Game on for the biggest leveraged buyout

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0:17Good morning from the Financial Times. Today is Tuesday, September 30th, and this is your FT News Briefing. Elon Musk is seeing his higher-ups head towards the exits, and investors think the euro's big moment can get even bigger. Plus, the largest ever, leveraged buyout of a company is turning heads. If you can think big, if you can get the financing to do it, it might be possible now in a way it historically wasn't. I'm Mark Filippino, and here's the news you need to start your day.

0:56Senior staff at Tesla and XAI have been leaving in droves over the past year. This includes roles like Tesla's chief information officer and XAI's chief financial officer and general counsel. The FT spoke to more than a dozen current and former employees to understand the recent exodus. Some happily left after a long career to found startups or take a break, but others left because of burnout, Musk's political activism, or disappointment with his pivots. For example, take Musk's beef with ChatGPT chief executive Sam Altman, one former employee said that Musk is spending every waking moment trying to put Altman out of business.

1:35Musk, Tesla, and XAI declined to comment.

1:45The video game maker Electronic Arts just struck a$55 billion deal to go private. They're the company behind blockbuster franchises like Madden NFL and The Sims. Now, this deal involves a consortium of investors, and it is the biggest ever leveraged buyout of a company. Oliver Barnes is our U.S. deals and activism correspondent. He's here to talk more about this landmark move. Hey, Oliver. Hey, Mark. So, yeah, just tell me a little bit about this buyout. U.S. President Donald Trump's son-in-law Jared Kushner is a part of it. So is Saudi Arabia's Sovereign Wealth Fund. There's a lot going on here.

2:19Yeah. So there's a full cast of characters and you tend to need like big names when you do a deal of this size. So it's Silver Lake Capital, the tech focused private equity firm that we've seen around media products like Endeavor, which is behind UFC. Jared Kushner, who's President Trump's son-in-law and also runs an investment firm himself, Affinity Partners. And then on top of that, the Saudi Sovereign Wealth Fund, PIF. And it's that consortium which is putting a huge check to work and a huge amount of capital to work and a huge amount of debt to work to take electronic arts off the public markets and take it private.

2:57Why are these big players taking out all this debt? Why are they so interested in electronic arts? Well, your standard leverage buyout works with they put an equity check forward and they also get some debt on top of it. Obviously, this stands out because it's such a large amount of debt. It's a$20 billion financing package that's being arranged by JP Morgan. I think that's the wrong way to understand this. At the core of this deal is the ambitions of PIF, which, of course, where do they get their money from? Saudi's oil and gas wealth. But where are they deploying their money? They're deploying it across entertainment, hospitality.

3:35They want to diversify the things that the kingdom invests in. They've done deals in the gaming space before. They're familiar with it. They were already a shareholder in electronic art. So the best way to understand this LBO is not a mathematical equation. It's an equation of the huge ambitions of PIF and Saudi Arabia. As I mentioned,$55 billion is a staggering number for a deal. And again, it is the largest ever leveraged buyout of a company. Is this indicative of other deals that could be coming down the pike? Or is this kind of its own thing? I think it's indicative of one thing, which is that this year so far, the deal volumes that we've seen, we've seen around$3 trillion worth of transactions by the end of the third quarter.

4:23The deals that are happening tend to be big and ambitious and bold. and sometimes kind of like unthinkable under prior administrations. And that's because of the kind of M &A environment that I think that President Trump has created, which is that initially we saw off the back of Liberation Day turmoil in the markets and uncertainty, and dealmakers don't like uncertainty. So deals weren't really happening. But now what a lot of companies see is a window to go and do stuff that previously maybe regulators would not have waved through. The flavor of this deal is a flavor we're seeing across M &A at the moment, which is if you can think big, if you can get the financing to do it, it might be possible now under the current administration in a way it historically wasn't.

5:13That's the FT's Oliver Barnes. Thanks, Oliver. Thanks.

5:24UK Chancellor Rachel Reeves is asking citizens to trust her and the Labour government when it comes to the struggling economy. Here she is speaking at her party's conference yesterday. Whatever tests confront us, have faith. Because our party and our country have overcome greater challenges than these. That faith is key because yesterday her party refused to rule out raising taxes. If Labour opts for this, it would break the party's manifesto pledge not to raise income tax. The Prime Minister's Chief Secretary Darren Jones told Sky News yesterday that tax increases are still up in the air. When the Chancellor is in a position to make decisions, which she will be in the coming weeks, she will make those decisions and then she'll tell the country budget in the normal way.

6:10So basically you cannot rule out raising VAT or income tax rents up for now? I'm not ruling anything out or anything in. Reeves is scheduled to deliver the autumn budget at the end of November. Meanwhile, Prime Minister Keir Starmer will speak today at the Labor Conference and look to unify his party after a messy cabinet reshuffle earlier this month.

6:36The euro is on an absolute tear right now. It's having its biggest rally since 2017. And get this, according to analysts, the so-called global euro moment may only just be getting started. My colleague Ian Smith is here to explain how the currencies climb as testing policymakers. Hi, Ian. Hi, Mark. So Ian, first of all, just put this all into perspective for us. How strong is the euro right now? As you say, it's been a really dramatic rise in the euro this year. It's up about 13 % against the sliding dollar to around$1.17, being one of the big beneficiaries from the decline in the dollar's value this year.

7:13And just out of curiosity, why is this happening? why are investors eager to get euros into their portfolio? So there are a few drivers here. One is there's some greater optimism around the eurozone economy. Perhaps the region is pulling together. You've seen that big spending package out of Germany that will help to lift eurozone growth. And at the same time, Donald Trump's policymaking in the US is making people question the dominance of the dollar within global investment portfolios. And you're seeing some hedging activity linked to that, which is also benefiting the euro. So there are a few things that are lifting the euro at the same time.

7:48So in some senses, this would seem like it would be a good thing. The currency is strengthening. But how is it actually impacting European economies? Yeah, a stronger currency is a good reflection of how the global market is viewing the eurozone economy. That's certainly true. but it does come with challenges, say, for exporters whose goods being sold into the US are now on a less competitive basis. Also, rate setters at the European Central Bank have talked about it becoming a bit trickier if you see a lot more appreciation in the euro from here because of the impact that can have in pushing down inflation.

8:25And for a central bank, which is largely believed to be finished with its rate cutting cycle, there's this question as to whether they might have to countenance a further interest rate cut to restrain the soaring euro. That does not seem to be on the cards right now, but that is something that could come to the fore if you see a sharper rally from here. Ian, the dollar is the global reserve currency. Is this pivot toward the euro maybe the start of a longer term, maybe more permanent trend? I think it's really important to differentiate between a decline in the dollar's value and its role as the de facto reserve currency and US treasuries as the de facto global reserve asset.

9:06It doesn't seem like the status of the dollar is being defenestrated. But what you are seeing is people saying, I want to hedge my dollar exposure in a way that I haven't done in recent years. That in itself is helping to strengthen the euro and weaken the dollar. But it also reflects how they feel about the dollar's role in their investment portfolio. And there are broader concerns that the policy making coming out of the White House is going to deter some people gradually from investing in the US. So you might see more incremental investment coming into European assets as people look to diversify away from what has been a really high allocation to US assets.

9:44So that also serves to benefit the euro. Ian Smith is the FT's senior markets correspondent. Thanks so much, Ian. Thank you very much. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

10:25Authoritative Legal AI, LexisNexis. Decisions made in Washington can affect your portfolio every day. But what policy changes should investors be watching? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington right now and how they may affect your finances and portfolio. Listen at schwab.com slash Washington Wise.