One thing to start: Ex-WPP boss Martin Sorrell has set his sights on the first target for his new venture. It’s a Dutch digital production company called MediaMonks and Sorrell is in talks to buy it for €200m. Read the FT exclusive.
When Michael Dell joined forces with tech-focused private equity group Silver Lake to buy out his namesake PC company, few believed the Texan entrepreneur would pull it off. Five years on, Dell has seen his original $3.5bn equity stake in Dell Technologies grow into a $35bn stake, while Silver Lake’s $1.4bn investment is now worth about $14bn.
Whether the actual company is in better business shape than it was half a decade ago (which was the original goal of going private) is still being debated. But there is no doubt that from a financial engineering prospective the Dell-Silver Lake combo has been an absolute killer.
So why did Dell decide to return his company to the public markets? The complex transaction, unveiled on Monday, will see Dell buy an unusual tracking stock, which will give it greater control of VMware, which it already partly owns after it agreed to buy EMC for $67bn in 2015.
Tom Braithwaite, the FT’s newly appointed companies editor, put it very well back in April when the possibility of such a transaction was first rumoured:
The trouble with socialism, Margaret Thatcher once said, is you eventually run out of other people’s money. The trouble with private companies is you sometimes run out of your own.
Dell built up his company through a series of mega-leveraged buyout deals that have piled on the company nearly $53bn in debt. The easiest way to get rid of that debt is by accessing public markets. In addition, the deal will give Silver Lake a chance to exit its investment whenever it feels like it.
Can anything go wrong? Investors sitting on the other side of Dell have learnt the hard way not to overly challenge the man from Austin. But when you have the likes of Elliott Management, Carl Icahn and DE Shaw owning a portion of the tracking stock being bought by Dell, you should expect a bit of a fight.
The point of contention here is that Dell is buying the tracking stock at a 40 per cent discount to VMware’s actual market value — and that’s despite Dell offering shareholders of the tracking stock a 29 per cent premium on Friday’s closing price.
Holders of VMware’s tracking stock will have to vote on the proposed deal in October. At the moment, DD knows that activist investor Elliott is not happy with the current offer, but between now and then they are likely to find a compromise. At least, that’s what all parties are willing to achieve.
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The end for chairman Ren
China’s most prolific and important dealmaker on the global stage is stepping back. Ren Jianxin will leave the massive state chemicals and agribusiness conglomerate, ChemChina, which he built through a series of acquisitions.Taking over the reins at the group, much to Ren’s displeasure, will be his rival Ning Gaoning, who runs Sinochem.
It had been widely telegraphed for some time that the Chinese state was pushing for a merger of Sinochem and ChemChina, though DD got the impression that Ren was doing his best to find a way to hold on to power. Here’s the FT story on the latest news.
While Ren will be remembered as a tireless entrepreneur and master bureaucratic operator who prospered within China’s state-dominated economy, his name is synonymous with the daring $44bn acquisition he led of rival Swiss agrochemical company Syngenta as well as the takeover and relisting of Italy’s Pirelli.
The buyouts turned ChemChina into a player on the global stage but also alarmed Beijing, given Ren’s penchant for pushing the button on takeover bids without getting approval from his paymasters in the government. Remember the time he made an approach for BG Group, which was in the process of being acquired by Shell? His acquaintances have shared tales with DD of cigar-filled, heavy-drinking dinner sessions where Ren charmed his peers and associates.
Not long after the announcement of the Syngenta deal in early 2016, rumours began to swirl over state rival Sinochem’s planned merger with ChemChina. Ning, in contrast to Ren, is a savvy, western-style operator and even goes by the English name Frank. He took over as head of Sinochem in 2016 after leading state cereals group Cofco in its own push to go global.
By mid-2017 it was clear that China’s economic planners had the merger in mind and Ning was the man to oversee it. The FT reported in May last year that the massive merger would happen in 2018 and in November we revealed a top Ren lieutenant was moving on from ChemChina.
The deal will create an international chemicals giant with revenues well over $100bn, and with businesses spanning seeds to iron ore trading to oil. It will also settle a deep-seated rivalry within the apparatus of China’s state companies. While Sinochem was traditionally China’s top chemicals group, it has been overtaken by ChemChina in recent years as Ren went on a global dealmaking spree. The latest move will witness Sinochem return to what many powerful policymakers view as its rightful place.
As for Ren and Ning, neither of them wanted to see the deal happen. For Ren it’s the end of his empire building. Now it falls to Ning to navigate a merger with debt-laden ChemChina. Lex, like the Chinese government, thinks the deal makes sense.
Nestlé fights Loeb and changing consumer tastes
Dan Loeb is getting impatient with Nestlé. The US activist behind the Third Point hedge fund is looking to light a fire under the world’s largest food and beverage company a year after first revealing his stake in its shares. Loeb has launched a website and expressed his frustration with the pace at which the company is moving to shed its underperforming and non-strategic businesses, as well as its stake in L’Oréal. He wants it to use the proceeds to buy assets or buy back shares. Here’s his letter to Nestlé’s management. Here’s the full FT story.
But if Nestlé is stressed, you won’t see it in the comments from Mark Schneider,its chief executive.
The former boss of German healthcare group Fresenius has set about doing deals at his own speed, in particular focusing on the coffee sector. The first outsider to ever run Nestlé, Schneider has also tried to shake up its conservative corporate culture by doing things like (gasp!) tearing up the seating plans for meetings of his top executives and allowing them to sit where they want. To get a full picture of what’s going on inside Nestlé and how it is fighting Loeb, as well as changing consumer tastes, check out the FT Big Read.
China Merchants Group has teamed up with a London-based firm to launch a new Rmb100bn ($15bn) technology investment fund with the aim of becoming China’s answer to the near-$100bn Vision Fund created by Japan’s SoftBank. The state-owned conglomerate, along with other unnamed Chinese groups, has pledged to invest up to Rmb40bn in what would be a huge pool of capital for Chinese tech companies. Full story here.
Wagamama, the noodle restaurant chain, has been the subject of inquiries from groups including Bridgepoint, the London-based buyout fund that recently agreed the sale of sandwich chain Pret A Manger, and CVC. Separately, KKR, the US buyout giant, and L Catterton, the world’s largest consumer-focused private equity firm, have also expressed interest in a business that its owners hope could sell for as much as £750m. Full story here.
SoftBank has hired Ford Motor’s US lobbyist Ziad Ojakli at a time when the Japanese conglomerate is seeking US approvals for some of its acquisitions. Ojakli also served as a White House aide under former President George W Bush. He starts at SoftBank on August 1.
Inga Beale, the first female chief executive of Lloyd’s of London, will step down next year after heading the centuries-old global insurance market since 2014. The process to find her successor is under way.
White & Case, the law firm, has hired Emmie Jones as a new partner in London. Jones joins from Macfarlanes and will focus on private equity deals.
UBS has poached Jeff Rose from Deutsche Bank, where he was global co-head of consumer retail and services, according to Reuters. Rose will become co-head of Americas M&A.
UBS also announced a substantial reshuffle of jobs in its European investment bank. It will see a series of bankers promoted into new roles including Jasper Tans, Juan Monte, Christian Lesueur, Alberto Palombi, Nestor Paz-Galindo and Stefanos Papapanagiotou.
Allen & Overy has hired Stephen Besen as an M&A partner based in New York. He joins from Shearman & Sterling.
Pernod Ricard general counsel Ian FitzSimons has left the French distilled beverages group. He will be replaced by Amanda Hamilton-Stanley, who is currently the top lawyer at Chivas Brothers, starting September 1.
Law firm Orrick has hired Vince Paparo, a former co-head of Proskauer’sfinance group, to its New York office, and Christine Kaniak, an acquisition finance partner from Kirkland & Ellis, in Munich.
Château Lafight What’s in a name? If you are Rothschild & Co and Edmond de Rothschild, everything. Here’s how they settled a bitter fight over the storied name in banking. ( FT)
A different sort of tick-tock The story of how the LA Lakers managed to sign LeBron James to a four-year, $154m deal. (WSJ)
SocGen CIB The leadership at Société Générale want to prove to the world that they are good at things besides equities and equity derivatives. ( FT)
GE breaking up At its peak, GE was a bellwether for the stock market. Now it’s being carved out faster than a turkey at Thanksgiving. Does the end of an era for an iconic industrial conglomerate mean others will be sliced and diced as well? ( FT)
What’s driving the global M&A boom? (FT Podcast)
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