© Financial Times

One big scoop to start: EY was warned in 2016 by one of its own employees that senior managers at Germany’s Wirecard might have committed fraud and one had attempted to bribe an auditor. This is a must read story from the FT’s Olaf Storbeck here

Welcome to the Due Diligence briefing from the Financial Times. Not a subscriber? Sign up here. Drop us a line and join the conversation: Due.Diligence@FT.com.

The Vatican and its London property deals

DD rarely delves into religious matters, but readers may remember the tale of Cardinal Giovanni Angelo Becciu

Becciu (pictured below) attracted attention last year when Vatican authorities launched an investigation into a specific London real estate investment he oversaw in 2014 with Catholic charitable funds.

© AP

In short, he gave the green light for a $200m minority investment in a Chelsea office building due to be converted into luxury apartments using Vatican funds. 

As it turns out, the deal’s orchestrator, Italian financier Raffaele Mincione, sold Becciu a stake in the west London building at three times the price of his initial investment. 

It’s unclear what attracted Becciu to buy a minority stake in a London building*.

Mincione argues the deal was standard and an attractive opportunity for the Vatican. He and his companies deny any wrongdoing and are pursuing legal action against the Vatican in London’s high court.

Brush up on the back story thanks to the dogged reporting by our colleague Miles Johnson in Rome here. But it doesn’t end there. 

Before the Vatican completed its probe into Becciu, he suddenly resigned last week, surrendering his rights as a cardinal and one of the church’s most powerful figures.

Then, as Miles reported this week, documents showed Becciu conducted additional investments of up to £100m in other London luxury apartments while he was second-in-charge at the Secretariat of State, the Vatican’s central administration office.

The documents show no signs of wrongdoing, but rather shed light on the financial activities of the Vatican, which invests hundreds of millions of euros of donations on behalf of Catholics.

Becciu said he stepped down on the request of Pope Francis (pictured above, to the right of Becciu) following the accusation he had diverted church funds to his family, which he denied. 

He made no mention of the original London property deal that sparked an internal investigation, and has repeatedly defended the investment as standard practice that did not result in any financial losses by the Vatican.

*This piece has been amended to remove a reference to Credit Suisse, which was not advising Cardinal Becciu on the property deal

Money doesn’t grow on trees, but Spacs do

© AppHarvest

We’ve been writing about the Spac boom for quite some time. That’s special purpose acquisition companies, for DD readers new to the fray.

This year, Spacs were finally beginning to shed their unsightly reputations as a means for shady financiers to unload dodgy businesses on the unsuspecting masses.

The trend has birthed some high-profile stars such as DraftKings, enticing billionaires like Bill Ackman to get in on the action.

But the meteoric rise of Spacs to the top of Wall Street’s to-do list has also invited some healthy scrutiny. 

Fraud accusations surrounding electric truckmaker Nikola — and subsequent FT investigations refuting multiple claims by the company — serve as a reminder to season each Spac offering with a grain of salt.

The fast-tracked route to public markets is often a gamble, but that’s what makes it so enticing. And what investor could pass on a juicy Spac deal when Martha Stewart (pictured) is in the kitchen?

© Getty Images

That brings us to the latest craze in Spac land: AppHarvest. The food and lifestyle tycoon has teamed up with venture capitalist JD Vance, Impossible Foods chief financial officer David Lee, and ValueAct co-founder Jeffrey Ubben to bring the indoor farming start-up public via a reverse merger with a blank cheque vehicle, Novus Capital Corporation.

The company aims to cultivate greenhouses across America’s impoverished Appalachian region, battered by a decline in coal-mining. Shares in Novus rose 20 per cent when the listing was announced on Tuesday.

But while it may seem like good pickings for investors eager to jump on the “agtech” trend, AppHarvest isn’t ripe for the public market, writes Lex. The start-up is going public at a $550m value, even though its management projects revenue of just $25m in 2021.

It remains to be seen whether the company can make its public debut without wilting.

NTT dials up a $40bn deal for subsidiary

In 2000, at the height of the tech bubble and long before the arrival of Apple’s iPhone, NTT DoCoMo saw its valuation soar to a record ¥43tn ($407bn) on the back of hopes for an explosive growth in mobile phone use. 

At the time, the independent future of the business, which had spun off from Nippon Telegraph and Telephone, Japan’s former telecoms monopoly, looked bright. 

Two decades on, NTT has sent shockwaves across the country’s telecoms industry with a $40bn bid — to be entirely funded by debt — to take its mobile unit private. 

With an offer of ¥3,900 per share, that represents a 40 per cent premium to NTT DoCoMo’s closing price on Monday.

So why is NTT, a third of which is owned by the Japanese government, spending so much money to purchase the remaining 34 per cent of its mobile telecoms unit it doesn’t already own?

At first glance, the move looks entirely defensive. Japan’s new prime minister, Yoshihide Suga, has pledged to pursue aggressive cuts in mobile phone fees. 

Jun Sawada, NTT’s chief executive, denies the move is to address government pressure, but admits a fully integrated NTT DoCoMo will now have the financial power to consider deeper price cuts.

But a pricing war is not the full story here. The bid is driven partly by NTT’s frustration about its unit’s decline in recent years with NTT DoCoMo’s market value falling to less than ¥10tn. 

With the buyout, the group is looking for a drastic shake-up in the mobile carrier, which also announced a new management team on the same day.

If it goes according to plan, the two companies will aim to significantly increase mobile sales to enterprises, a key growth area in the 5G era. 

That would reduce its reliance on consumer mobile, and higher margins will be expected. If it succeeds, $40bn may have been well spent, but otherwise, NTT’s decline will probably remain permanent.

Job moves

  • Goldman Sachs named Stephanie Cohen, the bank’s current head of strategy as its new co-head of consumer and wealth management. Omer Ismail was named the new head of Goldman Sachs’ consumer banking unit, Marcus. He was the longtime number-two of his soon-to-be predecessor, Harit Talwar

  • Swiss broker Tradition poached a four-person team from professional services group Duff & Phelps to lead its new private markets business, including managing director Dan Nolan.

  • Law firm Baker Botts hired Sian Williams as special counsel in the corporate department of its London office. She joins from Gibson Dunn.

Smart reads

E-roaches The security team at eBay was determined to protect the company against the growing threat of anti-Silicon Valley actors. Under the guidance of vindictive executives, the team spiralled into a tech twilight zone of paranoia, stalking and harassment. (NYT)

Wirecard’s government aid How did the payments group’s massive fraud evade detection as long as it did? It starts at the top of German politics. (FT)

Honesty is the best policy Alibaba’s payments offshoot, Alipay, presents a safer alternative for facilitating transactions within China’s convoluted, if not sometimes dodgy, financial system. Investors are taking notice. (Reuters)

News round-up

JPMorgan to pay $920m in largest-ever spoofing settlement (FT)

Asana set to test direct listing model alongside Palantir (BBG)

EU poised to clear $2.1bn Google Fitbit deal after new promises (FT)

Asda/Walmart/EG: the backstop brothers (Lex)

Hyperion sells $1bn stake to Hg as insurance brokers race for deals (FT)

Tencent to take China's Sogou private in $3.5 billion deal (Reuters)

Nokia to become biggest BT supplier as Huawei kit phased out (FT + Lex

The Polish IPO with a high price tag and even higher hopes (FT)

Spanish court acquits ex-IMF boss over Bankia collapse (FT)

HK property tycoon fights off creditors as coronavirus bites (FT)

South Korea’s IPO market set for best year since 2017 (FT)

Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Francesca Friday in New York and Miles Kruppa in San Francisco. Please send feedback to due.diligence@ft.com

Get alerts on Mergers & Acquisitions when a new story is published

Copyright The Financial Times Limited 2021. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article