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Trump and NATO, Papa John’s Out, Broadcom Buys CA: CEO Daily for July 12, 2018

July 12, 2018, 10:20 AM UTC

Good morning.

I’m in China this week, and have been surprised how little conversation there has been about the intensifying trade war. We held a press conference in Guangzhou Tuesday to promote the Fortune Global Tech Forum that was attended by local press, and not one asked about what, to my news nose, was the most obvious topic for discussion.

Turns out, there’s a reason for that—as this Reuters article makes clear. The Chinese government is trying to play down trade war talk and keep it out of the headlines. That’s part of a broader strategy of taking the high road, embracing multilateralism, and hoping Trump continues to alienate his natural trade allies. This story in the South China Morning Post offers an interesting take on the government’s thinking. It’s not clear how far the Chinese government will go to satisfy Trump’s trade demands; but what is clear is that it has little intention of overreacting. That should be a relief to global companies doing business here.

I spent this morning at Fuxian lake in Yunnan province, which has been the focus of a remarkable government- mandated clean-up effort in recent years—relocating farmers, closing mines and factories, and redirecting sewage. The now-pristine lake, nestled in the beautiful mountains of western China, will be the site of the Fortune Global Sustainability Forum next fall—bringing together business and non-profit leaders with a focus on preserving the global environment. It’s a stunning setting. Stay tuned: more details to come.

News below.

Alan Murray

Top News

Trump and NATO

President Donald Trump reportedly threatened NATO partners with a partial or full U.S. withdrawal from the military alliance, leading other NATO members to hold an emergency meeting on Trump's demands that they increase military spending. Germany media reported that Trump had a "tantrum" during the NATO summit in Brussels, regarding the failure of other members to spend more on defense. "I'll do my own thing" if other NATO members don't immediately increase military spending, he reportedly said. Trump now claims the other members subsequently agreed to "substantially up their commitment." Fortune

Papa John's Out

Papa John's founder John Schnatter is out as chairman after an article revealed that he used the N-word during a conference call with the company's marketing agency in May. He emitted the slur in the context of a role-playing exercise regarding media relations, in which he also described lynchings in graphic terms. After the call, the marketing agency, Laundry Service, ended its contract with the pizza chain. Fortune

Broadcom Buys CA

Chipmaker Broadcom has surprised industry-watchers by buying CA Technologies, a corporate-infrastructure software giant, for $18.9 billion. Broadcom's shares fell by 6.7% in after-hours trading; CA's popped by 15.3%. Broadcom chief Hock Tan: "With its sizeable installed base of customers, CA is uniquely positioned across the growing and fragmented infrastructure software market, and its mainframe and enterprise software franchises will add to our portfolio of mission critical technology businesses." Wall Street Journal

Comcast Responds

Although 21st Century Fox yesterday said it had secured a deal for the takeover of European broadcast giant Sky, rival bidder Comcast is not giving up. Comcast has raised its bid to outstrip Fox's, and now it claims that Sky's independent committee of directors has recommended its approach. Comcast's bid values Sky, which has 20 million subscribers in Europe, at $33 billion. BBC

Around the Water Cooler

Tesla Whistleblower

Martin Tripp, the former Tesla worker whom the company has sued for allegedly stealing data, has filed a whistleblowing complaint with the SEC. Tripp claims he saw falsified production numbers and the installation of damaged batteries while working at the automaker. His case has been taken up by Meissner Associates, the New York law firm that successfully represented a whistleblower who highlighted accounting violations at Monsanto. Fortune

BMW In China

BMW is about to become the first foreign automaker to take advantage of changes to China's foreign ownership rules in the sector. It reportedly will soon take majority control of its 50-50 joint venture with Brilliance China Automotive Holdings, in a demonstration of China's willingness to open up market access. The country has previously blocked outsider companies from taking majority control of their local automotive joint ventures. Bloomberg

Monsanto Ruling

Monsanto, owned these days by Bayer, may be hit with thousands of lawsuits after a federal judge decided to allow an expert witness to testify that the Roundup weedkiller causes cancer. The pilot case is being undertaken by a school groundskeeper named Dwayne Johnson, who says he got non-Hodgkin's lymphoma after using Roundup for a couple years. Fox Business

Trade War Prediction

Economist Stephen Roach, a Yale senior fellow and former Morgan Stanley Asia chair, reckons the U.S. will lose its trade war with China. Although the U.S. imports more Chinese goods than vice versa, seemingly giving it more leverage, Roach explained: "The U.S. is hugely dependent on China as a source for low-cost goods to make ends meet for American consumers. We’re hugely dependent on China to buy our Treasurys to fund our budget deficits, which as you know, are getting larger." CNBC

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.