One scoop to start: The AA, the heavily-indebted UK roadside recovery group, has agreed terms of a sale to two private equity groups, Warburg Pincus and TowerBrook. A deal could be announced on Wednesday morning. More here.
A second scoop to start: Germany’s Bertelsmann is in pole position to buy Simon & Schuster, outbidding Rupert Murdoch’s News Corp to strengthen its position as the world’s biggest books publisher. A deal could be announced as soon as Wednesday. More here.
US business leaders position for the Trump-Biden transition
Wall Street chief executives tend to have a lot of power. So when Donald Trump agreed to begin the transition to Joe Biden’s administration within hours of some of the biggest names calling for precisely that — though stopping short of a formal concession — they might’ve thought the two were related.
But Trump’s change of heart could also have something to do with the stack of courtroom defeats racked up by team Trump in its litigation efforts to overturn election results in key states.
On Monday, 164 business leaders signed a letter organised by Kathryn Wylde, chief executive of the Partnership for New York City, warning that delaying the inevitable “puts the public and economic health and security of America at risk”.
The list of signatories includes the who’s who of New York’s property, finance and legal worlds — and, not coincidentally, many political donors.
Alongside corporate CEOs from Accenture’s Julie Sweet to Mastercard’s Ajay Banga, there are big-name M&A lawyers including Paul Weiss’ Brad Karp and Cravath’s Faiza Saeed and well-known dealmakers such as PJT Partners’ Paul Taubman, Centerview’s Blair Effron and Guggenheim Partners’ Alan Schwartz.
These high-profile business leaders aren’t the only ones positioning for a new administration. General Motors is backing out of a legal fight levelled by Trump’s camp that sought to bar California from setting its own fuel efficiency and zero-emission standards for vehicles, revving up for electrification goals on Biden’s agenda.
And it wouldn’t be a Wall Street party without BlackRock’s Larry Fink, KKR’s Henry Kravis and Goldman Sachs boss David Solomon, all of whose signatures can be found on the letter.
Not all VIPs were in attendance, though — Wylde told the FT that “a handful of folks who are personal friends of the president” declined to sign.
That brings us to one of Trump’s most vocal supporters on Wall Street, Blackstone’s Steve Schwarzman, who said he supported the president but is ready to help the incoming Biden team navigate the challenge of rebuilding the US economy (Blackstone likes to be on the winning side after all).
More than two weeks after a call with other CEOs on which Schwarzman pushed back on a suggestion that the US might be at risk of a coup, he elaborated:
“I was trying to be a voice of reason and express why it’s in the national interest to have all Americans believe the election is being resolved correctly,” he said. “But the outcome is very certain today and the country should move on.”
G4S/GardaWorld: security groups in a punch-up
The protagonists in an increasingly bitter hostile takeover fight, Stephan Crétier and Ashley Almanza, could hardly be more different.
Crétier, the chief executive of Canadian security group GardaWorld, is a hard-charging, mud-slinging dealmaker and former baseball umpire who, friends say, will always “get where he needs to”.
Required reading: a profile on the “hard-nosed” entrepreneur — featuring models, kidnappings and garishly expensive wine — by DD’s Kaye Wiggins and Arash Massoudi.
Almanza, in contrast, who runs GardaWorld’s far-larger British rival G4S, is cautious and restrained — a bookish, mild-mannered, golf-playing former accountant.
Crétier, whose company is 51 per cent owned by the private equity group BC Partners, is determined to take control of G4S.
He has spent much of the autumn throwing rocks at his target, saying G4S’s management has “failed everyone”, in a bid to win its shareholders over, though his 190p-per-share offer is far below its current 227p price.
Almanza has called GardaWorld’s bid “derisory” and “opportunistic”. And he’s found some room for manoeuvre: not only has Crétier so far failed to win over even 1 per cent of G4S shareholders, but another potential buyer has entered the fray.
In October G4S said California-based Allied Universal Security Services had made a tentative, friendly 210p-per-share approach — though, when G4S responded quickly that this was too low, Allied’s executives were left wondering whether the UK group took their approach seriously or simply saw it as a way of putting pressure on GardaWorld.
Now the drama is reaching its final stages. GardaWorld’s bid expires on Saturday, after which — assuming it does not win shareholders over — it will have just days to raise it or walk away. If Allied wanted to formalise a rival bid, it would need to follow quickly.
G4S is in a stronger position now than when Crétier began his public battle in September, since its share price is 56 per cent higher. GardaWorld’s high leverage could hamper its ability to pay significantly more, without diluting Crétier’s stake. Meanwhile, Allied is still assessing its options.
At stake is the future of one of Britain’s biggest outsourcers, a company that the government has come to rely on for more and more of the services that were once provided by public sector staff. Go deeper with DD’s Kaye Wiggins and the FT’s Gill Plimmer here.
Credit Suisse: dragged through a hedge backwards
It’s been a rough year for hedge funds, York Capital Management included. The US investment group is shuttering about $3bn of funds, which includes its European business.
That has dealt a blow to Credit Suisse, a longtime investor in York. The Swiss lender said on Tuesday that it had taken an estimated $450m hit as a result.
The fund’s billionaire owner Jamie Dinan told investors that the company would focus on moving away from the asset class entirely in favour of private equity, private debt and collateralised loan obligations, known as CLOs.
York is the latest hedge fund to scale back some of its operations in a period of lacklustre returns, joining the ranks of billionaire investor John Paulson, who shut his hedge fund to external investors, and macro investor Louis Bacon, who has returned outside capital. London-based Lansdowne Partners, meanwhile, closed its $2.8bn hedge fund over the summer.
The writedown is just one more setback for Thomas Gottstein, who inherited the top job at Credit Suisse in February following a corporate spying scandal and has since spent his year navigating dual fiascos at Luckin Coffee and Wirecard, having worked with Credit Suisse on deals for both.
Adding to that laundry list, a July internal review by the bank into its involvement in creating supply chain finance investment funds with SoftBank-backed Greensill resulted in the Japanese conglomerate pulling $500m from Credit Suisse funds.
What’s $450m, in the grand scheme of things?
For one, Lex points out, in addition to piling up due diligence concerns, the bank is struggling to close the valuation gap with its larger local rival UBS, which boasts double the assets under management.
At least not everyone’s having a rough 2020 — while its peers battled dwindling assets, the algorithmic hedge fund WorldQuant is basking in one of its best years of returns, up nearly 20 per cent, even after a $200m hit from the stock market tumult earlier this month.
Peter Long, the executive chairman of troubled high street estate agent Countrywide, stepped down after a private equity rescue deal he negotiated with Alchemy Partners was rejected by shareholders. Former William Hill boss Philip Bowcock has joined as interim chief. More here.
MUFG has hired Stuart Taylor for the newly created role of head of electronic trading within global markets for Emea, Asia and the Americas. He joins from BGC Partners where he was global head of the company’s electronic buyside fixed-income unit.
Law firm White & Case has added Daniel Abercromby as a partner in its Hong Kong global debt finance practice. He joins from Weil, Gotshal & Manges.
RBC has hired Sarah Hindlian-Bowler as a managing director within its global technology group focused on the software sector. She joins from Macquarie Capital.
Law firm McDermott Will & Emery issued a fresh round of promotions. View them here.
When in Rome Airbnb, an American start-up, operates in China the same way as many western hotel chains with outposts in the region — by sharing its guests’ data with the Communist party. The company’s compliance with Beijing influenced its first “chief trust officer” to jump ship last year after six months on the job. (WSJ)
Old dog, new tricks Cerberus Capital Management gets its name from a mythical three-headed dog that guards the gates of hell. But its play for the ESG-centric Co-Operative Bank is less of a head-scratcher than one might think. (FT)
In it for the long haul MercadoLibre, Latin America’s answer to Alibaba, has emerged a victorious winner of the coronavirus crisis. However, it still faces some challenges, including a global minefield of antitrust issues and stiff competition on its road to spearhead the region’s digital transformation. (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 firstname.lastname@example.org
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