TheChek News Flow

Online betting shops have faced tricky odds in the United States. A 2018 Supreme Court ruling allowed states to legalise sports bets. But the federal Wire Act still complicates some ventures by limiting gambling across state lines. Only a handful of states have taken a chance on an online sports book, with much of the action in New Jersey, Pennsylvania and Delaware.

Those few are enjoying a windfall. New Jersey’s sports wagers totalled $4.1 billion through October 2020, with virtual gambling accounting for more than 90% of October’s bets, according to PlayNJ analysts. Like other home entertainment, digital sports betting had a captive audience when Covid-19 struck and is on track to rise by around a fifth globally in 2020, Fitch Ratings estimated in November. There is scope for further growth. New habits may stick, and legal options could displace illegal ones.

More states are likely to take the plunge, too. With typical tax rates on internet gambling in the mid-teens or higher and growth accelerating, it’s an opportunity to top up their coffers. And while online casinos come with a stigma, a nation of football, basketball and baseball fans may find sports betting more palatable. Massachusetts is debating the inclusion of online sports betting in its economic development bill. Ohio and New York are also looking at the idea.

Dublin-based betting behemoth Flutter Entertainment just committed $4.2 billion to increase its stake in U.S.-based sports betting site FanDuel, hailing easing American rules as “the single biggest market opportunity” today. A fellow investor, media group Fox, secured the option to raise its own stake. Meanwhile, casino operators are overcoming fears of cannibalizing their in-person business: MGM Resorts International and Caesars Entertainment are building up online, and Wynn Resorts started offering online sports betting in the third quarter. After the tax collectors get their cut, shareholders can divvy up the jackpot.

These vehicles, set up by financiers to raise funds for unspecified deals, are rare in Europe. Prior to December, just 19 listed over the past six years, according to Refinitiv, raising $3.4 billion. In 2020 alone, bold-faced names on Wall Street like Pershing Square’s Bill Ackman raised $66 billion worth.

SPACs are often controversial because they hand outsized rewards to founders and allow companies to skirt listing rules when going public. In Europe similar vehicles have a sketchy past. Vallar, the London-listed shell which raised $1.1 billion in 2010 for mining deals off banking scion Nat Rothschild’s contacts, foundered amid corporate governance problems.

Iliad co-founder Niel and Centerview Partners Paris chief Pigasse, have broken the drought before. They launched Mediawan in 2016, which bought European media businesses. Their new venture, 2MX Organic, comes as the volume of initial public offerings has declined for the last three years. Just $17.2 billion was raised in 2020, down 20%. European investors are hungry for new ways to put capital to work.

The Frenchmen won’t be alone. The continent is chockful of dealmakers and bankers who, like their American cousins, have the track records needed to win investor backing. Consider former bank chief executives like Jean Pierre Mustier of UniCredit and Tidjane Thiam of Credit Suisse. Or ex-UBS investment bank head Andrea Orcel.

Similarly, notable M&A grandees like Erik Maris in France or Claudio Costamagna in Italy may find a role model in former Citigroup executive-turned-rainmaker Michael Klein’s four U.S. SPACs. Gallic tech entrepreneur Marc Simoncini or Germany’s Samwer brothers, founders of Rocket Internet, could be in the mix. Even blank-cheque mining vehicles may stage a comeback: Imagine Glencore’s departing CEO Ivan Glasenberg buying his former company’s coal assets.

At least 10 European SPAC deals are in the pipeline, Reuters reports, set to raise some $3 billion. True, that’s small compared to the United States. But like other cultural imports, good and bad, what happens in America eventually makes its way across the pond

• Xinjiang-based Goldwind has supplied material for a large US project that will deliver clean wind power for Microsoft, shipping records show
• As more information emerges about the suspected use of forced labour in the region, the US government has begun restricting trade from the area

At the new Las Lomas wind project in southwest Texas, French energy giant Engie’s wind turbines will soon deliver hundreds of megawatts of clean power to Microsoft.

The 48 turbines, scattered for miles near the Mexican border, are expected to be up and running in January, and they will help bring Microsoft closer to its goal of 100 per cent renewable energy by the year 2025.

When Engie and Microsoft announced their deal last year, they hailed it as an act of social responsibility: two corporations moving towards carbon neutrality amid the looming climate crisis.

But according to customs records, shipping data and corporate documents reviewed by the South China Morning Post, their business at Las Lomas may end up entangling them in another problem of an entirely different order.

Shipping records show that wind turbines at Las Lomas were supplied by an energy company partly owned by the Chinese government in Xinjiang, the far western region of China that is not only rich in oil and coal, but also in wind and solar energy production – and where Beijing is accused of detaining at least 1 million Uygurs and members of other Muslim minority groups in internment camps and subjecting them to political indoctrination and forced labour.

Xinjiang Goldwind Science & Technology Co Ltd, China’s largest wind turbine manufacturer, better known as Goldwind, also announced this month it had signed a separate deal with the powerful Xinjiang Production and Construction Corps (XPCC), the quasi-military entity that runs huge portions of the vast region’s economy, and was sanctioned by the US Treasury Department this year for human rights violations.

Experts say those connections – and the mere fact that Goldwind is based in Xinjiang – may prove troublesome for Microsoft and Engie, just as they already have for many other multinational corporations with supply chains that run through China’s far west.

On one hand, the Las Lomas wind site is an example of US, Chinese and European companies taking action together, even while geopolitical tensions soar, to reduce carbon emissions and help the environment.

On the other, they are companies whose supply chains run through a part of China where there has been widespread international condemnation, including from a UN high commission in Geneva over human rights violations reported to be taking place there.

“If someone is coming to me and saying, ‘I’m importing something from this region’, I’m telling them, you should review your supply chain and assess potential risks, and we need to feel comfortable that you don’t have forced labour in your supply chain because [the US government is] going to be looking at it,” said Olga Torres, managing member of Torres Law, which specialises in trade and national security.

“If you don’t do these basic things, you’re being irresponsible,” she said.

As more information on Xinjiang’s human rights situation has emerged from eyewitness accounts, satellite imagery, customs records and Chinese official documents, the US government has begun to restrict trade from the region.

Analysts say some of the suspected forced labour, which Beijing denies is occurring, may be linked to the Chinese government’s “poverty alleviation” programme, while some may be connected to the camps.

Most of Washington’s attention has been on industries related to cotton and textile production, which Xinjiang has come to dominate in recent years, or surveillance tools, which reports say constantly monitor the region’s Uygur population.

But according to the Chinese government’s trade data, Xinjiang’s biggest export to the US this year is not shoes, clothes or cotton – it is wind turbines.

Under current policy, there is nothing stopping a wind project in the United States from sourcing equipment from a company based in Xinjiang, as long as no sanctioned businesses are involved.

That could change if the US government decides to do so, Torres said, leaving companies to either find ways to shift their supply chains or shut down their operations entirely.

On July 1, the US State, Treasury, Commerce and Homeland Security departments jointly issued a business advisory warning companies to “be aware of the reputational, economic and legal risks” of getting involved with firms linked to human rights abuses in Xinjiang.

That same month, the Trump administration announced Magnitsky Act human rights sanctions against the XPCC and some of its top personnel. The sanctions went into full force at the end of November.

Under the sanctions, doing business with the XPCC could lead to financial and criminal penalties for US firms, depending on how aggressively the Treasury Department decides to enforce the law.

Goldwind has cut deals with the XPCC but is not owned by it, Chinese corporate records show, making it unlikely that these specific sanctions would ensnare US companies that do business with China’s biggest wind turbine manufacturer.

One of Goldwind’s major shareholders, Three Gorges Renewables, a state-owned enterprise, is involved in multiple wind power development projects with the XPCC. Among them, it will rent 1.5 million square metres of land for free from the XPCC – the size of more than 200 soccer fields – until the year 2043, in an area of Xinjiang called Beitashan Pasture, about 400km (250 miles) northeast of the provincial capital, according to a company prospectus released in March.

On December 12, Goldwind signed a “strategic cooperation framework agreement” with a unit of the XPCC based in Beitun, a city in northern Xinjiang that is run by the XPCC itself. The deal was worth about US$2.5 million.

That came just one week after the XPCC’s powerful Communist Party secretary, Wang Junzheng, declared that the energy industry was “uniquely important for the XPCC’s development”.

Beyond the XPCC sanctions, a bill that some members of Congress tried to pass this year could have done much more to potentially block the Xinjiang wind industry from entering the United States. The Uygur Forced Labour Prevention Act would have cut off all supply chains that run through Xinjiang to the US unless the importers could prove their goods had no connection to forced labour.

Experts say proving that would be no easy task because supply chain audits are so difficult to conduct in Xinjiang, a result of pervasive government surveillance in the region.

Among the parts of the process an auditor would need to inspect are those involving hard manual labour: wind turbine construction often involves the forging of steel and fibreglass. Workers also need to wind up coils of wire inside the turbines’ electric generators.

A Goldwind representative said the company operated “in compliance with international business rules and local laws and regulations in the countries where it operates”.

She said the company has “manufacturing bases” throughout China, “all of which play an important role in the supply of Goldwind’s wind turbine products to the domestic and international markets”.

“Among them, the manufacturing bases for seaborne exports are mainly located in the eastern coastal areas,” she added.

Despite broad bipartisan support, the bill targeting forced labour in supply chains passed the US House of Representative by a vote of 406-3 but failed to reach the Senate floor amid a lobbying campaign by corporations and industry groups. Representative Jim McGovern, a Massachusetts Democrat and the bill’s sponsor in the House, has said he will introduce it again next year.

Lobbying disclosure records showed that Engie, which is 23.6 per cent owned by the French government, hired a firm to lobby Congress about the bill. After the Post contacted the company for comment, an amended disclosure form was filed that removed the reference to the legislation.

The disclosure records also show that the Consumer Technology Association, of which Microsoft is a member, lobbied Congress on the bill.

Engie and Microsoft did not respond to multiple requests for comment.

“As a company registered in Xinjiang, Goldwind keeps a close eye on the legislation and actions related to Chinese companies in the United States,” the Goldwind representative said. “We are monitoring and evaluating the possible impact on our business in the United States. Goldwind’s current business in the United States is conducted in a normal and orderly manner.”

Goldwind’s expansion in China and overseas has come with the support of some of China’s most powerful people and organisations.

In 2016, while touring a hi-tech expo in Cairo, Chinese leader Xi Jinping “highly recommended” Goldwind to Egyptian Prime Minister Sherif Ismail. Seven years earlier, then vice-president Xi visited Goldwind in Urumqi, Xinjiang’s capital city, and said the company should be a “national brand”.

Goldwind’s CEO and founder, Wu Gang, was a deputy of China’s National People’s Congress, the largely rubber-stamp parliament in Beijing, from 2012 to 2018, according to Wu’s biography on the company website.

Through multiple layers of state-owned companies and their subsidiaries, Goldwind’s largest shareholder is a state entity known as SASAC, which is in charge of the government’s assets.

The establishment of Goldwind in 1997 was initiated by Xinjiang Wind, a state-owned enterprise, which provided 90 per cent of the capital. In 2010, Three Gorges Renewables – a subsidiary of the Three Gorges Group, which holds 43.33 per cent of Xinjiang Wind’s shares – became the second largest shareholder of Goldwind, company files show.

Goldwind made a net profit of 2.2 billion yuan (US$336.4 million) in 2019, and its net profit in 2018 reached 3.2 billion yuan. It has also expanded abroad from its roots in Xinjiang.

In 2017, Goldwind’s Wu said Xinjiang should be the “electricity hub” for China’s Belt and Road Initiative, Beijing’s programme to build infrastructure projects in countries around the world. Goldwind has undertaken various belt and road projects throughout Asia and in September signed a new memorandum of understanding with Standard Chartered in Singapore to build a “strategic cooperation relationship” in Southeast Asia.

In August, Goldwind announced that it had received a US$10 million grant from the New South Wales government in Australia for an energy project there, amid rising tensions between Beijing and Canberra.

In 2018, Wu wrote that Engie, the French energy company, was a “major international client”.

In shipping records compiled by the firm S&P Global Market Intelligence, Goldwind’s biggest client listed this year has been the Las Lomas site in Texas. Its records for Las Lomas list Goldwind as the only supplier.

Goldwind has an American subsidiary, Goldwind Americas, based in Chicago. Its finance arm, Goldwind Capital, invests in wind projects around the US as more states rush to embrace renewable energy, despite US President Donald Trump’s statements ridiculing the industry.

In a speech last year to congressional Republicans, Trump called turbines “graveyards” for birds and suggested the noise from them caused cancer (the American Cancer Society said that was not true).

Yet the industry is expected to keep growing rapidly in the US.

Wind power is the largest segment of renewable energy in the United States, accounting for 7.1 per cent of total domestic generation in 2019, followed closely by solar, at 7 per cent, according to US government data.

US wind farms generated 295 million kilowatt hours of electricity in 2019, a fourfold increase over a decade, and the Bonn-based World Wind Energy Association pegged growth in the global wind energy market in 2019 at more than 10 per cent, up from 9.3 per cent a year earlier.

The US Bureau of Labour Statistics says wind turbine service technicians will be the fastest-growing job in the country through the next decade.

“Wind power is well on its way to becoming a conventional source of power in the US; in some regions, and on some days, it can account for more than 70 per cent of power produced, and on an annual basis is likely soon to exceed 10 per cent of production nationwide,” said A.J. Goulding, a principal at London Economics International, an energy and infrastructure consulting firm.

“Wind power component supply is a global business, and Chinese manufacturers are a key part of the wind power supply chain,” he added.

President-elect Joe Biden has said he supports the industry and sees it as a labour issue, in addition to an environmental one, and a source of American jobs.

Whether that growth includes a company based in Xinjiang may depend on what the new US Congress and the Biden administration do next year.

“There’s nothing that prohibits you from importing from that region, but obviously there’s a lot of noise coming from that region,” said Torres, the trade lawyer. “I would still be looking at, where are the factories located? Are we close to any internment camps? Any industrial estates involved in ‘poverty alleviation’ efforts?”

“It’s a responsibility towards your shareholders, to your investors,” she added. “If you get into any kind of situation where your products all of a sudden cannot be imported, that could be devastating for companies.”

The 256-year-old company is now in the hands of a group of creditors, after its owner Fortune Legend Ltd. defaulted on loan payments.

PARIS — Troubled French crystal-maker Baccarat has changed hands after its owner, Fortune Legend Ltd., was taken over by a group of creditors.

The company is now under the management of a group of funds led by Hong Kong-based private alternative credit fund Tor Investment Management, which have taken full control of FLL, a subsidiary of Asian financial holding group Fortune Fountain Capital, which announced in 2017 that it was acquiring Baccarat.

The new owners intend to file a mandatory takeover bid for all the Baccarat shares, and plan to subsequently delist the company, French stock market regulator AMF said in a statement. They will explore all options to pursue the growth of the firm, “including any sale or reorganization of the group,” it added.

Despite buzzy collaborations like the Crystal Clear collection designed by Virgil Abloh, Baccarat has been sharply hit by the coronavirus pandemic, and was placed under judicial administration in September against the backdrop of the dispute between its controlling shareholder and its creditors.

The company reported revenues of 52.2 million euros in the first half, down almost 30 percent in reported terms, and recorded a net loss of 11.5 million euros during the six-month period, versus a loss of 318,000 euros during the same period a year earlier.

Daniela Riccardi, who had been chief executive officer of Baccarat since 2013, left the post at the end of March. Former ceo Hervé Martin returned in October as temporary director charged with the operational management of the company after it entered receivership.

At the time of the acquisition, Coco Chu, chairwoman of FFC, said it was willing to commit up to 50 million euros to support Baccarat’s five-year growth plan. But her Hong Kong-based family office has been defaulting on credit payments.

“Baccarat now has a majority shareholder with the resources to support its development. FLL intends to support and strengthen Baccarat’s leadership position in its market,” FLL’s new leadership said in a separate statement issued on Dec. 23.

Founded in 1764, Baccarat is one of Europe’s oldest purveyors of exclusive crystal creations, ranging from made-to-measure chandeliers to Champagne glasses and jewelry pieces.

The PHLX Semiconductor index has gained nearly 50% in 2020, vastly outperforming the S&P 500 and other indexes, but next year is still ripe with opportunity, Mizuho chip analyst Vijay Rakesh wrote in a client note Monday. Based on historical trends that Rakesh compiled, chip stocks have outperformed gross domestic product growth in every year over the last 20 that wasn’t subject to an economic downturn.

In a typical year, the PHLX outperforms global GPD growth by 21 percentage points, while revenue of companies in the index beat global output by 10 percentage points.

Beyond a recovering global economy, the Mizuho team predicts that the automotive industry will grow roughly 14% in 2021, after a sharp decline amid the coronavirus pandemic, coupled with factory shutdowns. Companies that make chips for autos stand to benefit because more vehicles use driver assistance systems and are electric. Both technologies require more chips per vehicle.

Auto chip makers are also likely to get a boost from the Biden administration’s proposed energy and climate policy, which includes adding 500,000 charging stations for electric vehicles. More charging stations could mean more people willing to buy electric cars.

Rakesh raised his target price for auto chip maker On Semiconductor (ticker: ON) to $36 from $34 and upped his target price on Allegro MicroSystems (ALGM) to $30 from $28. Both companies are potential acquisition targets within the auto industry, Rakesh wrote.

Meanwhile, the development of 5G wireless technology has brought faster, broadband-like speeds to cellphones and other internet connected devices around the world and a fresh reason for consumers to upgrade their handsets. Because of how 5G technology operates, new flagship phones need roughly 20% more radio frequency chips, Rakesh wrote, while mass-market phones use 40% to 50% more radio frequency, or RF, chips.

More RF chips will benefit several of Rakesh’s other chip favorites, including Qualcomm (QCOM), Broadcom (AVGO), and Skyworks Solutions (SWKS)—all of which have a Buy rating from the analyst.

Handset strength could power another chip company to a strong 2021 too: Micron Technologies (MU) stands to benefit from the increasing amount of memory in next-generation phones, and a bottoming in the price of dynamic random access memory, Rakesh wrote. Memory is a commodity, much like oil and gold, and an oversupply of such chips hurt companies in 2020. Rakesh raised his target price on Micron to $85 from $75.

Rakesh also includes Nvidia (NVDA) on his list: “While the valuation is relatively high, we believe NVDA is the leader in data center acceleration, and AI which is still in its infancy in a potential $100B market.”

Rakesh is less enthusiastic about the stocks of companies that produce hardware to power 5G base stations because demand in China is slow, and there is little investment from U.S. carriers other than Verizon (VZ).

Japanese group’s shortlist is part of investment push to hasten pivot to digital services

Fujitsu has drawn up a shortlist of 20 acquisition targets as part of a $5.8bn investment drive to capitalise on a pandemic-induced increase in demand for its digital services.

Takahito Tokita, chief executive, told the Financial Times that the mergers and acquisitions push would accompany an acceleration in the disposal of non-core assets to sharpen the Japanese group’s focus on tech and consulting services.

Under Mr Tokita, the company is attempting to regain its international footing. It is seeking to pivot from a traditional IT vendor to compete against the likes of IBM and Accenture, the professional services firm. 

Fujitsu has struggled to shake off its hardware-only image, even after selling its mobile phone and laptop businesses to refocus on cloud computing and artificial intelligence technologies. 

“Instead of simply bolstering our hardware, we are considering various M&A options with a global impact that will strengthen our software and services,” Mr Tokita said. 

The acquisitions will be financed by a five-year budget of as much as ¥600bn ($5.7bn) for investments in alliances, technology development and recruitment.

Mr Tokita declined to identify or provide details on the 20 M&A targets, and said no decisions had been made.

Fujitsu’s M&A strategy is spearheaded by Nicholas Fraser, an acquisition specialist poached from McKinsey, the professional services firm, in March. He joined as part of Mr Tokita’s diversity push involving hires from rivals such as PwC, Microsoft and SAP, Europe’s largest software company. 

While coronavirus has forced many companies to cut IT spending, Fujitsu expects appetite for 5G, cloud services and AI will boost its digital services revenue to ¥1.3tn in three years, which would account for 37 per cent of overall sales.

As with domestic peer NEC, Fujitsu sees the US-China trade dispute and sanctions against Chinese telecoms group Huawei as a chance to get back in to the global race to supply 5G equipment.

“There is no question that opportunities will arise from the exclusion of Chinese companies, and we are in fact receiving offers,” Mr Tokita said.

In June, US satellite company Dish agreed to use Fujitsu radio units, a deal Mr Tokita hopes will provide an avenue for expansion in North America.

The shift from hardware to software, however, is a challenge that has long bedevilled Japan’s once powerful consumer electronics giants.

While Japanese companies excel at making customised products for clients, they have lagged behind in creating technologies and services capable of being applied globally, said Mr Tokita. 

Fujitsu’s reputation took a hit in October when a hardware glitch in the trading system it developed triggered a full-day outage on the Tokyo Stock Exchange.

But Mr Tokita’s promises of change and greater profitability have buoyed investor confidence, with shares in Fujitsu up 89 per cent since he took the helm in June 2019. For the fiscal year ending in March, the company projects an operating profit of ¥212bn, its highest in two decades. 

As part of a revamp alongside Tokyo’s push for a “digital transformation” of Japan Inc, Fujitsu has said it plans to halve office space and permanently shift its 80,000 staff in the county to telework.

“The year ahead is going to be a very big challenge for us in terms of whether we can really change our traditional image,” Mr Tokita said.

Activist hedge fund manager steps up focus on private markets

Daniel Loeb, the hedge fund manager best known for bruising activist battles at public companies, is turning his hand to venture capitalism.

Mr Loeb’s Third Point is raising its first dedicated venture capital fund, targeting as much as $300m for the vehicle, according to people briefed on the matter. Third Point is aiming to complete its first round of fundraising as soon as February, the people said.

The new fund is the latest example of a hedge fund manager moving deeper into Silicon Valley, as public market investors seek new sources of returns in private markets.

Mr Loeb will be the sole general partner of the new fund, which will also be led by Robert Schwartz, a Silicon Valley-based managing partner who has overseen Third Point’s venture investments since 2000.

“We continue to be in the relatively early stages of a continued period of innovation, growth and change — and the need for capital to fuel those businesses,” Mr Loeb told the Financial Times. Third Point declined to comment on the fund, citing regulatory restrictions.

Third Point will enter an exuberant market for venture capital, fuelled by years of low interest rates in developed markets and a recent run of big initial public offerings for companies such as the travel group Airbnb and data analytics company Snowflake.

Almost 230 US venture capital funds raised $56.6bn in the first three quarters this year, according to PitchBook data, already surpassing last year’s total in spite of the coronavirus pandemic.

Mr Loeb is perhaps best known in Silicon Valley for an activist campaign he waged against the search company Yahoo, leading to several management changes, including the hiring of former Google executive Marissa Mayer as chief executive. He targeted another tech company this week, urging the chipmaker Intel to consider shedding its struggling manufacturing operations.

Mr Loeb told the FT he had some reservations about dual-class share structures that concentrate power in start-up executives, an arrangement that has proliferated as venture capitalists court founders.

“The standard multiple share class configuration on a lot of these new companies ultimately will hurt their valuations,” Mr Loeb said.

Third Point’s hedge funds have been investing in private start-ups for two decades, but the new fund would be its first standalone vehicle for the investments.

Mr Loeb hinted at his ambitions in an October letter to investors, writing that advancements in artificial intelligence and the “digital enterprise” had created opportunities “to pursue with dedicated capital”.

The letter said Third Point’s venture investments since 2015 had generated returns that would rank in the top decile of venture funds that began investing that year, citing PitchBook data. 

Third Point ranked as the largest outside shareholder in the digital lender Upstart, which reached a market capitalisation of $3bn following its initial public offering this month. Its hedge funds have also invested in asset-backed securities and pass-through certificates tied to Upstart loans.

Another company in Third Point’s venture portfolio, the cyber security firm SentinelOne, was valued at $3bn following an investment led by Tiger Global Management in November.

Mr Loeb wrote in the letter that Third Point owned about 10 per cent of the company after first investing in 2015, and he expected it to go public in the next 12 to 18 months.

Lawmakers have called for an investigation into the tech giants’ contract, dubbed ‘Jedi Blue,’ which allegedly allowed for auction rigging

State attorneys general said in a lawsuit earlier this month that a 2018 business agreement between two digital advertising giants, Facebook Inc. FB -0.08% and Alphabet Inc.’s GOOG -0.98% Google, was an illegal price-fixing deal. Lawmakers are calling for further investigation. The companies say it was above board.

The Wall Street Journal viewed part of a recent unredacted draft version of the lawsuit, which elaborates on allegations in the redacted complaint filed in a Texas federal district court.

Ten Republican attorneys general, led by Texas’ Ken Paxton, say Google gave Facebook special terms and access to its ad server, a ubiquitous tool for allocating advertising space across the web. This and other conduct by Google, they allege in the final lawsuit, harms competition and deprives “advertisers, publishers and consumers of improved quality, greater transparency, increased output and/or lower prices.”

Previously unreported details from the draft, including contract terms and company documents, shed light on the legal battle ahead and the relationship between two tech giants who have called each other competitors even as they hold an ever-widening share of the digital advertising market.

s many other aspects of our ad tech business. We look forward to making our case in court.”

Facebook, which isn’t a named defendant in the case, also disputed the states’ claims.

“Partnerships like this are common in the industry, and we have similar agreements with several other companies. Facebook continues to invest in these partnerships, and create new ones, which help increase competition in ad auctions to create the best outcomes for advertisers and publishers. Any suggestion that these types of agreements harm competition is baseless,” the company said in a statement.

Sen. Mike Lee (R., Utah), who is chairman of a Senate subcommittee on antitrust, said he thinks the companies should testify under oath about the contract. “If it hasn’t done so already, the Justice Department must investigate these allegations,” said Sen. Amy Klobuchar (D., Minn.), the panel’s top Democrat.

The Justice Department sued Google in October for allegedly using anticompetitive tactics to preserve its search monopoly and could add further allegations. Google says that suit lacks merit.

Crucial to the backdrop of the Google-Facebook deal was the advertising industry’s movement toward an ad-sales method called header bidding.

Header bidding helped website publishers circumvent Google’s exchange for buying and selling ads across the web. The exchange auctions ad space to the highest bidder during the split second it takes a webpage to load.

Header bidding allowed the publishers to directly solicit bids from multiple ad exchanges at once, leading to more favorable prices for publishers. By 2016, about 70% of major publishers used the tool, according to the states’ lawsuit. Google worried a big rival might embrace header bidding, such as the Facebook Audience Network ad service, or FAN, cracking Google’s profitable monopoly over ad tools, the states allege. The Facebook service said it paid publishers $1.5 billion in 2018, the last time it provided such details on its financial payouts.

“Need to fight off the existential threat posed by header bidding and FAN,” Google advertising executive Chris LaSala wrote in an internal document outlining 2017 priorities, according to the draft complaint.

In March 2017, Facebook publicly endorsed header bidding. Google approached Facebook and in September 2018 reached the digital advertising agreement, the states allege. The draft lawsuit says Google code-named it “Jedi Blue.” In December 2018, Facebook announced it was joining an advertising program, “Open Bidding,” that Google offers as an alternative to header bidding.

In return, the states allege in the final suit, Google gave Facebook special treatment. Among other things, it allowed Facebook to send bids directly into Google’s widely used software, known as an ad server, the draft lawsuit says.

Typically, bidders go through an exchange, which sends the winner on to Google’s server. By circumventing the middleman, Facebook could face less competition and save money. Google’s exchange charges a transaction fee of about 20%, according to the draft lawsuit.

Google charged Facebook 5% to 10% on each transaction, separate from an exchange fee, and barred Facebook from discussing pricing terms publicly, the draft says. The Google spokeswoman said 5% to 10% is the standard fee in the open bidding advertising program. She declined to answer other questions about whether terms provided to Facebook were the same as those provided to other auction participants.

“We don’t manipulate the auction,” she said.

Google added that at least 25 other companies participate in its open bidding program, and that Facebook participates in similar auctions on rival platforms. “There’s nothing exclusive about [Facebook’s] involvement, and they don’t receive data that is not similarly made available to other buyers,” she said.

Wall Street Journal publisher News Corp, an outspoken Google critic, was among the companies contacted by antitrust investigators, along with New York Times Co. NYT -0.21% , Gannett Co. , Nexstar Media Group Inc., NXST -1.11% Condé Nast and others, people familiar with the matter said.

Google also told Facebook which ad opportunities were likely produced by bots rather than by consumers, and it didn’t charge Facebook for those impressions, according to the draft suit. Other auction participants asked Google for the same information but were denied it, the final lawsuit says, redacting the information in question.

Any bidder without that information would be at a disadvantage, said Adam Heimlich, CEO of ad technology company Chalice Custom Algorithms LLC. “It’s like saying CarMax has the ability to tell when they have a junky used car, and they don’t tell you,” he said. Mr. Heimlich accused Google of harming competition at a Senate hearing this year.

The Jedi Blue contract also appears to address the concerns of Facebook and rivals that Google both runs ad auctions and participates in them. The contract states Google won’t use data about Facebook’s bidding history, known as bid response data, to influence pricing, “reverse engineer” Facebook’s strategies, or “adjust or otherwise influence in real-time the bid response of another bidder (including Google),” according to the draft lawsuit.

Dan Rose, a Facebook vice president during the negotiations, emailed CEO Mark Zuckerberg saying the company sought such provisions “so that Google is no longer able to advantage their own demand,” creating “a level playing field,” the draft lawsuit says. The final version redacts the email and contract excerpts.

Unlike other types of antitrust cases, which can require complex market analysis and the sussing out of business motivations, agreements to fix prices or rig auctions are inherently illegal, said Harry First, a New York University antitrust law professor who was once the head of New York state’s antitrust enforcement bureau.

“The only defense that a court will hear is, ‘We didn’t do it,’ ” he said.

Company plan is likely to rekindle criticism of potential conflicts of interest between Jared Kushner’s role in White House and his family’s business

Kushner Cos., the family business of White House senior aide Jared Kushner, filed papers to raise at least $100 million by selling bonds in Israel.

The deal would be Kushner Cos.’ first capital raise on the Israeli bond market, as well as the largest unsecured capital raise by the family-controlled business that owns billions of dollars worth of apartments, office buildings and other commercial property in the U.S.

Kushner Cos. filed the papers this month with the Israel Securities Authority and would sell the bonds on the Tel Aviv Stock Exchange. The company has raised other forms of capital in Israel in the past from both banks and equity partners.

“Kushner is considering the option of issuing bonds on the Tel Aviv Stock Exchange,” a company spokesman said. “The company has had years of success working with Israeli institutions as both a borrower and a partner.”

Israel’s bond market has become a growing source of capital for U.S. real-estate companies, including Extell Development, Silverstein Properties Inc. and Starwood Capital Group.

Still, the move by Kushner Cos. is likely to rekindle the criticism of the potential conflicts of interest between Mr. Kushner’s role in the White House and his family’s business. Mr. Kushner, who is also President Trump’s son-in-law, has played a lead role in advancing the administration’s Middle East agenda.

Also, Mr. Trump this month pardoned Mr. Kushner’s father, Charles Kushner, who was sentenced in 2005 to two years in prison after pleading guilty to tax evasion and witness tampering.

A spokesman for the White House declined comment.

After joining the Trump administration, Mr. Kushner sold personal stakes in Kushner properties to family members to protect against conflicts, but some critics say he didn’t go far enough.

Reporting couldn’t determine what role, if any, Mr. Kushner will have in the family business after Mr. Trump leaves office on Jan. 20.

Kushner Cos.’ bond sale in Israel would likely take place in the first quarter of 2021. The Kushner spokesman declined to say what the company would do with the proceeds. A number of real-estate investors have begun stockpiling cash in recent months in anticipation of a wave of distressed sale opportunities hitting the market because of the Covid-19 pandemic.

Kushner Cos. appears to be joining this effort. This month, it put a portfolio of 10 Maryland rental-apartment properties with about 5,500 units on the block. It could be worth as much as $800 million.

The company has raised other forms of capital in Israel in the past including loans from Bank Leumi and Bank Hapoalim, as well as equity investments from companies like Psagot Investment House and Harel Insurance Investments and Financial Services Ltd.

Kushner Cos. has steered clear of new fundraising from sovereign investors since early in the Trump administration when the family’s efforts to salvage its investment in the office tower at 666 Fifth Ave. in New York City set off a firestorm of criticism. At one point, the elder Mr. Kushner was negotiating with China’s Anbang Insurance Co., which had close ties to top Chinese officials.

Mr. Kushner’s talks with Anbang never led to a deal. Kushner Cos. eventually sold a long-term lease of 666 Fifth Ave. to Brookfield Asset Management.