One scoop to start: the US private equity firm KKR is revving up for a wave of new deals in Japan, especially in the transport sector, as the pandemic decreases ridership and forces cash-strapped companies to dump their non-core assets. More here.

And a wild story to get you going.

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

Airbnb leaves Ackman at the door

The entire business model of Airbnb relies on being a good host. But when Bill Ackman (pictured below) turned up with an offer to take the home-rental company public, Airbnb showed him the door. 

After getting investors to write his hedge fund Pershing Square a $4bn blank cheque through a listing on the New York Stock Exchange to find a suitable target, Ackman wants to make a statement. 

He raised the largest Spac, or special purpose acquisition company, to date, and now he has to strike an impressive deal.

© Bloomberg

Let’s start with the least surprising part. It was almost inevitable that Ackman would approach Airbnb about a potential merger with his Spac. 

The clues are in a regulatory filing for Pershing Square Tontine Holdings, the name of Ackman’s Spac. 

It reads like a dating ad aimed straight at Airbnb: looking for a “mature unicorn” (check), whose business has been hit by the coronavirus pandemic (check) and whose investors could be keen for an exit (check). The only missing part is “if you like pina coladas and getting lost in the rain” . . . which sounds a bit like one of the “experiences” Airbnb charges for. 

Anyway, it clearly didn’t take long for Ackman to make his move. 

Somewhere between PSTH listing in late July and Airbnb filing for an initial public offering in mid-August discussions started and stopped. 

The banks hired to manage the San Francisco-based company’s stock market listing, Morgan Stanley and Goldman Sachs, even deployed additional advisers to deal specifically with his approach, a person with knowledge of the matter told team DD. 

What may be more surprising is that Airbnb turned Ackman down, at least for now. That $5bn capital injection — which includes the money PSTH raised on the stock market plus a $1bn investment from Pershing Square itself — was surely tempting. 

Coronavirus caused a huge disruption to its business. The company cut around 25 per cent of its workforce, cancelled its marketing spend and raised $2bn in emergency debt funding. 

Investors who purchased equity warrants gave Airbnb an implied valuation of $18bn, down from the $31bn figure it reached during a round of funding in 2017, which likely put the company within Ackman’s purview.

Airbnb’s brush off could be a sign that companies are still wary of taking the road less travelled. Spacs have certainly seen a renaissance this year but they come with baggage

There is perhaps a dissonance between how investors feel about Spacs — Ackman said he had to stop marketing the PSTH IPO on the second day of the roadshow after receiving more than $12bn of demand — and how potential targets feel about them. 

Regardless of what happens between Airbnb and PSTH, it’s a good indicator of where Ackman is aiming. 

Notes on a Credit Suisse scandal

There’s more than just the coronavirus to worry about for Thomas Gottstein as he embarks on his new role as Credit Suisse’s chief executive.

As a welcoming gift, the previous establishment left him a series of salacious fires to put out. Who knew joining the Swiss bank could get you a two-for-one corporate espionage deal?

The first scandal culminated back in September last year when Credit Suisse’s chief operating officer Pierre-Olivier Bouée took the fall for the bank’s decision to tail its former wealth management head Iqbal Khan after he split for a job at rival UBS. Khan’s departure followed a domestic spat with the bank’s chief Tidjane Thiam (pictured below), who was purportedly clueless of the Hollywood-worthy drama.

The crisis only deepened when news emerged that the middle man consultant who connected Credit Suisse and Investigo, the spy firm used to keep tabs on Khan, died by suicide.

But wait, there’s more. 

In an eye-watering sequel, Thiam was ousted in February following revelations of yet another spying incident. This time, the bank’s chairman Urs Rohner revealed the Swiss bank illicitly surveilled its former head of human resources Peter Goerke, and even though there was no proof linking Thiam’s involvement, the board had no choice but to “make a change at [the] top of the house”.

Damage control just got a lot more difficult for Gottstein, now that the Swiss financial regulator Finma has escalated legal action against the firm in its probe of the extraordinary spy scandal double feature.

The bank’s new chief has won plaudits for guiding Credit Suisse through the pandemic crisis, which has pushed several European banks out of the region’s blue-chip stock index, and proposing sweeping changes to its structure since his promotion in February.

But the laundry list of scandals has kept growing since Thiam’s exit, including a circular financing arrangement with SoftBank and fraud in its Africa wealth management division. With the spy probe evolving into a more formal legal case, DD wonders whether Gottstein will be able to wriggle the bank away from controversy anytime soon.

A mining company and a double-murder in Missouri

Five years ago, two middle-aged South African bikers rolled up in Springfield, Missouri, and checked in to La Quinta Inn. They should have pressed on — they were trying to ride the whole of the Route 66 highway from Chicago to Los Angeles — but they stayed three nights because they were feeling unwell. 

Around lunchtime on Saturday, May 9 2015, the motel’s staff opened the doors to their rooms and found them dead. The local coroner ordered some tests and the police announced that they had succumbed to cerebral malaria.

But as revealed in a new book by FT investigations reporter Tom Burgis, Kleptopia: How dirty money is conquering the world, the scientific evidence indicates that the chances of malaria being the cause of death are “almost certainly nil”. Apart from the obvious reason — the need to establish what caused two now apparently unexplained deaths in a US town — that matters because of who the men were.

© FT montage

James Bethel and Gerrit Strydom (pictured above) had until shortly before they died held senior posts in the African division of Eurasian Natural Resources Corporation

ENRC is the target of a seven-year corruption investigation by the UK’s Serious Fraud Office. The investigation is focused on the African division. It is alleged in court documents filed in a bitter court battle between the mining group and its former lawyers that senior managers at ENRC oversaw bribes to senior officials in Africa, flouted sanctions and overpaid during acquisitions of related companies. 

Bethel and Strydom were potential witnesses. Indeed, the SFO’s investigators had already contacted Bethel.

ENRC and its oligarch owners from the former Soviet Union deny wrongdoing. They say they are the victims of a stitch-up by the SFO, their own former lawyers, a Kazakh dissident and assorted private investigators. As of the middle of this year, a new agency has joined the saga — the FBI, which has taken over the investigation of the Springfield deaths.

Job moves

  • The law firm Mayer Brown has hired Barry Cosgrave as a partner in London. He joins from K & L Gates.

  • Arnold & Porter recruited Maja Zerjal Fink as a partner in the law firm’s bankruptcy and restructuring practice in New York. She joins from Proskauer Rose.

  • Point72 Ventures has hired Scott Barclay to head its new healthcare investment team. He was formerly a partner and head of DCVC’s healthcare group.

Smart reads

First class The future of flying may not be so grim after all. Low air traffic, quiet cabins and sanitised quarters make for a smooth ride despite the turbulence playing out on the ground below, says our environment and clean energy correspondent Leslie Hook. (FT)

Bad vegans The “Yogi slumlords” behind a string of luxury Brooklyn properties-turned illegal rentals lost their Zen as the coronavirus crisis zapped their ubiquitous revenue streams. A jarring example of how the pandemic upended New York’s property market overnight. (New York Magazine)

Digital diplomacy Disney’s dreams of breaking the box office with its $200m Mulan live-action remake aren’t over. The film’s theatrical debut in China is the result of years of calculated planning to woo consumers on the mainland and in Hong Kong, if, that is, they’re ready to return to the movies. (Wall Street Journal)

News round-up 

Head of German financial watchdog resists calls to resign over Wirecard (FT)

Abu Dhabi oil group reaches $5.5bn real estate deal with Apollo (FT)

Ant Group plans to raise more funds in Shanghai than Hong Kong in giant IPO (Reuters)

Europe’s ‘zombie’ recovery will fall behind US, Deutsche Bank warns (FT)

Ex-Blackstone trader balks at ‘grubby’ terms of Codere debt deal’ (FT)

Blackstone, GIP make takeover bid for Kansas City Southern (WSJ)

DWS abandons auditor EY in wake of Wirecard scandal (FT)

Investors pour cash into Chinese start-ups in hunt for next Tesla (FT)

Dating app Bumble to plan IPO at $6bn-plus value (Bloomberg)

Michael Jordan takes stake in sports betting company DraftKings (FT)

Saudi Aramco slows diversification plans amid industry downturn (WSJ)

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 2020. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article