know, once a month, however it.
Works sometime it's daily or yeah.
Pill forms as well. So if you can take these drugs and get into better shape, you're not gonna need a stint.
That's that's the that's the thesis going on right now.
Wow.
But I mean there's there's a lot of caveats too.
There's zimmer Bioment, for example, it's another orthopedic company like Striker. Their CEO came out and said, hey, some of these patients who were too obese for surgery, if they take these weight loss drugs, then they'll be healthy enough to get their knee replacement or to get their hip replacement.
Uh.
And then the other thing too is you know there's data coming out. I mean, the diabetes companies have been trying to fight back hard on this, but they're showing data that these patients who are taking these glps, these weight loss drugs, they're they're not taking them after a year, they're not taking them after two years.
So it's you know, and it's something.
Where but they keep the weight off.
No, So these they try.
These, they don't keep the weight off.
And half of these patients are like just dropping out after a year even more.
But so they lose weight, They lose a year and then they're like I liked being fat.
I see it as like, do you want to keep you know, injecting yourself with this every single day or even once a week.
It's you know, it's a it's it's a lot.
And yeah, but so as being obese, Yeah, so I would probably rather object inject myself.
Probably, But I also at the same time, if you keep injecting yourself and then you know there is bariatric surgery as kind of that you know, safe safety net there.
Then you go like this would be interesting to hear. I I mean, I wonder if beriatric surgery is better or worse the band in terms of in terms of losing the weight and keeping it off. I wonder which one's better longer term.
We hear more about that kind of in this third quarter call.
And so that's could be intuitive surgical, and that's gonna be metronic.
And yeah, it's a it's a stay tuned type of dude.
What a fascinating industry to.
Cover it is?
It is, it's good stuff. I mean, the whole healthcare space is just you got it. It's just it's never going away. It's always a growth industry. You're always going to have a job if you're in the helpcare well.
And lately I've been looking at like pictures of FDR or pictures of ideas, say it looked like one hundred years old and they died when they were sixty.
Matt Hundredston's senior ecodanalysts covering all the medtech space for Bloomberg Intelligence, joining us live here in our Bloomberg Interactive broker studio. This is Bloomberg.
You're listening to the tape Cat's are live program Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, and the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Let's look at the M and A front here. We've got a big M and A trade looks like it actually might close. Microsoft Activision sixty nine billion dollars. We got some approval I think from the UK's regulatory body. That was kind of the last one to fall. Jennifer rejoins us. She's a senior litigation analyst. She focuses on antitrust. It is right down her alley. She does that off for Bloomberg Intelligence. So, Jen, what did the UK authority's rule here on this Microsoft Activision deal?
Well, Paul, at long last, it finally looks like this deal is going to close. What they have said is that a new remedy that Microsoft proposed about a month ago or so is probably sufficient to cure the concerns they had about the deal. That it looks likely that it's sufficient. This is a provisional decision, and so what they will do now is listen to comments by interested public other entities to participate in the market, and then at some point after October sixth, issue of final ruling. But really, Paul, this is called provisional, but this is it. I mean, they're going to ultimately clear this deal, there's no doubt in my mind.
The weird thing to me was, if you're going to do a big M and a transaction, I get that you need to have the US regulators approve it, right and I get because it's a massive market, I get that you're going to have to have Europe approve it. But England do they really matter that much anymore?
Well, I guess they do now they've made a big splash in the antitrust world. You know, the UK used to be part of the European Union before Brexit, so it didn't really issue its own opinions with respect to these big global mergers that were big enough to trigger European Commission review. You know, there might have been other deals that actually did trigger just only UK review in which the UK was still involved, but for the most part, when you had these big acquisitions like Microsoft activisions, you didn't have the UK independently involved. And now they are, and I think they really want to flex their muscles. They want to show that they are a real antidrus regulator.
I mean, obviously that would common as tongue in cheek. So if you're British and you're offended. Please don't email my boss. They do have sixty seven million people, but again it's only sixty seven million people in the UK. What other regulators do I have to worry about?
Am I am?
I going to the Indonesian regulator. They have a lot of people, Well what about India? Do they look at the M and a deal?
You know, you know what people don't notice. But I'll tell you what. When these deals get filed, sometimes they're filed with over one hundred jurisdictions. There are they could be fire out filed in Azerbijan. There are so many jurisdictions with competition authorities, so you know there's a whole group within these law firms. We have to assess every single jurisdiction globally where a deal has to get filed, where it might trigger the thresholds for that country or that jurisdiction. But in reality, the jurisdictions that really have the law behind them and I think the will to actually block a deal are primarily the US, EU, China and now UK.
Yeah, it's interesting. So I mean I saw some reporting jen which kind of goes to what you said to that the what you're talking about about the UK, and the UK says, hey, you know, we're going to kind of prove this one here, but you better be careful what you bring to us because we're going to be We're not going to be a pushover here. So I guess that if you're an anti trust m and a lawyer, you got to keep that into account.
These days, you know, absolutely, I think it's getting harder and harder. I mean, just the fact that the FTC and DJ are changing a lot of rules, making it more onerous actually to notify the deal to the regulators, more expensive as well, and have these extended review timelines and have become very unpredictable. Now you have to deal also with this unpredictable CMA in the UK, and I think that it just adds to the uncertainty of deals that makes it harder and harder for the merger arbe treasures to actually do what they do. And I think, you know what I'm thinking about right now is the Adobe Sigma deal because I wonder what the UK is going to do on that one. It's moved into a phase two on it, and I could see the UK actually being one of those regulators that tries to block that deal.
Hey, Jen. I mean on the banking side, we usually charged a percentage of the deal size as our fee, and that got negotiated up front, that percentage. How does it work on the legal side? Is it still all about hours? Billable hours? So I mean a case like this with all the anti trust must have been just a juicy yeah, juicy deal for the lawyers.
Yeah, oh yeah, it's all about hours. And I'll tell you the attorney's logs and serious hours. When these jurisdictions go into those in depth investigations, they are rigorous. They take a lot of work. I mean, that's what I spent most of my legal practice doing was responding to these second requests from the Federal Trade Commission in the Department of Justice, and they ask for a lot of data, a lot of information, a lot of responses to questions. There are depositions, there are interviews of company executives. It takes a lot of time, and when it's so protracted like Microsoft activision, with appeals and going in to court, it is expensive. Those lawyers did very well, by the way.
On that note, and kind of an aside, but do you round up to the nearest hour? I mean, if you're if you're driving home to Westchester and you a lawyer for one of these cases and somebody calls you from the company to talk about it, and it's like a five minute conversation. Is that one billable hour?
No?
No, Now, I will say that every law firm has different rules about what becomes a billable hour and what doesn't become a billable hour. I can only vouch for the firm I work for, which was very careful about these things, and a five minute call would not have been a billable hour. But if those five minute calls start to add up, you know, maybe you have a billable hour there.
And it also.
Sometimes depends on how much do the legal counsel within the company push back on those bills, because they do and they can, and you.
Know see in my experience, it's been, well, quarter hours you get built for like a five minute phone call, you'd get built a quarter hour.
Right, Well, that makes more sense.
Yeah, and Jen, how about the senior partner just devolved away from Michigan, I mean, no Microsoft, Microsoft, to just kind of how they make money. So the senior partners at these white che New York law firms, do they still have the bill hours or they just take a salary.
Oh no, they bill hours, everybody built. Yeah, no, they bill hours and it goes to the client. I mean, look, I haven't done practicing on now for about eight years, but as far as I know, things haven't changed. And the senior partners have to keep the calendar just the same way the associates do and log all their time, bill their hours.
That is just no way to live a life, right, Yeah.
I feel like the bankers may have it figured out, but maybe I'm wrong.
Yeah, I don't know. The lawyers do just fine as far as I can tell you. All right, Jen, thanks so much for joining us giving us a little primer on how to how you earn your money in the law firm. So your bill hours, I guess. Jennifer Ree, senior litigation analyst covering the anti hour costs.
At one of the top white shoe law firms.
Boy, I don't know. Five hundred hour, thousand dollars an hour, definitely over a thousand, over a thousand bank all right. I mean I don't know if I would break down my deal feed into hours, and I don't know how that would be looking.
Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
And I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio