Sony Eyes Kadokawa Acquisition: Implications for Gaming and Anime Markets

In this episode, Richard Hoeg dives into the potential acquisition of Kadokawa by Sony, examining the pricing process regulatory questions and more. Richard explores Sony's stake in Kadokawa, the company's anime involvement, and potential antitrust issues. He provides insights into Sony's acquisition history and financials, the implications of leaked information, and the role of cash in acquisitions. The episode also touches on Tencent's influence, anime market monopolization worries, and jurisdictional challenges for international companies, concluding with thoughts on regulatory concerns and FromSoft's potential independence.

Episode Transcript

(00:38):
Hello, everybody, and welcome to anotherepisode of Virtual Legality.
I'm your host, Richard Hogue, managing memberof the Hogue Law Business Law Firm of
Northville, Michigan.
And today, we're talking a little bit aboutbusiness and law because our good friends in
the video game industry have once again decidedthat we should talk about acquisitions.
Now folks online have already asked me a numberof questions about this particular story we're

(01:00):
gonna talk about today, Sony's potentialacquisition of Kadokawa, and I apologize in
advance if I mistake that pronunciation.
It is a Japanese name.
So it undoubtedly has a correct pronunciation,but I don't know precisely what it is.
So we're gonna talk about that today becausethere are a lot of things, a lot of factors
involved with this particular discussion thatpeople have a great deal of interest in.

(01:23):
So with that said, let's talk about the initialreport.
This is Reuters from a couple of days ago.
Sony is in talks to buy media powerhouse behindElden Ring, and you saw from the thumbnail to
this video that I asked whether Sony wouldbecome the Elden Lord, a a character or concept
from the game Elden Ring, but really Elden Ringis only the start of our discussion here today.

(01:44):
So as described by Reuters, New York, Tokyo,November 19th, 2 sources familiar with the
matter say Sony is in talks to acquireKadokawa, the Japanese media powerhouse behind
the Elden Ring game.
If successful, a deal could be signed in thecoming weeks.
Now I wanted to point out as our at the startof our conversation here that as you know, if

(02:06):
you've been in virtual reality or if you justfollow these stories elsewhere, signing a deal
does not mean that the company changes hands atthat moment in time.
You sign a deal, and there are a number ofconditions that have to be met, including
regulatory approvals and things that we sawwith respect to Microsoft's purchase of
Activision and other contexts as well.
And so we are at the point in time right nowwhere this is just a rumor as presented by

(02:31):
Reuters.
We'll see it was followed up on and confirmedin some respects by Kadokawa in just a minute.
But where we are in the time frame is thatthese two parties are potentially talking about
an acquisition.
They would then have to sign a document thatsays we're gonna get more definitive documents
together.
They would sign that document, and then theclosing of the transaction, Kadokawa becoming

(02:52):
Sony's company, wouldn't happen for some periodof time thereafter.
Probably not as long as it took for Activisionto become a part of Microsoft because I
wouldn't anticipate as much regulatory concernshere, but that's a part of this conversation as
well.
Either way, we are a couple steps removed fromeven having this actually happen, but people
are interested because Elden Ring, Demon Souls,Dark Souls, the from software library of games

(03:16):
becoming owned by Sony raises concerns forcertain people that love those games that don't
want them to be held exclusive by Sony just asthe Call of Duty question became one for
Microsoft making it potentially exclusive aswell as Bethesda games, like Starfield,
potentially like Indiana Jones, though we knowthat's coming to PlayStation now.
And so this is an important discussion to behad, and though a number of folks think that I

(03:40):
defended Xbox from the FTC and the CMA in theUK, specifically because I'm an Xbox fan, I
would reiterate in this context that I'm a fanof gaming more than I'm a fan of hardware
manufacturers or any other company withingaming.
And so if the FTC or the DOJ or any otherinternational body were to come down on this

(04:01):
transaction, I would have my own concerns withthat regarding whether or not that was a just
use of their authority and power, just like Idid with respect to Microsoft and Activision
Blizzard.
So with that said, I wanna talk a little bitmore about this deal.
Sony already has a 2% stake in Kadokawa,Reuters notes here.
That's important when we're gonna talk aboutthe price of this transaction.

(04:23):
A lot of folks have asked me about the price,both both because of a tweet that I put out
into the world, which we'll talk about as partof this video, and because it's an important
question for Sony and their ability to pay forthe transaction in general.
It's important to note here when we do the matha little bit later on, and as always, I warn
people of lawyer math because lawyers are knownfor their word crafting and not their

(04:46):
mathematical prowess, that we will get into injust a minute.
Sony would only be purchasing 98% of thecompany because they don't have to buy the 2%
that they already hold.
Continuing on, I wanted to mention that I amsympathetic to Reuters having to come up with
different ways to talk about these companies inmany, many articles that they put out there.

(05:09):
Sony here is described as the inventor of theWalkman, which I thought was an interesting way
to describe Sony.
Undoubtedly true, but perhaps not the mostuseful here.
Maybe the hardware manufacturer, thePlayStation would be better.
Sony's focus, they note, includes anime, whichI know is a particular concern for a number of
people with this particular transaction becauseKadokawa controls the distribution and creation

(05:32):
of a lot of anime themselves.
Sony already has an interest in Crunchyroll andsome other aspects of the anime industry, and
so that is one area where folks have brought tomy attention that there might be a concern with
respect to monopolization and antitrust laws aswell.
I don't think that will wind up being an issue,but we'll talk about that as part of this video

(05:53):
as well.
I also wanted to note here one other thing thatReuters notes.
Sony, which has a market value of about a114,000,000,000 in January scrapped the
$10,000,000,000 merger of its Indian arm with ZEntertainment Enterprises, and I wound up
talking about this online to a number of folksbecause they asked me why I thought this
potential transaction would be a problem forSony's pocketbook.

(06:13):
And I noted that this transaction was scuttled,and they said it was for conditions that were
not met.
And I wanted to point out to people that Sonyis run by people, individuals.
Every business is, Microsoft, Activision, Sony,Kadokawa.
And when you get to the end state where you'regoing to hand over your money for that company

(06:35):
or for those assets, you can reevaluate whetheror not it's a good idea.
And this particular transaction with ZEntertainment Enterprises wound up being a bit
of a legal fight after the fact because Sonybacked out of the transaction in its entirety.
And I'm not saying that specifically becausethey didn't wanna spend the money at that
moment in time, but there was a legal fightabout it because individuals, human beings, can

(06:59):
act on pretextual reasons for getting out of atransaction.
And, ultimately, this deal died for any numberof reasons, not the least of which is because
Sony just didn't wanna do it at the end of theday, and that may or may not be a function of
how much money they would have had to spend.
Similarly, as Reuters notes here, Kadokawa'sbusiness has been buffeted in recent years.
They say in June, it was hit by a cyberattackthat lowered the price of the shares of

(07:21):
Kadokawa.
And then 2 years ago, Subihiko Kadokawa, theson of the company's founder, resigned as
chairman after he was indicted on briberycharges related to the Tokyo Olympics.
And you can go look up the Wikipedia articleand all that for this particular item.
But what's worth noting here is much likeActivision and much like a lot of transactions
you see out there in the world, this is acircumstance where this particular company has

(07:46):
an intrinsic value in making goods and servicesand selling them out into the market, and then
that value is decreased to some extent in thepublic stock market because of circumstances
that are likely black swan or individual eventsthat are unlikely to reoccur.
So like Activision and the lawsuits inCalifornia about harassment and unequal pay and

(08:08):
things like that that lowered the price ofActivision to a place where Microsoft was
comfortable making that bid, This does appearto be this a set of circumstances where we
would expect somebody to come in and say, well,maybe you are undervalued in the market now
because you've had certain issues with yourcompany that maybe we can fix, maybe we can't,
but that the stock market is not valuing you atthe level that it should.

(08:29):
And so we see a set of circumstances asdescribed here, which is only referenced by I
believe it's sources familiar with the matter,but it makes sense from the story that Reuters
has put out here, and there's no reason todisbelieve it, especially once Kadokawa reveals
that they have received a letter of intent fromSony.

(08:51):
Now like I said, that's really only step 1.
It's even before step 1 of a transactionbetween these companies.
But But I wanted to talk to you all a littlebit about what a letter of intent is because
you call up a company, if you're Sony, and yousay, hey.
Are you interested in selling?
And they say, probably not because we'rerunning our company right now.
And Sony says, well, what about for this priceor for this deal?

(09:12):
Would you at least be interested inentertaining that?
And if they can get you across the line ofsaying, yes, we would at least entertain that,
then Sony can move forward with its lawyers andsay, alright.
Put together a letter of intent for us and puttogether it based on the these transaction
terms that we have agreed to or we think we canget Kadokawa to agree to in the medium to long

(09:34):
term.
And if you haven't seen a letter of intentbefore, I use forms that you can find online so
that I don't have to redact my own clientinformation and potentially miss something
because there is attorney client privilege inall the transactions I conduct and any other
lawyer conducts.
But a letter of intent is basically a primarilynonbinding type of document that says, this is

(09:54):
the price tag for these goods, whether it'sequity in the company, whether it's the assets
of the company, however the structure might be.
It sets forth the price and what otherdocuments that we might need.
This is how long your founders have to staywith us.
This is what we would pay to your currentoption holders in order to clean the books of
this particular company.
All sorts of things that come up with legalese.

(10:14):
But it's important to note before we get intotalking about the price of this company and
other aspects of where that price might beshifting, that the lawyers basically only come
into full play with the drafting of thisdocument, and it would usually be with a set of
bullets or a telephone conversation that says,this is the purchase price that we are willing
to offer to this other business.

(10:35):
These are the structural terms that you need toknow to incorporate into the letter of intent,
and that the lawyers like myself do notactually set the value of the company.
That's the business people on either side ofthe transaction deciding on what this thing
should look like, what offer they are willingto make, then the lawyers lawyer it up with
some legalese so that it's binding in theplaces that it needs to be binding and

(10:55):
nonbinding in the places where it shouldn't be,and move forward with that.
I, in other words, am a lawyer.
I am not the financial adviser.
I'm not the financial analyst.
A lot of people get paid a lot of money to goout there and value companies and figure out
what the price might be that we could purchasea company or sell if we're on the other side of
the transaction in order to make the most moneyfor their shareholders or otherwise meet their

(11:20):
fiduciary duties.
And so the lawyer doesn't usually engage in alot of lawyer math here.
They're usually just documenting thetransaction as best as they are able to, and
you see these little notes to draft here.
This is the kind of precedent that I would workoff of when putting together a letter of
intent, not necessarily this long, notnecessarily with this many terms.
A lot of these could come out depending on whatthe transaction actually was, but this is when

(11:44):
the lawyers get involved, and not before.
But Kadokawa says they've received a letter ofintent from Sony at this point in time.
It undoubtedly has a purchase price or purchaserange if Sony hasn't done all the due diligence
that it needs to yet to figure out what priceit's willing to pay.
And then the letter of intent can be signedonce the board of directors of the company

(12:05):
agrees that this documentation should moveforward.
At that point, Sony then enlists its lawyers totake this letter of intent, these bullet points
of the deal, and then to draft a stock purchaseagreement or draft an asset purchase agreement,
draft a transition agreement, draft a wholehost of other documents that might be necessary
to get all of this set up for closing.

(12:26):
And then that point in time, what Reutersdescribes as in a couple of weeks, is when the
parties can agree to a set of deal documentseven though the closing is probably gonna be
months to a year out from that point.
So we're still a bit far away, but Kadokawa, asa public company in Japan, wants to tell its
shareholders, wants to tell its investors thatthose articles you've read about this

(12:50):
particular issue are true insofar as Sony'smade an offer, but they also say here that the
company has received that letter of intent, butno decision has been made at this time.
And this is important.
Right?
As a public company, you are supposed to betransparent with all material information about
the state of the company because the investorsneed to know what's going on inside the company

(13:12):
in order to best be able to buy or sell shareson the open market.
Here, Kadokawa says we haven't moved forwardyet, and we'll tell you if there's more to be
said about this in the future.
So it's still a few steps away, which leads tothe other question here, which is to say, how
did this information get to Reuters?
Right?
We'll see in just a minute that the price ofKadokawa's stock in the open market jumps when

(13:37):
this news gets out the door.
And that's not unexpected because every companythat you're going to purchase on a public
market is going to have to be purchased at somepremium to the price that it is currently sold
at on that market.
So because of that fact, even though we don'tknow the price right this second, we know that
Sony, in order to even get through the door,would have to offer some amount higher than the

(13:59):
shares are currently trading at.
And so generally speaking, Sony doesn't have agreat deal of incentive to go out the door with
the information that they're thinking aboutbuying this company, and they don't want to get
into either a situation where the price of theshares goes beyond the place where they would
be comfortable buying it or that investorswould be comfortable selling it to Sony even

(14:19):
though the price might have been agreed to atthe start, and they also don't wanna get into a
bidding war.
Right?
Part of the story with this particular company,Kadokawa, is that Sony is a major investor, 10¢
a major investor, other huge companies with alot of money, a lot of potential cash on hand
to make a transaction like this would beinterested potentially in buying the company,

(14:40):
increasing their investment in the company ifthey knew it was for sale.
Right?
So in general, buyers don't want the news to goout the door that the company is potentially
shopping itself around because that wouldincrease the price again on the Sony side.
So we can probably discount, and this is allsupposition on our part.
We don't have eyes or ears in the room.
We could probably discount that Sony is theleaker behind this particular story because it

(15:05):
doesn't make a lot of sense for them to beleaking this to Reuters.
On the other hand, Kadokawa and its managementdoes get the benefit of that stock bump,
especially if, as was the case in the Reuters,article and its notes, their stock price has
been somewhat artificially decreased for aperiod of time to justify their continued
management of the company and or to stave offwhat they would view as a different kind of

(15:30):
hostile bidder.
And I've seen online certain folks guessing oror kind of proposing that a different hostile
bidder could be at issue here and that Kadokawawas effectively using this story as a kind of
white knight defender, of the company fromsomebody that they really didn't want to own
the company, and that's all possible.
But suffice it to say, it seems more likelythat Kadokawa is leaking this, someone inside

(15:55):
Kadokawa is leaking this, because it doesn'tmake a ton of sense for Sony too.
The other aspect of this is I just mentioned isthat lawyers are involved here.
It really doesn't make sense for the lawyers toleak information like this.
Lawyers, particularly transaction lawyers, havea lot of business deals, a lot of financial
understanding that is private to them, that isprivileged information between the lawyers and

(16:16):
the companies, and that they could lose theirlicense and their ability to practice law if
they were to leak it in a fashion like this toReuters.
So I really don't think the lawyers are likelyto be the culprits here, but, of course, they
would have the information as well.
Now with that all said, I do wanna talk alittle bit about the price situation here
because a lot of folks have asked, and I amresponsible for at least some of that because

(16:39):
when I first saw this news, when it was leakeda couple of days ago, the very first thing I
said was, honestly, I'd be more concerned aboutSony accidentally bankrupting themselves than
monopolizing games and anime anime, which iswhat I saw being discussed online.
I just don't see a simple way for them to payfor this, and this was somewhat flippantly made
as a tweet, as I often do on Twitter, because Isee this bit of news, and then I give my

(17:04):
initial impression of these things.
A lot of people got mad at me for evensuggesting that this could be an issue, and
this was sent around to various places andsaid, Xbox fanboy lawyer cries foul when Sony
does acquisitions, but attacked FTC for a$100,000,000,000 Microsoft acquisition that led
to Phil erasing redlines, which is a whole lotof video game discussion points baked in there.

(17:26):
But one of the things that I want to say tothis kind of concept is that I'm not crying
foul on this transaction.
I don't want to see Sony harmed.
I want to see Sony continue to be out there ingaming, making hardware, being a participant in
this industry that I love so much, and I wantto make sure that they don't accidentally get
sucked into a, quote, unquote, shooting warwith cash money that they don't have.

(17:50):
My initial reaction to this story was I don'tthink Sony has that much money to make a
transaction like this, and that was really theimpetus behind my initial statement.
And as for attacking the FTC, I suggested asthose of you that have been in virtual reality
know that the FTC did not have a strong caseagainst the Microsoft Activision Blizzard

(18:11):
transaction, and I would say that whether itwas Sony buying them or Nintendo buying them as
well as Microsoft.
So this is really not a case where I amattacking one party or the other.
I just wondered where the money would comefrom.
And you've probably heard me say in the past onplaces like the BitCast, which you can find me
on at 11 AM, on Sundays, if you are sointerested, that this is the kind of story that

(18:35):
we should be talking about with respect to whatantitrust means and what gaming consolidation
means, in these corners.
But the reason I said that was because Sonyreally doesn't have a lot of money or cash on
hand.
And I do again want to disclaim just a lawyerhere, just a humble country lawyer, not a
financial analyst, and a lot of these websitesthat I was looking to for this information,

(18:58):
particularly when we get to Kadokawa, are notterribly trustworthy.
They have a lot of numbers that don't makesense.
They appear to be, AI grabs of financialreports that maybe don't understand exactly
what they're seeing, don't tell you whatdenomination it's in, whether it's yen or US
dollars, whether it applies to quarterly ormonthly or annual financial statements.
So I did my best with what I could grab onthese questions, but, again, don't listen to

(19:22):
lawyer math in general.
Don't listen to online sources for thefinancial statements if you don't have to.
And, really, the conversation I wanna havearound what the price of this deal might be and
whether or not Sony could pay for it is reallyaround how these things get determined and the
the kind of concepts and themes around the maththat goes into a question like this more than

(19:44):
the numbers themselves.
So please don't take this video as definitiveevidence that price will be x, price will be y.
Sony can pay for it.
Sony can't pay for it, but more anunderstanding of how these decisions get made
and how financial analysts work.
So one of the things I wanted to point out isthat Sony right now in in its most recent
report has about $14,250,000,000 available.

(20:06):
Now if you say, Rick, that's not a ton ofmoney, but also you just said $1,000,000,000.
In both cases, you're right.
It's not a ton of money for operating a multi$100,000,000,000 corporation.
You wanna have enough money to make sure youcould effectively pay for rainy days and have
enough cash flow, to move around employees orwhatever else you need to do in your

(20:27):
corporation, but it's not nothing either.
Right?
And so we need to determine what the value ofKadokawa actually is.
And, again, like I said, this is a little bitdifficult to track down.
A lot of these numbers don't make sense, butthis appears to be a fairly good rendition of
the value of Kadokawa online, and this suggeststhat it's $3,590,000,000 right this moment.

(20:50):
But but this itself has a caveat, which is tosay that it's, yes, 3,600,000,000 right now,
but right before the rumors, it's at about2,640,000,000.
So 2,640,000,000 is probably the more usefulnumber here, because this already incorporates
the value of potential Sony acquisition, and isnot reflective of what the market thought the

(21:14):
company was worth before those Sony rumors cameout.
So Sony has $15,000,000,000.
The market valuation of this company is about2,640,000,000.
No big deal.
Right, Rick?
Well, like I said earlier in this video, you dohave to pay a premium on these shares.
And why do you have to do that?
Because right now, these shares could be soldin the open market for that amount of money

(21:35):
without giving up control of the company andfor no other reason than I just wanna sell my
shares.
So you get a premium if you're a stockholder ina company that's being acquired because they
have to drive basically all the shareholders toadopt this transaction even if they get board
approval.
And those shareholders are gonna want a littlebit more than they would otherwise get because

(21:57):
this acquirer is going to be taking control ofthe company when it wasn't in that company's
sole control in a public marketplace.
So we call that a control premium, but it'svery normal.
In order to get this deal done, you have to paymore than it would be sold for in the open
market.
That's not based on this higher number here.
It's probably based on the lower number.
We don't know for sure because we don't havethe LOI in front of us, and none of this

(22:20):
transaction has been finalized at this point intime.
But at 2,640,000,000, we're probably looking ata place where Sony can pay for this, which
brings me back to my original tweet, which isnot a concern that Sony will bankrupt itself
specifically by buying Kadokawa, but a concernthat Sony gets stuck in an acquisition war with

(22:43):
a company that has a lot more cash on hand.
So Microsoft, as we will see as part of thisvideo in just a minute, has 100 of 1,000,000 of
dollars potentially available for it.
Right?
This second, it has a little bit less than thatbecause it just paid for Activision Blizzard,
but it has 100 of 1,000,000 of dollars ingeneral to potentially spend on transactions
should it choose to do so.
The answer to that for Sony should not be tojust go into an acquisition war in the gaming

(23:09):
industry because it's a short loser, and,realistically, it can result in overspending by
a company and putting itself in a positionwhere it can't sustain itself, which is not
what I want.
I want Sony to succeed just as much as I wantMicrosoft to succeed and just as much as I want
Nintendo to succeed.
But I realize that these companies are not runby aliens, not run by all seeing robots or

(23:33):
gods.
They're run by people.
And just like a home budget can beoverextended, so too can a business budget, and
I don't wanna see that happen.
So here, we've got a company that may be worthabout 2 and a half 1000000000 in the open
market.
We've talked about premium.
Sony has about 15,000,000,000 available.
Let's talk about how these deal numbers getmade.
So this is a private company document.

(23:55):
Again, I am a mergers and acquisitions lawyer.
I've worked in venture capital.
I've worked with entrepreneurs and smallbusinesses for my entire career, which is
coming up on 20 years really, really soon now,and this is the way smaller businesses, private
businesses kind of get evaluated.
Right?
So in this particular case, this is aboutEBITDA multiples.
EBITDA is earnings of a company, a kind of netincome notion, but before it pays for interest

(24:22):
taxes, depreciation, and amortization.
If you don't know what all those words mean,that's okay.
The basics of this is it's a way ofestablishing what your profitability, what the
value of the company is that doesn't take intoaccount how it's structured financially.
Right?
So interest and taxes, depreciation,amortization are all ways that you can handle

(24:42):
your tax reporting.
And you have different decisions that you canmake when you're running a company that can
result in different emphasis on thoseparticular categories.
EBITDA is basically the answer to that saying,we just wanna know about your earnings
realistically as close as we can get it to whatyou are making and then selling out into the
marketplace.
And then because that's a fairly realistic wayof looking at what this company is actually

(25:05):
worth, a lot of people, a lot of financialanalysts, a lot of companies go out there with
the notion that we're gonna take this EBITDAnumber, and we're gonna pay you a multiple of
that, and that's gonna be the value of thecompany on the whole, which is representative
of the cash flows that will come into thecompany over the course of x amount of years.
Now in this particular case, this particulartable suggests that things like software

(25:27):
development, which is arguably what thiscompany, Kadokawa, is closest to in this
particular context, might receive a multiple ofits EBITDA of about 11.9x, which is a ludicrous
number.
This is not accurate.
This is only for the first half of twentytwenty four.
And the reason these tables and web materialsare not overly accurate is because, as I said,

(25:51):
almost all of this information of privatetransactions is privileged between attorneys,
financial professionals, and the companies thatissue.
So companies like this one, this is actuallyFirst Page Sage.
There's others like PitchBook that go out thereand try to collate this information are
basically dependent on voluntary participationin their surveys and whatnot in order to come

(26:12):
up with what people are spending to buy certaincompanies.
But I also wanna point out that first half oftwenty twenty four is not gonna lead to a lot
of deals, and it's gonna get skewed resultslike the ones we see across this table.
A far more normalized number here is softwaredevelopment, 10 to $75,000,000, as you'll know,
a lot lower than what we're talking about here,at about a 3.4x, to EBITDA.

(26:35):
But, again, this is only back of the envelopestuff.
I'm not a financial analyst.
Financial analyst get paid lots and lots ofmoney to do this over the course of weeks, if
not months, to come up with a number that theythink something is worth, but we can talk about
the way that this is arrived at.
And so we've got a multiple of EBITDA concept,so we're gonna need to know what Kadokawa's
EBITDA is.
So if we look at various Internet resources,this is the pitch book resource that I talked

(27:00):
about earlier, we see a reference to a trailing12 month EBITDA of a 169229 or what would be in
1,000,000 for this particular period, and wecan see that that's a number that makes a
certain amount of sense for the type of companywe're looking at.
If we look at Yahoo Finance, we see28,090,000,000.

(27:20):
We know that just by order of magnitude, thatmust be in yen and not dollars, and so we can
do a little bit more back of the envelope mathbased on that to come up with what is that in
the US dollars?
Well, it's about a 180,000,000 US dollars.
Right?
Okay.
Well, that's in the same range as what we sawfrom PitchBook.
So even though they aren't identical, we canuse that and say, well, okay.

(27:41):
Let's take that.
We'll multiply it by 4 because this is aquarterly number, at least as proposed by Yahoo
Finance in the earlier web page there.
And we come up with a number of 728, some odd,$1,000,000, and we can take that and we can
start to use that to adjust our EBITDAmultiples to come up with prices for this
company.
If we take the 3.4 multiple of that number forEBITDA again, we can see a value of

(28:06):
2,470,000,000.
Now we know that number is too low.
Why?
Because even at the number in the market beforethe surge from the Sony transaction, we had a
number of 2,640,000,000.
So we we have a good feeling that that 2.4number is too low.
And, again, we're not using pure EBITDA in anyevent because we had to do this back of the

(28:27):
envelope math.
Then if we take 11.9 as our multiple, whichagain is ludicrously high, almost certainly not
the case, we get a number at 8,660,000,000.
So we have a range now between, we'll call it,2a half 1000000000 and 8,700,000,000, and that
seems like a reasonable range for thistransaction price to take place in.

(28:48):
All back of the envelope, nothing that you cango to your accountant or your financial adviser
and say, Rick said it was worth this amount ofmoney because it's not the case, folks, but we
have a number that we can at least entertainSony paying for with its 14,000,000,000 or so
cash on hand.
Now, obviously, if I'm running Sony and thecompany demands 8.7 or $9,000,000,000 and I

(29:10):
have 14 and change, I'm really unhappy tryingto run my entire corporation with only
$5,000,000,000 in cash as liquid assets to movearound as needed for the next year of
operation.
So I probably wouldn't do that in that way.
But the other aspect of this that we need totalk about is the notion of paying in cash.
Right?
The Microsoft Activision deal, as we'll see injust a second, obviously very notable because

(29:32):
it was paid for in cash.
And cash, as they say, is king because cash isimmediately liquid.
It is its value in your pocket.
Now that's obviously a little bit different,with respect to inflation and things as we know
it now in the marketplace and economics, butit's superior to stock even in a public company

(29:52):
because stock in a public company fluctuates invalue, could go up, could go down largely
outside of my control and requires certainhoops to jump through in order to sell, in
order to become value in my pocket.
So in general, a company that is going to sellitself for cash is going to accept a lower
total price than a company that's going to sellitself for something like cash and stock or

(30:17):
potentially other assets as well.
In order to understand this, if I were to sellyou a lamp right now, I might be willing to
accept a $100 from you because I know what a$100 is worth.
If you're gonna pay me in gold bullion, I mighthave to make that a $140 because I'm now
essentially disadvantaged by the fact that Ihave to go figure out how to sell that gold

(30:38):
bullion to someone else.
Similarly, if you sell it if you say you'regonna pay me in bullion cubes, I might charge a
$180 because I have no idea how to move a $180in bullion cubes, and so it would take me that
much time and effort and potentially loss invalue of the bullion cubes in order to realize
my gain from the transaction.
So all cash deals are superior to kind ofcombination deals in the eyes of the seller,

(31:03):
and we don't know what Sony's offering.
But, certainly, Sony as a public company couldbe offering to to buy this company, Kadokawa,
with cash or cash and its own equity, issuancesof its own stock, and that might be an
acceptable answer to the question of whether ornot Sony can, in fact, pay for something like
this.
Now additional pricing factors are that, as Isuggested, Microsoft has a lot more money here

(31:28):
in macro trends.
They suggest that Microsoft has about$80,000,000,000 or a little less than
$80,000,000,000.
Again, a 45% decline year over year becausethey just bought Activision.
They just spent that money, but we will we'llsee that Microsoft probably will have more
money by the time, the year is up.
Obviously, a lot more than $15,000,000,000however you slice it, which is to suggest that

(31:49):
they are in the business of acquiring companiesfor cash, and Sony probably shouldn't be unless
it wants to long term lose on that particularscore.
Now I do wanna point out that Activision, whichwas purchased in January of 2022 for about
$68,700,000,000, was sold at about51,000,000,000 just before that announcement

(32:12):
was made.
So if we look at the premium in that particulartransaction, we can see that 68.7 over 51.8
means that Microsoft paid about a 32% premiumover the market price of that particular
company.
If we were to apply that to what we know rightnow with respect to Kadokawa, we would see a
price of about $3,500,000,000.

(32:35):
So that's probably more likely where we wind upon all of this because our EBITDA math is so
kind of controlled, by the various places wecould see it.
A lot of assumptions made even in those places,and so we've got a price of about
3,500,000,000, but I'm not done withconfounding factors just yet.
If we look at what Kadokawa actually consistsof, we can see another important data point

(32:59):
here, which is to suggest that on October 29,2021, Kadokawa announced that it had formed a
capital and business alliance with who?
Tencent, which acquired a 6.86% stake in theconglomerate for 30,000,000,000 yen or
$264,000,000.
Now taking all that as true, and, again,Wikipedia, your mileage may vary on these

(33:20):
things, but usually they get these kinds ofdata points correct.
Taking all that as true, we know that Tencentspent $264,000,000 on 6.86 percent of the
company, which means we can establish what thevalue of the company is that Tencent bought in
at in October of 2021, not so long ago.
And that value is, doing a little back of theenvelope math once again, about $3,800,000,000.

(33:47):
So now we have 3,500,000,000 as a reasonablenumber, 3,800,000,000, and potentially,
companies like Tencent wanting even a littlebit more premium because they were involved in
a strategic transaction with this company,which presumably would not be as strategically
beneficial to them if it were owned entirely bySony.
So we've got a range of about 3 and a half tomaybe $5,000,000,000 or potentially more if

(34:10):
Tencent goes out there and ask for more.
We know that Sony has interacted with Tencentin these investment syndicates pretty well, in
the past, most notably in my eyes in the caseof their shared ownership of Epic Games.
But we also don't know exactly how Tencentfeels about its relationship with Kadokawa and
or whether or not they would make a bid forthemselves.

(34:31):
Right?
They just spent 100 of 1,000,000 of dollars,not a not 4 years ago, in order to invest their
particular interest in this company.
Would they be interested in blocking Sony?
And this is part of the reason whyunderstanding who leaked that information is
gonna be so important long term because if Sonyaccidentally gets 10¢ in a bidding war, Sony
also can't afford to bid its cash money against10¢ as those of you who follow the Chinese

(34:56):
conglomerate know.
So Sony has all sorts of things happening here.
Kadokawa may or may not wanna accept the dealfrom Sony, but its board of directors, just
like every board of directors, has a fiduciaryresponsibility to go maximize the value of the
company's shares over the short term.
And so if they believe Tencent could be draggedinto a bidding war on this, then that might be

(35:18):
something that they would be inclined topursue.
So we are many, many steps removed from Sonyowning FromSoft, owning Elden Ring, owning all
these other things that you might be concernedabout.
But the fact that Kadokawa is admitting there'san LOI, the fact that it would seem more likely
than not that they were the ones, somebodyinside Kadokawa, to leak the information to
Reuters in the first place is suggestive of acompany that probably does want to move forward

(35:43):
with new ownership.
So I think that this is the kind of thing thatwe need to look at.
I think this is the kind of thing that peopleare justifiably concerned about, but we are a
few steps removed from Sony owning theseparticular assets.
I also want to point out here that FromSoft isits own kind of ball of wax in this particular,
categorization because while Sony owns 2% ofKadokawa, they already own 16% of FromSoft,

(36:09):
with 10¢, again, that name, owning the other14% and Kadokawa owning 70%.
So, yes, Sony would own FromSoft if theyconsummated this transaction to purchase
Kadokawa, but Tencent would already also own15% of FromSoft, and they would be essentially
co owners even though Sony would be themajority holder in that company.

(36:29):
Tencent would probably be more disinclined tomake FromSoftware software, an exclusive to the
Sony PlayStation, but Sony being in control ofthe company would certainly have the bigger
say.
So that's all a part of this conversation onsetting the price of this.
I'm most inclined to say that price comes in atsomething like $5,000,000,000 because we saw

(36:51):
the 3.5, we saw the 3.8, the 10¢ put forth, wesaw the premiums paid on Activision.
All those numbers lead to something like, a$5,000,000,000 purchase price.
I think Sony probably can pay for that.
Again, based on my tweets before, I wasconcerned they didn't have enough cash.
They actually had a little bit more cash than Ithought they did.
I thought they had 12,000,000,000.

(37:12):
The current information suggests they haveabout 14,000,000,000.
Either way, $5,000,000,000, not aninsubstantial amount to spend on a
$14,000,000,000 cash pot, but I do think Sonycould pay for this if they wanted to.
I have my concerns that Kadokawa isn't playingboth sides against the middle here, in some
respect or another in terms of who they want topurchase them and how high they can get that

(37:34):
price to be.
Certainly, Sony could not engage in a biddingwar on this company to any great degree, and
that must be a concern of theirs movingforward.
The other thing I wanted to talk with you allabout was this notion about anime.
Right?
So this is from an article, I think, oncomicbook.com that suggests this would be
terrible for anime.
Says Kadokawa had already gotten a lot ofattention from anime fans in the last few years

(37:57):
following their announced effort to produce atleast 40 new anime titles a year back in 2021.
This has resulted in more franchises that havebeen successful for sure with recent anime
hits.
The production giant has also recently acquirednotable studios like Doga Kobo, which has
gotten attention in the last couple of yearswith other anime titles, but that's just what
makes it to the screen.
The company reaches out far beyond that, andthey describe it describe it, etcetera,

(38:19):
etcetera.
Sony, for their part, already has this in turnwith Aniplex that has overseen the releases of
massive franchises and other releases fromAniplex's production studios such as a one
pictures and CloverWorks.
Sony themselves has also revealed their plan tonurture new talent within the industry, and
there's Sony stake in Crunchyroll, one of themajor streaming platforms for anime.
After fully acquiring Funimation with themerger completely taking effect spring,

(38:42):
Crunchyroll is now the exclusive home to manytitles fans can't get elsewhere.
While this has changed slightly with some ofthe more blockbuster franchises being shared
around like Dragon Ball Baima and Dandadan, Ithink, maybe maybe pretty close on that
pronunciation.
Let me know in the comments.
This fall, it's still the home to the majorityof new anime releases each new seasonal wave.
This could result in a more unified globalrelease for major series, which in turn could

(39:05):
be good for anime fans.
But at the same time, it also means thatanother major publication with its own voice in
franchises would fold under Sony would befolded under Sony, I think, is probably the
better way to say that.
There's no indication that they would justclose these companies, but this is the major
concern I saw in my direct messages.
Saw people ask me, which is that, okay, Sonycan't be allowed to buy this company because

(39:27):
they would take a monopoly control over anime.
Right?
And one thing I wanted to point out, and I'lluse the Department of Justice and Federal Trade
Commission guidelines to show this, even thoughthese are Japanese companies, is that it is
entirely unclear whether quote, unquote animeor manga or streaming anime distribution or
what have you are relevant antitrust marketsfor purposes of analysis.

(39:52):
So if we look at these Federal Trade Commissionguidelines, and these are the new ones, these
are the ones that have really not been vettedyet by the court system in the United States,
and we've seen the Federal Trade Commissioncome up against certain issues with bringing
cases before the courts on these particularassumptions.
We saw that with respect to Activision.
We saw that with respect to Facebook and withinthe Federal Trade Commission is seemingly out

(40:15):
of pocket on a lot of these notions right thissecond that a significant increase in
concentration in a highly concentrated marketcan indicate that a merger may substantially
lessen competition.
That's what we're concerned about In the law,depriving the public of the benefits of
competition.
But, again, that relevant market is what'simportant.
So we have to scroll all the way down to whatis the most important thing in this particular

(40:36):
analysis because for whatever reason, they putit on page 40 or so.
So what is a relevant market?
If you've been in virtual gallery for a littlewhile, you already know this.
But if you haven't, a relevant market is adefinition that is, somewhat big and fuzzy.
The Clayton Act protects competition in anyline of commerce in any section of the country,

(40:58):
and the Clayton Act is the one that we'retalking about when we talk about mergers and
acquisitions.
The agencies engage in a market definitioninquiry in order to identify whether there is
any line of commerce or section of the countryin which the merger may substantially lessen
competition or tend to create a monopoly.
A relevant antitrust market is an area ofeffective competition, comprising both product
or service and geographic elements.

(41:21):
The outer boundaries of a relevant productmarket are determined by the reasonable
interchangeability of use or the crosselasticity of demand between the product itself
and substitutes for it.
So the substitutes are important here, and thisis why I don't think there is likely to be a
particular difficulty with anime.
Right?
When you think about anime or manga, these aregenres within broader fields of television or

(41:45):
movies or books, more than specificallysomething that we would need to be worried
about not having adequate substitutes for on abroad level.
So, yes, you can protect markets.
You don't really protect genres.
Right?
If one studio wound up purchasing all theaction movie creators, in the world, we would
not say that they had a monopoly on actionmovies necessarily.

(42:06):
Both because other studios could pop up to makeaction movies, other studios can pop up to make
anime, but also because a genre is not its ownmarket.
It is infinitely substitutable for drama orcomedy or horror or what have you.
And similarly, anime is a specific way ofmaking television shows or movies, but it does

(42:27):
not strike me as a relevant antitrust marketfor this purpose.
Now it doesn't mean the Federal TradeCommissioner or the Department of Justice or
anyone else couldn't move against a deal likethis.
We saw that with respect to the CMA and the FTCand Activision, but we also saw those agencies
essentially have to back down, after Microsoftpresented a a lot of information about why

(42:47):
there were substitutes, why this was not arelevant market, and why in this particular
case Microsoft would agree to certaincontractual rights to other people within the
market that would eliminate all argumentsagainst them.
Now might Sony have to make similar concessionsin a similar circumstance?
It's certainly possible, but I would doubt,right this second, in November of 2024, that

(43:08):
the Federal Trade Commission would be willingto spend political capital on trying to ensure
equal and competitive access to anime programs.
That strikes me as unlikely.
But a lot of the things the Federal TradeCommission has done of late strike me as
unlikely, so it is not impossible.
Still, this is the kind of thing where I thinkthere are lots of substitutes for anime, lots

(43:31):
of substitutes for manga, and it's unlikelythat just Sony taking control of these
particular aspects would result in federalregulatory problems.
I also wanna mention, I did see online a numberof people saying, well, these are Japanese
companies.
The FTC would have no say.
That's not how this works.
You should probably recognize that by the factthat Australia, New Zealand, and the United
Kingdom had to approve the Microsoft Activisiondeal.

(43:54):
But in short, if you sell a product or serviceinto a jurisdiction, that jurisdiction has a
certain right to say exactly how you sell it,what the constitution of your company is.
It has a right to control its sovereignjurisdiction.
And so if Sony were to move forward with thisand the Federal Trade Commission or the
Department of Justice wound up saying, hey.
This might be an issue.

(44:15):
They would 100% have the ability to say, wedon't know that this deal should be allowed to
go through.
We don't know that we would recognize thecombined company or allow its sales in exactly
the way that Sony combined would see them be bemade.
And so the FTC, the DOJ, United States ingeneral, but all sorts of other jurisdictions,
100% has the right to have a say in thesevarious things, but I don't see it as likely

(44:40):
that they would seek to block this particulartransaction.
Now with that said, this has been virtualreality for today.
If you like this video, if you enjoy thesekinds of conversations, please do consider
supporting the channel.
I'm gonna probably be doing more membershiponly streams, more things of that nature of
late.
So please, if you're inclined at all, sharememberships with people.
Super chats are always appreciated.

(45:01):
Player and Patreon links are in the descriptionto this video if you wanna support us through
an outside platform.
Otherwise, your likes, comments, participationin the chat, all of that is very much
appreciated.
We cannot do these kinds of videos withoutsupport from viewers and listeners like you.
Okay.
Does anybody have any questions or comments onwhat I just said?

(45:28):
Let's see.
It looks like we're gonna be okay, which I'mgonna take to mean that I was just entirely
lucid and clear throughout all of these manyconversations and many different points on this
transaction.
I'm gonna just take that as a big win, forright now.
But if you do have questions or comments onthis video, please do mark them with an h
colon, a q colon, athoglaw, anything alongthose lines, and I will try to grab them if I

(45:53):
can and answer them, if I have an answer forthem.
Otherwise, I'm probably gonna just say goodbye,for right now, and see you on the next episode
of virtual legality.
So thanks to everyone.
I do wanna make sure that I capture any othercomments that I might have missed.
Let's see here.

(46:13):
Goddamn Dan asks, will the CMA address limitedenemy streaming platforms like they did about
cloud platforms during Microsoft and theActivision merger?
Well, I think I answered this a little bit, butone thing I will always say about government
regulatory agencies is there's a lot of goodpeople at them making a lot of tough decisions,
but I cannot read their minds.
I do not know whether they will pursue anaction against this particular, transaction if

(46:38):
it were to come into being, which, again, werea number of steps removed from that at this
point in time.
But, certainly, the CMA has proven to be one ofthe more activist bodies on questions like this
one.
So it's it's possible, but it does strike methat when you're in entertainment as it stands,
it's already kinda difficult for thesecompanies to really use their political

(46:58):
capital.
If you make it just Japanese animation anime,then it becomes even harder.
I understand the points that people are raisingabout that, especially digital streaming, kind
of pipeline getting monopolized by someone likeSony on these cases, but I do think the
government regulatory agencies are less likelythan even video games to step in and try to

(47:19):
block something on those grounds.
The Lucy Allen asks, regarding jurisdictionalissues, if 2 companies reside outside of the
US, what kind of remedies could an outsidecountry apply?
Is it different to local companies?
Generally speaking, they control their ownsovereign jurisdiction.
Right?
So they would say, you have to comply with ourlaws or else you cannot sell your product or

(47:40):
service within our borders for the most part.
And if you choose to, then we start to havefines, then we start to have other things that
can get into our bag of remedies, as it were.
But most people are not gonna just ignore, a USregulatory body and say, no.
We're just gonna do it anyway.
Come after us, bro.
So, realistically, those are the controls theyhave.
They can't unwind the company.

(48:00):
They can't prevent you from actually doing thetransaction on a on a real legal basis because
that's all happening within the jurisdiction ofJapan, but they can prevent you from
participating in the place here in the way thatyou would prefer to.
Rambling entertains says, does Sony closinginformation and users losing digital products

(48:22):
affect the CMA stepping in?
Same kind of answer, which is to say, I stillthink we are probably too, kind of focused on a
small section of a small section ofentertainment and that most government bodies
are not going to be interested in setting theirfoot in on this particular issue.
And the CMA might be chasing already from theway the Activision deal went, for them, but I

(48:46):
do I don't think that that's very likely.
I also don't think it's impossible.
Gintlestone?
If Kadokawa takes stock in lieu of cash, theyare betting on so many success in the future.
No?
Yes.
In general, if you are taking equity in youracquirer, you are betting on both the company

(49:07):
success that's buying you in the future andalso kind of the the synergies to use in
business parlance or the value of the 2combined entities being improved over the value
of them separately, in a way that can makesense, but it is inherently less valuable than
cash in your hand.
It's like the hamburger tomorrow versus thehamburger today.
And so those prices go up.

(49:28):
The one thing I tell clients, I tell peoplethat are all negotiating deals like this is
that whenever you make somebody, moreuncomfortable, whenever you ask something of
them, the overall price goes up.
So if you need more protection on therepresentations and warranties, expect to pay a
little bit more.
If you wanna pay in something other than cash,expect to pay a little bit more.
And if that asset is something that theyintrinsically don't value, expect to play a lot

(49:52):
more.
So if you can convince them that Sony's greatfirst of all, the lawyers have to write big
much longer documents because everybody has togive reps and warranties to each other on a
deal like that.
But if you can convince the other side thatSony is great, then maybe you don't have to pay
that much more than all cash, and that might begood for Sony.
That might work for them perfectly fine.
We don't know because we're not in the room ofthat particular conversation, but I did want to

(50:15):
express that it what it is different to pay insome combination of assets rather than just
cash.
Painful discourse asks, does FromSoft have hasa day in this?
They signaled they are not interested inexclusives, and Sony, excluding to appoint
Bungie, is not known for sharing properties orbeing consumer face slicing faillacing.

(50:36):
I did my best, Painful Discourse.
But does FromSoft have a say in this, I believeis the question.
No.
Not broadly.
So FromSoft sold itself to Kadokawa, Sony, andTencent.
So that consortium controls what it has a sayin, what it does.
Sony, obviously, is not gonna be unhappy withSony.

(50:56):
Tencent, we talked about having potentiallyconflicts all over the place as to whether or
not it would wanna proceed with thetransaction, whether we wanna get out of this
investment potentially.
There's all sorts of things that could happenbehind the scenes there, and so FromSoft
doesn't have an individual say, but the actualpeople that make things at FromSoft certainly
could say, if you try to make this exclusive,if you try to do things that we disagree with,

(51:19):
then I'm not going to wanna make products foryou anymore.
And when we talk about things like Miyazaki inthat particular context, that's what you have
to worry about.
Right?
If there's a specific amount of value that youcan ascribe to a specific person in the
company, you have to make that person happy.
And that's completely separate from the legalquestion.
It's completely separate from the kind ofcorporate transaction issues, but it's still

(51:40):
important if you're thinking about gettingvalue out of that asset that you just
purchased.
Googleman 81 says, given the culturalbackground of both companies, would it be
feasible to assume the possibility of some kindof special agreement between the 2?
Yeah.
We would usually consider that a strategic dealrather than a financial one.
When we looked at the Wikipedia entry for,Kadokawa and 10¢ involvement with it, that 6%

(52:03):
that it bought, it mentioned that strategiccomponent.
Right?
So a lot of companies will invest in anothercompany to participate in that company's
upside, but also to kind of get them in thedoor for agreeing to some kind of strategic
relationship with the company.
So Sony and FromSoft, Sony and Kadokawa couldagree to a strategic deal as part of this that

(52:24):
would usually be an investment concept, not anacquisition one.
And Sony already owns 2%, so this could bebacked down to essentially an increase in their
investment rather than acquisition.
But, yes, absolutely.
There's all sorts of deals that can be made,but to the extent that that impacts the
financial or other situation of Kadokawa as apublicly traded company on their own, they

(52:45):
would have to reveal that to the publicmarkets.
So if that were to happen, it wouldn't itwouldn't likely be super secret unless it
really wasn't material, wasn't important.
So if they did that, then that would be thatwould be something that we would know about
long term.
Hargit Shani says, question, with the DisneyFox merger leaving a bad taste, will the

(53:07):
combined Sony Pictures, Columbia, Aniplex,etcetera, cause regulators to look at them
adding more studios?
Well, Disney Fox did go through the regulatoryreview process.
We actually saw the FTC move against that anddemand some, removals of certain of the assets.
It's possible.
Again, I don't wanna sit here and tell you thatit's impossible that some regulator could say

(53:28):
you can buy Kadokawa, but you have to divest ofthe anime assets.
I just don't see it as extraordinarily likely.
Even with Disney Fox, even with Sony Columbia,and all the other combinations of studios that
we're seeing around entertainment, I just don'tI'm not feeling like there's a lot of appetite
for stepping in on entertainment questions,especially after Microsoft ABK and what

(53:50):
happened with the various regular regulators inthat particular context.
Anime compilations.
Hogue.
So I'm gonna lose access to FromSoft gamesbecause of the Sony region lock?
You mean because Sony requires a PlayStationNetwork account and doesn't provide PlayStation
Network access to all the jurisdictions aroundthe world?
It's possible.
Again, I don't wanna tell you that it's not.

(54:11):
I think that would be shoot shooting themselvesin the foot if they if I were Sony, but I've
thought that a long time for the PlayStationNetwork, and I think that they should make sure
to extend that network to all the jurisdictionsin which they would like to sell video games.
So I think more likely, if you wanna have apositive spin on this, if Sony were to take
over FromSoft and they wanna sell FromSoftgames through their PlayStation network, then

(54:32):
you might see an emphasis on making sure thatthey extend the technological capabilities of
that network to these jurisdictions that don'totherwise have it right now.
So I like to be an optimist.
I like to be positive on these things.
I'd like to think that Sony would take this asa moment in time, an inflection point to expand
the PlayStation Network access rather than tojust have FromSoft games not be available in
all these different jurisdictions.

(54:53):
But, again, I don't think it's likely that theywould make them exclusive to Sony in any event.
So there's your answer.
Alonzo v says it wouldn't surprise me if we sawFromSoft announcing their independence in the
upcoming days.
Well, that's a part of this as well.
I don't think they likely have enough money tobuy themselves out, and they have major players

(55:16):
that they would have to buy themselves outfrom.
Kadokawa, Sony, and Tencent.
So I think that's unlikely, but it wouldn'tsurprise if the creative forces at FromSoft
went public and said that we they don't want tobe controlled by places like Sony, like we just
were talking about with respect to Miyazaki.
So I I don't think that's impossible.
I don't think they have the financing to justbuy themselves out, but I also don't know what

(55:39):
kind of potential financing sources they have.
So management and the people at these companieshave bought themselves out before.
We've seen that in video gaming to a greatextent of companies going independent after
they were purchased by giant parent company,but it's a u it's a unique set of circumstances
and you really do need to have a financialbacker to make that happen.

(56:00):
Alright.
Well, I already said goodbye earlier because Ididn't know whether y'all would have any
questions, but I thought those were goodquestions.
I hope they were informative.
I hope this whole video, and series on virtualreality is informative, and I hope you do share
it around with people that might otherwise beinformed by a conversation like this one.
And good luck to everybody involved in thetransaction.
Good luck to all the regulators that are gonnahave to review it if it goes through, and thank

(56:23):
you so much for being here in virtual legality.
I will see you on the next episode wheneverthat might be.
Thank you again so much.
Virtual legality is a YouTube video series withaudio podcast versions presented as commentary
and for education and entertainment purposesonly.
It does not constitute legal advice and doesnot create an attorney client relationship.

(56:47):
If you have legal questions about the topicsdiscussed, please consult your own legal
counsel.