One thing to start: Birkenstock, the German sandal company, is exploring a €4bn sale to private equity groups and has held talks with CVC and Permira.

And one interview start: real estate holdings “are not trading at tangible value”, Brookfield chief Bruce Flatt tells the FT’s Michael Mackenzie as he prepares to delist the Canadian investment group’s property arm in a $5.9bn deal.

Welcome to the Due Diligence briefing from the Financial Times. Not a subscriber to DD? Sign up here. Drop us a line and join the conversation: Due.Diligence@ft.com 

Macron: a banker to gain connections, a politician to get re-election

If a yoghurt maker can be protected in the name of ‘economic patriotism’ in France, then it seems the same logic can be applied to defend the place where that yoghurt is sold. 

That’s DD’s takeaway after Canadian petrol station operator Couche-Tard walked away from a €16.2bn bid to buy France’s dominant retailer Carrefour.

The shortlived affair, which ran into serious problems once France’s finance minister Bruno Le Maire declared his opposition to the deal, has not left any of the parties involved looking too good. 

It has also rekindled memories of France’s sometimes wild interventions into global dealmaking. 

Recall that for over 15 years, France has been trying to shake off its reputation as a country hostile to foreign acquirers ever since its prime minister vowed to protect Danone from a rumoured bid from PepsiCo (back in 2005, then French prime minister Dominique de Villepin said that the food multinational was one of the country’s industrial “jewels”). 

Since then, a number of cross-border deals for French companies including steelmaker Arcelor, telecom gear specialist Alcatel-Lucent, cement giant Lafarge, and energy group Technip have been executed successfully. 

“How can you tell me France is investor-friendly and go and do something like this?” one person involved in the deal told the FT’s Leila Abboud in Paris. “Protectionism may be politically popular but it is bad for the country in the long run.”

Breakdown of the retail groups: Carrefour vs Couche-Tard

This time around, though, the irony is that the country is now run by a politician who spent several formative years striking deals in the Paris office of advisory firm Rothschild & Co. But what Couche-Tard seemingly failed to calculate is that Emmanuel Macron is a politician with huge ambitions. 

His time at Rothschild was intended to ingratiate him in the world of the rich and powerful. One source recalled that Macron didn’t even know what ‘ebitda’ was back when he started at the firm in a senior position, before ascending to even greater heights. 

The mooted takeover of Carrefour, the country’s largest private-sector employer, would have played out dangerously for Macron, as he prepares for a re-election campaign.

French president Emmanuel Macron © AFP via Getty Images

Now, dealmakers are left to ponder whether blocking a friendly Canadian bid into the French market was driven primarily by political calculations (and thus whether that stance will shift once elections are over), or whether there has been a narrowing in the sorts of assets that foreign bidders can attempt to buy.

Couche-Tard chief Brian Hannasch on Monday blamed the pandemic and fears over food security for the French government’s reaction. He also suggested that if the government changed its tune the Canadian company would be open to re-engaging. 

In the short-term, none of this is much comfort to shareholders in Carrefour, whose fortunes continue to wane relative to its international competitors.

Line chart of Forward 12m price-earnings multiple (x) showing Carrefour trades at a discount to peers

One Parisian banker offers an alternative view that brings the whole episode closed circle: “If you let Carrefour go, then the next one to fall is Danone.”

Speaking of which, on Monday, Leila reported an activist investor has called for Danone’s chairman and chief executive Emmanuel Faber to be replaced because of its “disappointing” share price performance.

Private equity does ‘rebellious self-expression’ 

Dr Martens have long been associated more closely with countercultures than capitalism. 

But the chunky lace-up boots have won over fans in the finance world as well — executives at the company’s owner, private equity firm Permira, dubbed them “a canvas for rebellious self-expression”.

Now it plans to list the business.

Permira paid £300m to buy the company from the Griggs family that had run it for more than 100 years, in a deal completed in 2014. Now it expects a London listing to value it at between £3bn and £4bn, people familiar with the matter say. 

Here’s how much its revenues grew in those years (though growth slowed significantly in the nine months from March 2020, which is not on the chart, as the pandemic forced store closures):

Dr Martens' performance under Permira

Among other things, a £3bn-£4bn listing would mean big carried interest payouts. If the private equity group sold its whole stake at a £4bn valuation it would add £545m to the pool of “carry” available, according to an analysis by Peter Morris, an associate scholar at Oxford university’s business school. At a £3bn valuation, the figure would be £395m. 

DD readers may know that carry is usually based on a whole fund’s performance, not a single deal. But the idea that this investment could, in theory, boost the ‘carry’ pool by the equivalent of almost £2m for each of the 290 people who work in Permira’s private equity business shows how lucrative for insiders the industry’s top-performing deals can be. (We should point out that management teams generally also stand to receive some of the payouts.) 

Such a success would be a contrast to some previous Permira IPOs, such as motoring group the AA and Saga whose share prices have tumbled since listing — though the IPO of TeamViewer has fared better.

Permira had previously held talks with Carlyle about a possible sale of Dr Martens after the US private equity shop sold luxury sneaker brand Golden Goose to Permira in February. 

The talks were called off when lockdowns began in March, then resumed in September — but the sides couldn’t agree on price, two people familiar with the matter said, so Permira opted for the stock market instead. Go deeper with DD’s Kaye Wiggins and the FT’s Patricia Nilsson.

Come hell or high water: Veolia’s takeover battle for Suez

“It is out of the question that I sell the 30 per cent I own of Suez, our goal is very much to buy 100 per cent,” Antoine Frérot, chief executive of Veolia, the French water and waste group trying to take over its rival, said Monday evening.

His tenacity will probably disappoint Bertrand Camus, his arch-rival at Suez, who is hoping he can make Frérot give up his €11bn takeover attempt and the 29.9 per cent in the group Veolia already owns.

Antoine Frérot, chief executive of Veolia © Bloomberg

Camus’ plan involves getting Veolia to the negotiation table where a friendly solution could be thrashed out.

And a proposal from two funds, France’s Ardian and Global Infrastructure Partners, which could lead to an offer for all of Suez at €18 a share — the same price offered by Veolia — has given him some leverage to make the attempt.

The willingness of Suez to talk to Veolia is a bright spot after months of accusations, legal challenges, and a poison pill defence.

But the friendly solution remains unclear. The plan that advisers are spinning is that Suez will be able to convince Veolia to walk away by giving Frérot some assets as recompense for time spent. That appears . . . unlikely.

What’s more likely is that Suez will have a bit more leverage in negotiating the endgame of this hostile takeover. 

Job moves 

  • Linklaters is gearing up to hire a new senior partner as the firm’s chairman and senior partner Charlie Jacobs term nears its end, according to law.com.

  • SoftBank managing partner Jeffrey Housenbold, one of the leaders behind the Japanese group’s Vision Fund, is leaving the company in July.

  • The Duke and Duchess of Cambridge’s private secretary Christian Jones is leaving the British royals to join the private equity group Bridgepoint as head of corporate affairs. 

  • Johnathan Ford has stepped down as chief financial officer of Centrica for personal reasons. He will depart on January 31 and be replaced by Kate Ringrose, a 16-year company veteran.

  • Investcorp appointed Frances Fragos Townsend, emeritus vice-chairman at MacAndrews & Forbes, to its board. 

Smart reads

India’s debt debacle The country’s banks were struggling before the pandemic struck, and a widespread case of bad loans bogging down the system further lessens its chances of India’s economic recovery. After years of resistance to foreign capital, there may be a silver lining for foreign opportunists. (FT)

San Francisco’s tech exodus Silicon Valley workers are rethinking their close quarters, sky-high rents, and steep income taxes as the industry goes remote. As greener pastures beckon, the Bay Area faces a real estate reckoning. (New York Times)

Playing the bad cop Joe Biden’s pick to run the Securities and Exchange Commission has spent his career unbothered with making friends on Wall Street, signalling a stricter regime at the US regulator. (Wall Street Journal)

Breaking new ground Mike Henry took the helm of BHP, the world’s largest mining business, just before the pandemic. But controversial moves by its rivals has also tasked the new chief with navigating the sector’s swiftly unfolding PR crisis. (FT)

News round-up

Global investors in limbo after Ant IPO torpedoed by Beijing (FT)

Thyssenkrupp considers spin-off of troubled steel business (FT)

Total deepens ties with India’s Adani in $2.5bn green energy investment (FT)

Akzo Nobel offers €1.4bn for Tikkurila (FT) 

Pension funds stick by Blackstone despite closeness to Trump (FT) 

Latest fundraising values Deliveroo at more than $7bn (FT) 

ECB threatens banks with capital ‘add-ons’ overleveraged loan risks (FT) 

Arm China chief makes $179m gain on stake in chip company’s customer (FT) 

Blackstone in talks to buy Butlin’s owner Bourne Leisure (FT) 

US state officials call for greater scrutiny of potential G4S takeover (FT)

HSBC CEO expresses regret to Hong Kong activist over frozen bank accounts (FT)

Scoreboard: Golf’s reckoning with Donald Trump has come (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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