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Meet the new CEO at Citigroup

Wall Street’s highest echelons have spent the past decade trying to shrug off their male, pale, and stale image. Citigroup has finally managed two of the three, appointing Jane Fraser, pictured, as the US bank’s next chief executive.

Fraser, a 53-year-old who will take over from Citi’s veteran boss Mike Corbat next February, breaks the mould on all fronts. 

For a start, she is obviously not male. That is the fact which was most celebrated by industry heavyweights rushing to commemorate her historic elevation. 

“Congratulations to Jane Fraser, the next CEO of Citi and a pioneer in becoming the first woman to lead a major US bank,” wrote Goldman Sachs boss David Solomon, pictured below, a big proponent of women’s advancement who unfortunately has a management committee packed with men running its most important divisions.

Fraser is also anything but stale. 

Past and current colleagues describe her as gutsy and unapologetically ambitious. This is a woman who, when she joined McKinsey at the tender age of 26, said she would only take the job if she could work directly for the consulting group’s head of banking. 

She also has a reputation as a prankster, fond of sending mischievous messages from unattended BlackBerrys back in the day, and other practical jokes. 

A keen sense of humour might do her well in the early days of her new role, if Corbat hasn’t figured out how to recover the $900m Citi accidentally wired to lenders of its client Revlon.

Perhaps the gutsy Scot can recover the bank’s millions from Brigade Capital and the other creditors calling “no give backs”.

Embarrassing near-billion-dollar blunders aside, Lex reminds us the coronavirus pandemic poses an enormous challenge for the bank and its new leader. Citi shares are down nearly 40 per cent from January when they were up 120 per cent from the start of Corbat’s tenure, and the bank will face a barrage of credit defaults and consistently low interest rates in the years to come.

Line chart of Share price and index (rebased) showing Citigroup shares have remained in line with rivals under Mike Corbat

Nevertheless, Fraser has kept high spirits through some of Citi’s most challenging jobs — heading strategy as it emerged from the financial crisis, reshaping its private bank after the Smith Barney deal and leading its mortgage business through a challenge-filled 2013 to 2015. 

In person, as attendees of the FT’s next Global Boardroom conference will soon find out, she comes across as engaging, spirited and direct, a refreshing contrast to the many executives who use interviews and briefings to demonstrate their (impressive) ability to use a lot of words while saying very little. 

DD is watching to see if more women will join Wall Street’s highest ranks: JPMorgan’s former finance chief Marianne Lake moved into an operating role last year. Both she and her successor Jennifer Piepszak are in the running to replace the bank’s chief executive Jamie Dimon, though he is showing no signs of going anywhere any time soon.

What crisis? Private equity is spending big

In the months before the coronavirus pandemic, the talk among private equity dealmakers was about how valuations were getting too high and it was only a matter of time before a crisis or recession brought them down. 

Well, they got the crisis, but from the sound of EQT’s latest deal, they didn’t get the low valuations. 

The Swedish buyout group has just agreed to pay €1.3bn, or 25 times 2019 earnings — yes, twenty five times — for the Spanish property classifieds site Idealista. Five years ago, rival private equity group Apax bought it at a valuation of just €235m. Catch up here.

The company has increased revenues quickly under Apax’s ownership, including with acquisitions. EQT’s bet: it can do what Silver Lake-owned Zoopla, and Rightmove, have both done in the UK by shifting more and more of the market online. 

Lockdowns may have helped prepare the ground for that switch, which according to EQT dealmaker Bert Janssens has so far happened more slowly in southern Europe where Idealista operates than it has in Britain. 

But with a potentially long and tough recession on the cards, a high-priced bet on the property market is brave.

Side note on ludicrous ESG claims: EQT said in its press release that the deal would contribute to the UN’s sustainable development goals. 

To be precise, by “enabling efficient transaction between prospective homeowners and sellers” it would contribute to SDG 11, which aims to “make cities and human settlements inclusive, safe, resilient and sustainable”. 

DD suspects that leveraged buyouts of real estate websites were not what the UN general assembly had in mind. 

Mike Ashley’s puzzling play against the PIF

Just what is Mike Ashley’s game? 

The British billionaire owner of Newcastle United hasn’t been winning much on the pitch nor when it comes to deal making. So his attention is now shifting to beating the body that runs England’s top football division.

Ashley has sanctioned an astonishing attack on the Premier League six weeks after a consortium led by Saudi Arabia’s sovereign wealth fund walked away from a £300m takeover.

Newcastle, and by extension the club’s owner, claim the Premier League blocked the deal from happening.

That’s not what the consortium led by the Public Investment Fund, which is controlled by Crown Prince Mohammed bin Salman, had suggested, while the Premier League hit back with a firm rejection of Newcastle’s claims.

The investor group, which also included the British financier Amanda Staveley and the billionaire Reuben brothers, claimed it had “formally withdrawn its interest” acquiring the team. Richard Masters, chief executive of the Premier League, has said the decision was made “voluntarily”.

But Newcastle’s claim is that the consortium failed the Premier League’s so-called owners’ and directors’ test, which determines whether a would-be buyer is worthy of taking control of a club. 

The club, which accused the league and its chief executive of failing to act “appropriately”, said it had provided “overwhelming evidence and legal opinions that PIF is independent and autonomous of the Saudi Arabian government”.

A reminder that Prince Mohammed, pictured below, Saudi Arabia’s de facto ruler, chairs PIF.

Perhaps more puzzling was Ashley’s move to empathise with the club’s supporters, many of whom want him out because they want an owner more willing to splash out cash on stars. His acknowledgment of their frustrations isn’t exactly in keeping with the rocky relationship he has had with fans in the past.

With the Premier League season starting on Saturday, the question is whether Ashley’s conciliatory tone is a sign that he has given up on the deal and needs the fans back on side.

Or is this a dramatic last-ditch attempt at resurrecting a takeover?

Job moves

  • Paula Rosput Reynolds will succeed Sir Peter Gershon after he steps down as chairman of National Grid’s board in January 2021. Reynolds currently serves on the boards of General Electric, BP and BAE Systems.

  • Marshall Bailey has stepped down as chairman of LCH Group and as a non-executive director of the London Stock Exchange Group board.

  • King & Spalding hired Darren Gardner, Amanda Sonneborn and Dominic Hodson as partners in its corporate, finance and investments practice. Gardner and Hodson will be based in the firm’s San Francisco office, and Sonneborn will split her time between Chicago and Los Angeles.

  • Battery Ventures promoted Paul Morrissey to partner in its London office. 

  • The law firm Baker Botts hired Nigel Stacey as a partner in its corporate department. He joins the London office from Gibson Dunn.

  • K&L Gates has recruited Richard Hayes as a partner in its Sydney office. He joins from Hogan Lovells.

  • The law firm Orrick added Shana Solomon as a partner in Boston and Faraaz Samadi as a partner in London. Solomon was previously general counsel at the biotech start-up Velocity Sciences and Samadi joins from Milbank.

Smart reads

Posh pre-nup Almost a decade ago, the luxury leather goods purveyor Hermès was betrothed to LVMH and its “wolf in cashmere” boss Bernard Arnault. But Hermès made a break for it, and stands to emerge from the pandemic relatively unscathed as the French conglomerate navigates a messy divorce with Tiffany. (The Economist)

Dividend drought Covid-19 has dried up shareholders’ hopes of ample dividends this year as companies slash or suspend cash payments completely. As companies hoard their earnings, pension providers are struggling to stay liquid. (FT)

First flight to Tokyo Warren Buffett’s unexpected bet on Japan’s trading houses could lead a gaggle of money managers in his wake, tempted by Tokyo’s cheap stocks and technological innovation. (FT)

News round-up

JPMorgan fires several employees who took Covid relief funds (FT)

Nikola shares fall after short-seller claims business is an ‘intricate fraud’ (FT) 

UK must intervene in Nvidia deal for Arm, says Labour (FT)

LVMH retaliates against Tiffany by preparing lawsuit (FT)

BP enters offshore wind with Equinor deal (FT + Lex)

Wall Street brushes off political tensions to dig deeper into China (FT)

The Hut Group aims to raise up to £1.9bn through IPO (FT)

Saga criticises former private equity owners for loading it with debt (FT)

JPMorgan calls senior traders back to the office (FT)

Yum China shares drop as much as 6.3% on Hong Kong debut (FT) 

How a retail options craze fuelled SoftBank’s ‘whale’ trade (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


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