Happening today: join DD’s Robert Smith for a look back at some of the most high-profile accounting scandals in recent years with Carson Block, the short-seller behind Muddy Waters Research. Be sure to register here.
One thing to start: the private equity group Dyal Capital is in talks to merge with Owl Rock Capital and go public through a blank cheque vehicle, in a complex deal that will value the companies at a combined $13bn. More here.
Europe’s most exclusive club: the banking boardroom
On Wednesday we took you round the revolving door of European banking — a cosy league of well-established figureheads trading slots at the sector’s top institutions.
And despite their well-documented underwhelming performance, the club has remained largely inaccessible to outsiders rearing to shake things up.
Perhaps one of the most exclusive haunts east of the Atlantic is Deutsche Bank. DD readers may be familiar with its longtime chairman Paul Achleitner, who since 2012 has seen the German lender through scandal and strife.
It raises the question, as the FT’s Lex column once did, why Achleitner remained put through the hiring and firing of four chief executives over the years, dodging the guillotine each time, even after a vote of no confidence in 2018.
According to this scoop by the FT’s Laura Noonan, Olaf Storbeck and Stephen Morris, an attempt at slashing through the German lender’s velvet rope by the US private equity group Cerberus, Deutsche’s fifth-largest shareholder, was unsuccessful. But the plot still underscores shareholders’ growing agitation with the status quo.
The PE firm had courted and floated Morgan Stanley president Colm Kelleher in conversations with regulators and Deutsche chief Christian Sewing, insiders told the FT, making strides in its years-long campaign to remove Achleitner before his 10-year term officially ends in 2022.
One of the German bank’s most senior executives called the potential swap a “very surprising” proposition since Kelleher doesn’t speak German and spent his career at a Wall Street institution vastly different from Deutsche.
Another gold member of the European banking set, Jean Pierre Mustier, did not have the luxury of a fixed board seat to buy him some time against his opposition. The UniCredit chief executive was ousted by the institution’s Italian board, which did not like the Frenchman’s stance against domestic M&A and his cost-cutting initiatives.
Mustier, a former paratrooper and Société Générale alumni, held a vision for the Italian bank’s future that was incompatible with that of its incoming chairman, the former Italian finance minister Pier Carlo Padoan, who thinks UniCredit should double-down on its domestic market.
“It was clear that the differences were irreconcilable,” a person involved in the talks told the FT’s Silvia Sciorilli Borrelli and Owen Walker. “Neither side was willing to consider the other’s position.”
UniCredit’s shares dropped 8 per cent on Tuesday following the news, and are down over 40 per cent this year. The Stoxx Europe 600 Banks index lost 21 per cent over the same period.
The incident reflects a growing chasm among Europe’s big banks — those looking to expand domestically versus those trying to carve out a global footprint.
Speaking at the FT’s Global Banking Summit on Wednesday, UBS chairman Axel Weber argued the continued fragmentation of European institutions would only play to London’s favour in terms of remaining the continent’s dominant financial centre after Brexit.
“The division of Europe is a massive benefit to the City of London because if Europe were united the impact . . . of Brexit would be much more,” the former Bundesbank president said. “It’s all about competition between financial centres within Europe, Frankfurt against Paris. It shouldn’t be a zero-sum game.”
SoftBank’s whale fail
When Japan’s whaling fleet broke an international moratorium last summer, setting sail for its first commercial hunt in more than 30 years, it provoked an outcry from environmentalists the world over.
Yet, despite all the furore, the fact remains that not many Japanese people actually eat whale any more.
Japanese investors this year showed a similar lack of appetite for a cetacean of an altogether different nature: SoftBank’s “Nasdaq whale” trade.
When the FT revealed in September that the Japanese conglomerate was the mystery large buyer of options on US technology stocks making waves on Wall Street, shares in SoftBank initially plunged 14 per cent.
The group’s risk-addicted founder Masayoshi Son is not one to bow to external pressure. And when the FT first exposed SoftBank’s options bets, a person familiar with the strategy boldly declared “the whale is still hungry”.
But now, after booking $2.7bn in derivatives losses in the third quarter, the whale’s hunger has waned: SoftBank has decided to reduce its exposure to the controversial strategy by letting its options expire.
The internal hedge fund that carried out the trades — SB Northstar — will still very much exist, however. And that continues to raise governance concerns since it effectively allows Son to take out loans from SoftBank through Northstar, while he enjoys 33 per cent of the profits from a division inside the group.
The FT went deep on SB Northstar last month — get up to speed on the contentious structure and the players involved here.
G4S: hostile bidder gets serious
“He’s brought out the bazooka.”
That was one executive’s take on the latest twist in an increasingly rancorous corporate drama, in which the Canadian security group GardaWorld is trying to buy its much larger UK rival G4S.
The “he” in question is Stephan Crétier, the hard-charging dealmaker at the helm of GardaWorld. The bazooka: he’s raised his hostile bid from 190 pence a share to a much heftier final offer of 235 pence.
That catapults his bid from a widely-dismissed one backed by fewer than 1 per cent of shareholders to one that now must be taken seriously. “Shareholders should welcome an escape route,” Lex concludes.
It also means the heat is now on at Allied Universal Security Services, the California-based group that has been weighing a rival bid. Its dealmakers were startled by how much Crétier raised his bid, and will have to decide on the economics of a higher offer by December 9.
Shares in G4S closed at 246 pence in London on Wednesday, a sign that shareholders — or at least any merger arbs knocking about — seem to think they’ll go for it.
Mark Hawkins will retire as chief financial officer of Salesforce effective January 31, ahead of the closing of its $27.7bn deal with corporate messaging group Slack. He will be replaced by president and chief legal officer Amy Weaver.
Reginald Brown, the chairman of Wilmer Cutler Pickering Hale and Dorr's financial institutions group and the vice-chairman of its crisis management and strategic response group, is joining Kirkland & Ellis’ Washington, DC office along with partners Daniel Chaudoin, Jeremy Dresner and Daniel Kearney.
Citigroup’s longtime vice-chairman Steve Volk will retire from the bank next year. More here from Bloomberg.
LionTree has appointed Jill Bright as its chief administrative officer. She was previously an executive vice-president of HR & administration at Sotheby’s.
Tufan Erginbilgic is joining Global Infrastructure Partners as a partner. He was previously chief executive of BP’s downstream segment, including its global fuels, lubricants and petrochemicals businesses.
Clenching the purse strings In the wake of the prodigious 1MDB scandal, only one of Goldman Sachs’ top five former executives has not surrendered reparations: Gary Cohn. But the bank is struggling to make strides in its former president’s $10m game of hardball. (Bloomberg + FT)
Short on details The drama-fuelled world of short selling is just the tip of the iceberg — propping up many of the anonymous market-moving exposés is a shadow industry of multibillion-dollar funds, otherwise known as balance-sheet partners. (Institutional Investor)
Bad break-up Teneo co-founder Doug Band was a vital fixture in the Clinton White House and post-presidential empire. Until he wasn’t. Critics say he leveraged the relationship for his own financial gain (see: a $700m private equity deal with CVC Capital last year). His defenders revere him for his philanthropy. (Vanity Fair)
Amazon in talks to buy podcast maker Wondery (Wall Street Journal)
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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