One big event coming up: Don’t miss the FT Dealmakers Summit, a full-day virtual conference put on by FT Live and the Due Diligence team, on November 10.
Read up on the full event agenda here, which includes speakers from top banks, law firms, corporations, and private equity groups. FT Live is pleased to offer a complimentary professional pass to all Due Diligence newsletter subscribers. Use this link to register.
Special bonus: If you missed last week’s DD Forum event on Private Equity and the Covid crisis, you can watch a replay here.
Ant looks towards a gargantuan public debut
So it’s true — data really is the new oil. At least as far as global capital markets are concerned, writes the FT’s Hudson Lockett from Hong Kong.
Ant Group, the parent company of payments platform Alipay, is set to dethrone Saudi Aramco, the world’s largest IPO.
The Chinese company controlled by Alibaba founder Jack Ma set pricing for shares in its dual-offering at Rmb68.80 and HK$80 in Shanghai and Hong Kong, respectively. At those prices, it will raise $34.4bn from the sale of roughly 3.3bn shares across both markets, topping the $29.4bn Saudi Aramco raised in 2019.
It would return the record for the largest IPO firmly back to Ma. The state-run Saudi oil company pipped previous record-holder Alibaba, which had held the title for years after its $25bn listing on the New York Stock Exchange in 2014. If bankers exercise an overallotment option, Ant’s offering could bring in almost $40bn.
That means the bulge-bracket banks on the deal are readying for a windfall payday. China International Capital Corp joins Citigroup, JPMorgan Chase, and Morgan Stanley on the Hong Kong share offer, with Credit Suisse acting as joint global co-ordinator.
The Ant IPO also returns the financial spotlight on Alibaba’s founder, who earlier this year wasn’t even the richest man in China — that coveted status being briefly stolen by a bottled water magnate in September.
Following a year or so of low-profile philanthropy after stepping back from Alibaba, Ma’s bravado has returned in force alongside Ant’s listing.
Over the weekend, China’s champion of all things ecommerce held court in Shanghai. There he blasted the sort of financial regulations Ant has been keen to sidestep while competing with China’s banking juggernauts for dominance of the country’s lucrative payments industry.
And so far, at least, that approach has worked. Earlier this month Ant even managed to swing a deal offering onshore retail investors access to its IPO through an exclusive arrangement with funds sold on its own mobile payments app.
That effectively cut domestic banks out of a portion of the share offering — something that’s never been done before.
The next date to watch is November 5. That’s when Ant is set to begin trading and officially claim the crown for the biggest IPO from Aramco.
Sanjeev Gupta: nerves of steel
A huge German steel group that has fallen on hard times meets a deal-hungry tycoon who claims to have all the answers for a fading industry. What could possibly go wrong?
DD readers will be familiar by now with the exploits of Sanjeev Gupta, the British businessman who out of nowhere built a $20bn energy-to-metals empire in just a few years by snapping up unwanted furnaces, smelters, and mines around the world.
This month the self-styled industrialist made his boldest move yet, with a bid of an undisclosed price for the ailing steel division of German conglomerate Thyssenkrupp.
Valued by some analysts at almost €3bn, the enterprise dates back to the early 19th century and was long a symbol of Germany’s manufacturing might.
The acquisition would catapult Gupta into the big league of European industry, creating a combined company with about $25bn in global revenues and a workforce of more than 50,000 on four continents.
However, the former commodities trader has a considerable task on his hands if he is to convince politicians, unions and lenders of his credibility.
For all of Gupta’s boasts of turning round struggling mills, doubts have been fuelled by the opaque finances of his privately owned Liberty Steel and the group’s reliance to a large degree on unconventional funding for its expansion.
An FT investigation earlier this year revealed that a bank owned by Gupta had come under scrutiny from UK regulators for its lending to shell companies that finance entities he controls.
Nobody doubts consolidation is needed in Europe’s steel sector, which has taken a battering from Covid-19 and faces an existential challenge to meet tough EU climate change targets.
But there’s every reason to suspect that Thyssenkrupp — which is being dismantled after years of lagging performance — is hoping that Liberty’s approach will smoke out other potential suitors.
Russian roulette: private equity edition
A high-risk, high-reward game is back on the private equity scene, and investors are rolling the dice accordingly.
We’re talking about PIK deals.
A little 101 on the subject for DD readers who are unfamiliar: these financial instruments, short for payment in kind, allow companies to pay their debt with more debt, instead of handing over cash to their lenders. The risky deals tend to carry higher interest rates to compensate creditors. When things end poorly, a company’s financial obligations have tended to balloon because of the very nature of how the debt is set up.
These vehicles were all the rage in the early aughts — Warburg Pincus and TPG bought the US department store chain Neiman Marcus in 2005 financed with PIK debt (what a story that would become), the same year the billionaire Glazer family used PIK notes to fund its takeover of the English Premier League football club Manchester United.
And it’s no surprise that PIKs are now making a comeback. Interest rates on safer forms of debt have fallen to historic lows during the pandemic, sending bond investors scrambling for companies to lend to.
Two of the companies turning to PIKs now are backed by private equity shops.
Apollo-owned Aspen Insurance borrowed $500m through a PIK deal on Friday, with roughly half of the proceeds going into the private equity group’s pocket.
Platinum Equity-backed Multi-Color Corporation has received a less enthusiastic response to its proposed $500m PIK note, delaying the deal from last week as investors push back on the terms, despite a hefty double-digit interest rate on offer.
The trend’s resurgence follows another lucky draw by the private equity sector — the rise of dividend recapitalisations, where private equity owners have used the blockbuster demand for corporate debt to their advantage.
The private equity firm Thoma Bravo has hired Oliver Thym as a partner to lead its credit platform. He was previously a partner and head of the private credit group at Goldman Sachs.
Latham & Watkins has appointed Frank Saviano as a partner in its corporate department and entertainment, sports and media practice. He joins the firm’s New York office from Proskauer.
Morrison & Foerster has added Jeremy White as a partner in its corporate department. He joins the Tokyo office from Baker & McKenzie.
Mitsubishi Chemical has hired Jean-Marc Gilson as its new chief, the first appointment of a foreign boss in Japan since the 2018 arrest and ousting of Carlos Ghosn. Gilson is currently the head of Roquette, a French ingredients group. Read more here.
Brunswick Group has appointed former US International Development Finance Corporation communications chief Molly Millerwise Meiners as a partner in its Washington, DC office.
Clash of the billionaires Amazon chief Jeff Bezos is squaring off against Reliance Industries chairman Mukesh Ambani on his home turf as the ecommerce titans battle for control over India’s fast-growing retail sector. (FT)
Fire up the jet As commercial airlines tick by on life support, the private aircraft industry is taking off. An influx of ultra-wealthy first-time buyers are seeking out the ultimate luxury: peace of mind at 35,000 feet. But worries linger that new flyers won’t be enough to outpace the pandemic. (FT)
What crisis? The pandemic pummelled the US oil sector into chaos. ConocoPhillips boss Ryan Lance isn’t too perturbed, however, as he shells out $13.3bn to create the world’s largest independent oil and gas producer. (FT)
Cleaning house Under its chief Ignacio Galán, Iberdrola has evolved into a powerful evangelist of clean energy. Its latest $8.3bn acquisition establishes it as a big player in the US market. (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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