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TikTok is on Walmart’s shopping list

TikTok’s increasingly odd list of suitors following Donald Trump’s order to ban the Chinese video app unless its owner ByteDance sells to an American company just got longer. 

In addition to legacy software company Oracle and social media platform Twitter, the world’s largest retailer Walmart announced on Thursday that it had joined forces with Microsoft to bid for TikTok US. 

DD readers know there’s nothing standard about this Trump-induced M&A process, therefore Walmart’s interest shouldn’t come as a shock.

What’s more unusual is to see the retailer working with Microsoft. The rationale? Microsoft has the technology and Walmart has (or believes it has) the ecommerce capability to monetise a takeover of TikTok in the US. 

Think of how Instagram seems to read your mind based on the targeted ads appearing on your screen. Microsoft and Walmart hope to gather your consumer data in a similar way as you scroll from one addictive TikTok video to the next. 

The latest twist in the TikTok saga came after the FT revealed Kevin Mayer, pictured below, was stepping down three months after joining the Chinese-owned app from Disney due to the hostile political environment surrounding the app.

What emerged from Mayer’s letter to employees on Thursday was that he had grown tired of TikTok being a geopolitical punching bag in the US’s dispute with China. “He didn’t sign up for this,” said one person with direct knowledge of the matter.

DD also discovered that Mayer wasn’t too happy about being left out from negotiations with potential buyers, which were led by ByteDance’s founder and chief Zhang Yiming.

But like TikTok’s algorithmically-powered, infinite feed of viral videos, the story is ever-developing. Don’t rule out another dramatic plot twist, says Lex

Mayer left Disney once before. He could always go back. And who knows, Disney might be next in line for a shot at TikTok’s US business.

Anything is possible when Trump plays dealmaker-in-chief.

Citigroup and the $900m wire transfer that went wrong

The life of a Wall Street bank chief executive is not always glamorous, as Citigroup’s Michael Corbat can attest. 

This past April, a senior executive of the credit hedge fund Brigade Capital contacted Corbat. Brigade wanted Citi to resign as the administrative agent on a Revlon loan the bank had helped underwrite in 2016. 

The agent role is a somewhat mundane task for banks. The job pays little and mostly requires back office work. The day-to-day typically involves wiring periodic interest payments on behalf of the borrower. But it is the kind of work that helps banks maintain relationships with clients, especially as they seek to win more lucrative investment banking assignments in the future.

Citi’s role went from dull to dicey as Revlon fell deeper and deeper into distress. Revlon, in need of cash, sought to raise new capital. The cosmetics group needed the green light from its lenders, but Brigade and several other creditors objected.

That put Citi in the crossfire. After the April conversation, Corbat assured Brigade that the bank would indeed resign, according to a lawsuit filed by Brigade. Citi, in the end, never did and Revlon was able to override Brigade’s challenge.

The new deal depressed the value of the 2016 loan held by Brigade and two other funds, HPS Investment Partners and Symphony Asset Management.

Line chart of Price (cents) showing Revlon's new financing pushed down the value of an older loan

Earlier this month, Brigade and other funds turned to a new agent bank to file suit against Citigroup and Revlon over that deal. 

The story would have likely quietly wound its way through court if Citi hadn’t mistakenly wired $900m to creditors just days later, captivating Wall Street. 

Citi says many of the money managers that got money have since returned it. However Brigade, HPS, and Symphony have not returned the cash, arguing that they could not necessarily have known it was a mistake. 

For more on the situation and how the role of the agent bank has become more contentious, read this analysis from DD’s Sujeet Indap and Eric Platt.

As for Corbat, he has now been forced to explain to the world how the bank sent nearly $1bn of its own cash to people who did not deserve it. It’s money the bank’s shareholders are keen to see it recoup.

Rolls-Royce hits another patch of turbulence

Although Rolls-Royce long-since sold off its luxury vehicles business, its brand power remains synonymous with slow-motion music video depictions of £300,000 cars gleaming in front of Beverly Hills mansions.

These days, however, the British engineering multinational is having a much less glamorous time than its name evokes.

The aero-engine maker is seeking to raise £2bn by shedding assets including a division that manufactures fighter plane parts after being pummelled into a record half-year loss by the coronavirus crisis.

It’s another formidable burn for Rolls-Royce after being dumped by its largest shareholder, the San Francisco-based activist investor ValueAct, earlier this month.

The activist hedge fund began gradually reducing its stake in December following the departure of its chief operating officer Bradley Singer from Rolls-Royce’s board.

That left Rolls-Royce chief executive Warren East, pictured below, to do damage control against spiralling costs stemming from issues with the Trent 1000 engines that power Boeing’s popular 787 Dreamliner planes as rating agencies downgraded the company to just above junk status.

East told the FT last year of an “underlying modernisation programme” set to mitigate the damage of the Trent 1000 crisis and unleash £1bn in free cash flow in 2020. Then, the pandemic hit. 

The Rolls-Royce boss’s goal was to use that £1bn to pay its debts and return some cash to shareholders. But as of the end of June, the group had burnt £2.8bn in cash instead.

And ValueAct isn’t the only shareholder to abandon the company in its darkest hour.

The engine manufacturer’s finance director Stephen Daintith is parachuting to stabler ground at online grocer Ocado, billed by stock broker Peel Hunt as the “Microsoft of Retail”.

Can Rolls-Royce chart a flight path to safety? As its shares hit a 10-year low, East may want to focus on its defence arm, which has thus far remained immune to the pandemic. 

Job moves

  • Duncan Tatton-Brown, chief financial officer of online grocer Ocado Group, is stepping down from his role due to “family circumstances”. He will be succeeded by departing Rolls-Royce finance chief Stephen Daintith.

  • Law firm Skadden hired Louise Batty and Aurora Luoma as counsel in its London office. 

  • BNP Paribas has hired Sarah Wang as head of structuring for the Americas. She previously worked as head of securitised product solutions structuring at Barclays.

Smart reads

Everything must go American small businesses’ blood, sweat, and entrepreneurship were already no match against retail chains and ecommerce giants. The Covid-19 pandemic and Washington’s chaotic scramble to disperse federal loans may be the final nail in the coffin. (FT)

Deadly silence Hundreds of US businesses are on a silencing spree, forbidding employees from sharing potentially life-saving information about coronavirus within their ranks. (Bloomberg)

Dethroned Under “Cryptoqueen” Ruja Ignatova, OneCoin, a cryptocurrency once poised to rival bitcoin, raked in billions. Until she vanished. Federal prosecutors have accused her of running an elaborate Ponzi scheme. (WSJ)

News round-up 

Chipmaker Kioxia to raise up to $3.6bn in Japan IPO (FT)

Beauty group Coty plans to sell its factories as it battles pandemic (FT)

Citi’s $900m payment blunder was culmination of months of drama (FT)

Hut Group shuns US for £4.5bn IPO (FT)

Alibaba in talks to hike stake in Chinese courier YTO Express (Reuters)

Klarna chief says IPO closer as pandemic drives online shopping boom (FT)

Two best-performing funds since pandemic are run by Morgan Stanley (FT)

RWS adds translation software to the portfolio with £809m SDL deal (FT)

Porsche presses on with electric vehicle launches as it battles Tesla (FT)

Pret A Manger slashes third of its workforce (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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