One scoop to start: JPMorgan Chase lost out to Morgan Stanley in the $7bn bidding war to buy US investment manager Eaton Vance, a revelation that highlights the fierce competition among Wall Street powerhouses to bulk up their asset management arms.
Get the full story from the FT’s Stephen Morris, Arash Massoudi and James Fontanella-Khan.
SolarWinds: private equity’s well-timed windfall
Most successful investors know that timing is everything. The adage certainly seems to be true for the private equity groups Silver Lake and Thoma Bravo.
The investors sold a $315m stake in the software group SolarWinds to one of their own financial backers, just days before its share price slumped about 20 per cent, on an announcement that hackers had hijacked one of the company’s products.
Here’s a quick timeline.
On December 7 California-based Silver Lake and its rival Thoma Bravo — which together held roughly 75 per cent of SolarWinds at the end of September and have three executives each sitting on its board — sold a chunk of their stake to Canada Pension Plan Investment Board.
If DD readers aren’t familiar with it, CPPIB is one of the world’s largest retirement funds, standing at $456.7bn in assets as of September.
Silver Lake and Thoma Bravo sold their shares at $21.97 apiece in a private transaction that gave CPPIB a 5 per cent stake in the IT company, which is used by multiple US federal agencies and almost all Fortune 500 companies.
Six days later the US government issued an emergency warning about what they said appeared to be a sophisticated cyber espionage campaign focused on Orion, a piece of SolarWinds’ software used by hundreds of thousands of organisations around the world.
The stock is currently trading at $18, whacking CPPIB with some heavy paper losses.
A well-timed sale that results in significant losses for a private equity firm’s longtime investor could prove embarrassing, but that isn’t enough to make it problematic under securities law, said John Coffee, a professor at Columbia Law School in New York.
Legal questions only kick in “if you possess, at the time of the sale, material non-public information”, he added.
Unlike buy or sell orders that companies do through stockbrokers, secondary private placements are typically negotiated for days or weeks before the transaction takes place.
In a joint statement to the FT, the groups said they “were not aware of this potential cyber attack at SolarWinds prior to entering into a private placement to a single institutional investor on December 7”.
Altice Europe: activists at the auction
There was almost a sense of inevitability when, in September, Patrick Drahi offered €2.5bn in cash to buy out the 12 per cent of Altice Europe that he didn’t own.
The Amsterdam-listed company had been a useful vehicle for the French telecoms billionaire in assembling a motley crew of telecoms assets straddling France, Portugal, Israel, the US and the Dominican Republic.
With its US operations spun out and €28.5bn in debt on the books, Drahi saw Altice’s pandemic-spurred collapse in value as a fairly opportunistic bid to delist the company at a modest 24 per cent premium.
It didn’t take long for the brickbats to emerge.
Hedge funds started queueing up to cry foul. Litigation was launched in Amsterdam and the US where correspondence over how that valuation had been calculated was sought, paralleling the 2016 minority battle at SFR when Drahi, via Altice, was foiled by French regulators before returning later with a better deal.
Altice stood firm as funds including Lucerne and the London hedge fund Winterbrook threw mud, arguing that the offer was marked above some of its direct peers. But as the owner of Sotheby’s, Drahi is no stranger to a bidding war.
Via his Luxembourg-based vehicle Next Private, he raised the offer to €5.35 a share — a 30 per cent increase and a 61 per cent premium — which added a tasty €700m-750m to the value of the squeeze-out.
The rebellious funds, including Elliott Management, which wasn’t known to be involved until Altice outed the firm, licked their lips, and pledged the 9 per cent of shares they jointly controlled to the revised offer. Shares in Altice Europe surged 23 per cent.
The billionaire feud in the background of a sex trafficking case
The arrest this week of Canadian fashion mogul Peter Nygard, who is accused by US officials of trafficking dozens of women and girls over the course of 25 years, has evoked some grim comparisons to the late convicted paedophile Jeffrey Epstein.
Similar to the alleged eerie goings-on at Epstein’s private island, Nygard’s sprawling Bahamas estate is said in the indictment by the US Department of Justice to have played host to an array of sexual abuses of minors.
It was also there, in the exclusive Caribbean enclave of Lyford Cay, where Nygard would make an adversary who would take it upon himself to help engineer his downfall — his next-door neighbour, hedge fund billionaire and macro pioneer Louis Bacon.
A February report by The New York Times chronicles how the billionaires’ neighbourly feud quickly descended into a chaotic years-long legal battle, with each levelling incendiary allegations against the other.
Bacon, the founder of Moore Capital, initially levelled suits against the retail executive for harming the local environment by overdeveloping his Vegas-esque retreat, which touted “sculptures of roaring lions and a human aquarium where topless women undulated in mermaid tails”, according to the NYT.
When Bacon upped the ante, reportedly helping fund the US class-action lawsuit in which 57 women accused Nygard of intimidating, bribing and forcing them into having sex, US federal prosecutors appeared to have taken notice. Nygard has in the past denied similar accusations and blamed them on a “smear campaign” by Bacon.
Denis Kessler will step down as chief executive of French reinsurer Scor but will remain as chairman following calls from the French insurance regulator to split the top jobs. He will be replaced by Benoît Ribadeau-Dumas, a former chief of staff to the French prime minister with no insurance experience.
China’s largest chipmaker Semiconductor Manufacturing International Corporation is “verifying” reports that its co-chief executive Liang Mong-song has abruptly quit. More here.
Volkswagen AG has named company insider Arno Antlitz as its chief financial officer, who is the current CFO of its luxury Audi brand. He will succeed Frank Witter, who will step down in June 2021.
The Ontario Teachers’ Pension Plan Board appointed Deutsche Bank veteran Nick Jansa as senior managing director of Europe, the Middle East and Africa and promoted the current head of its Singapore office, Ben Chan, to senior managing director of the Asia-Pacific region.
Toppled democracy Quantopian, a crowdsourced quant fund backed by Steve Cohen, aimed to take on the algorithms of Greenwich corporate fortresses from the foothills of Italy and other remote set-ups around the globe. But the start-up’s failure is a lesson in humility to novice traders. (Bloomberg)
Stranger than fiction Hedge fund Quintessential Capital Management claimed that the controversial medical device company Penumbra conjured a “fake doctor” to author its scientific research. Now, the short-seller says it has uncovered their true identity. (Institutional Investor)
Inconclusive data Alloy, a Silicon Valley start-up in part funded by billionaire VC entrepreneur Reid Hoffman, thought it had the key to fixing the Democratic party’s haphazard data operation. But internal quarrels and mismanagement would derail its fledgling success. (Vox)
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 email@example.com
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