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Top takeaways from the FT Dealmakers Summit

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One more event this week: the FT Global Boardroom kicks off on Wednesday. DD’s James Fontanella-Khan will host a panel on M&A as part of the proceedings on day two of the conference at 5pm GMT on Thursday. 

To read the full agenda and register for free, go here.

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.

Dealmakers Summit: the highlight reel

What happens when you (virtually) gather more than 50 of the leading M&A, private equity, hedge fund and corporate finance dealmakers to discuss the US election, global pandemic, Brexit and subsequent economic crisis?

A lot of great insight. A couple Peloton sightings. And, obviously, some Spac jokes. 

The latest edition of DD will look at the highlights from our full-day inaugural Dealmakers Summit. 

If you missed your chance to watch the sessions, you can still register to catch all of the action on-demand here.

DD’s Arash Massoudi and Kaye Wiggins

On the economy after Covid:

  • “This is wartime finance on an extraordinary scale,” the FT’s chief economics commentator Martin Wolf observed on the long-term implications of Covid-19, as debt ratios in developed countries will reach levels the world hasn’t seen since the second world war. 

  • Suspicion of big technology companies and the antitrust movement is rising, Wolf added. “And my god, you are seeing it in China where they’re stepping on Ant [Financial].” Watch his keynote presentation here.

Speaking of . . . on what was supposed to be the world’s largest IPO:

  • Chinese regulators’ suspension of Ant’s massive dual initial public offering signals that “everything that operates in China is still going to be regulated by the government, and everyone needs to play within their frameworks”, Gobi PartnersChibo Tang told the FT’s Henny Sender. 

  • For fintech up-and-comers, Tang added, “it’s never too late” to build bridges with Beijing. Ant’s troubles may cause companies to re-examine the “pros and cons of dual listings in both Shanghai and Hong Kong”. Watch the panel here.

 On the Spac boom:

  • “Not to brag but I think DraftKings led to an acceleration of Spacs,” former MGM chief executive turned Spac-promoter Harry Sloan told DD’s Sujeet Indap. Catch up on one of Wall Street’s biggest, and most divisive, trends here.

On post-pandemic M&A:

  • Mergers are the only way forward for oil and gas, Goldman Sachs banker Michael Carr told DD’s James Fontanella-Khan. “This is pretty clear to everyone who participates in that market,” he said.

  • Hellman & Friedman chief executive Patrick Healy told DD’s Arash Massoudi that the buying and selling of companies has been private equity’s “business model forever, and I think if you step back and say, ‘we can actually be thinking like an owner’ . . . that opens up a lot more opportunities.”

  • “I think they played it pretty well,” Healy added of competitors such as KKR, who aggressively snapped up opportunities during the height of the coronavirus economic crisis. Watch the full conversation here.

  • Apollo Global Management head of Europe Rob Seminara said: “We’re assuming flat multiples . . . I’d be nervous on some of these growthier deals about constant multiples on the way out five years from now.” Watch the full private equity panel held by DD’s Kaye Wiggins.

On Bill Ackman’s latest hedge:

  • “I’m long equities and still short investment-grade credit. And I feel very comfortable in that position,” the founder of Pershing Square Capital Management told DD’s Ortenca Aliaj. Read the full story here

  • Ackman predicts that while the economy is set to make a “robust recovery” in the long-term, companies will struggle to pay off their debts stemming from the crisis in the short-term as a potential second lockdown looms.

  • News of a breakthrough in the search for a Covid-19 vaccine is “actually bearish” because it is likely to make people more complacent about wearing masks and seeing the virus as a threat, he added. Watch the keynote interview here.

DD’s Ortenca Aliaj and Bill Ackman

And finally, ending on an excellent note, a word from Silicon Valley:

  • “If there’s a dip, you should buy more,” said GGV Capital managing partner Hans Tung. You heard it here folks. Watch the full discussion with DD’s Miles Kruppa.

Xavier Niel: ‘We are not activists, but rather rebellious shareholders’

There are lots of losers in the battle at Europe’s largest mall operator, Unibail-Rodamco Westfield, and one big winner: telecoms billionaire Xavier Niel. (DD broke down the fight for you last month.)

Legions of short-sellers who faced a mega-squeeze on Tuesday when shareholders sided with an activist campaign by Niel to vote down a proposed €3.5bn capital increase. Among them was D1 Capital Partners, which had a significant 4.4 per cent stake, according to the data group Breakout Point.

Xavier Niel © Reuters

Only a few weeks ago, almost a third of the shares in the heavily indebted owner of Westfield London and Forum Les Halles in Paris were out on loan, making it one of Europe’s most shorted stocks. 

Then management, led by chief executive Christophe Cuvillier, saw its strategy undercut by the company’s own shareholders. Cuvillier refused to say if he would resign, but the activists clearly want his head, as Niel hinted in an interview with the FT’s Leila Abboud.

They mounted a slick activist campaign complete with slides and punchy media interviews, not only killing the share sale but securing themselves three board seats. 

Niel maintains their success was down to doing the hard graft of calling every shareholder who would speak to them. He doesn’t, however, appreciate being lumped in with aggressive US hedge funds: “We are not activists, but rather rebellious shareholders.” 

Initially they did not expect any of the proxy firms to support them, he said, but proxy adviser Institutional Shareholder Services was eventually won over, providing a key boost.

Conspicuously absent from Unibail’s press release or public comments on Tuesday was any mention that it welcomed the new administrators.

“I told Leon earlier, we have bought ourselves a lot of work,” cracked Niel. “The management still thinks they are right, and this type of battle, especially as public as this one has been, is sure to leave some scars.”

Job moves

  • British tycoon Sanjeev Gupta’s GFG Alliance appointed a judge of the supreme court of India, SJ Mukhopadhaya, and former first minister of Wales, Carwyn Jones, to its newly created global advisory board. The move is controversial due to Mukhopadhaya’s overseeing of court cases involving GFG entities, and alleged conflicts of interests stemming from Jones’s former government position. More here.

  • Law firm Reed Smith has hired Christopher Jackson and Adam Longney as partners in its London aviation group. Both join from REN Legal.

  • Craig Stewart, former chief counsel to the US attorney for the Southern District of New York, has rejoined Arnold & Porter’s white collar defence and investigations practice. 

  • Pan-African private equity group DPI hired three new senior partners: west Africa deal lead Babacar Ka, east Africa deal lead Takudzwa Mutasa, and portfolio manager Marc Stoneham.

  • Latham & Watkins has hired Kaede Toh as a partner in its litigation and trial department as well as its white collar defence and investigations practice. She joins the Tokyo office from Ropes & Gray.

  • New York Advisory group PJ Solomon promoted Kenneth Baronoff to the newly created role of president. He first joined the company in 1999 and has worked as chief operating officer since 2010. 

Smart reads

Arms length Wall Street overwhelmingly backed Joe Biden on his march to the White House. But executives in the Democratic camp may not enjoy the same proximity to the Oval Office as certain financiers do in the current administration as the party’s progressive wing pushes for separation of finance and state. (Wall Street Journal)

Missing in action Unanswered questions continue to swirl around Wirecard’s gobsmacking $2bn fraud. The man that can answer them — Jan Marsalek, who went from chief operating officer of the fallen German payments group to Interpol’s most wanted list — remains nowhere to be found. (Bloomberg)

Full throttle 2020 has been a wild ride so far, especially for Elon Musk. The Twitter-prone chief executive became the third-richest man alive, launched two astronauts into orbit, and led Tesla to become the world’s most valuable carmaker. What’s next? (Vanity Fair)

News round-up

SoftBank’s Vision Fund unit considers move to Abu Dhabi from UK (FT) 

US banks in line for windfall after Covid-19 vaccine progress (FT)

Huawei to sell smartphone unit for $15 billion to Shenzhen government, Digital China, others (Reuters) 

Nikola and founder Trevor Milton subpoenaed by US justice department (FT)

ION agrees to sell Broadway’s bond business to win UK approval (FT) 

China draws up first antitrust rules to curb power of tech companies (FT)

Endeavour in Teranga merger talks as West African mining deals hot up (Reuters) 

Spotify continues podcast push with Megaphone deal (FT)

Bank of Japan offers to reward regional banks for mergers or cost-cuts (FT)

SoftBank jumps into e-scooters with $250m Tier Mobility deal (FT)





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Paper producer Segezha plans Moscow IPO

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Paper producer Segezha is planning an initial public offering on the Moscow exchange, making it the latest in a series of Russian companies looking to tap surging investor demand.

Segezha, which is owned by oligarch Vladimir Yevtushenkov’s Sistema conglomerate, said on Monday that it wanted to raise at least Rbs30bn ($388m) in the IPO. It is seeking a valuation of more than $1.5bn, according to a person familiar with the plans.

The structure of the offering will allow Sistema to retain control of the company.

Russian companies are rushing to go public in response to high demand for emerging market assets and in case geopolitical tensions with the west make it harder to list.

The stimulus-fuelled global stock market boom and a rebound in commodity prices have helped Russia’s market recover quickly from the pandemic.

The Moscow exchange’s benchmark index hit record highs in March and Russian central bank rates remain near an all-time low. Last year, the bourse doubled its number of retail investors to 10m as homebound traders moved away from bank deposits.

In March, discount retailer Fix Price held the largest Russian IPO since the US and EU imposed sanctions against Moscow in 2014. Ecommerce site Ozon, which is co-owned by Sistema, has more than doubled its valuation to about $12.5bn after going public in New York last year.

But the sell-off of the rouble on tensions with the US and the military build-up on the Ukrainian border has underlined that going public remains precarious.

GV Gold, a midsized goldminer whose key shareholders include BlackRock, said late last month it would postpone its IPO — the third time the company has announced a listing then backtracked — because of “elevated levels of market volatility in both the global and Russian capital markets”.

Segezha, which reported nearly $1bn of revenue last year and operating profit of $242m, is the fifth-largest producer of birch plywood in the world and is in the top two for production of heavy duty “multiwall” paper packaging.

Prices for its products have rebounded during the recent economic recovery, while 72 per cent of its revenue comes from export sales in foreign currencies — allowing it to take advantage of the weak rouble at its mostly Russian cost base.

“Bringing Segezha Group to the public markets will crystallize the value of our investment, raise funds that would allow Segezha Group to continue to pursue its investment projects and provide investors with the opportunity to share in the company’s strong growth and benefit from attractive returns,” Sistema chief executive Vladimir Chirakhov said in a statement.

JPMorgan, UBS, and VTB Capital are joint global co-ordinators and joint bookrunners on the IPO. Alfa Capital Markets, Gazprombank, BofA Securities, and Renaissance Capital are joint bookrunners.



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Spac boom under threat as deal funding dries up

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A crucial source of funding for blank-cheque company deals is drying up, pointing to a slowdown for one of Wall Street’s hottest products after a record-breaking quarter. 

Advisers to special purpose acquisition companies, which float on the stock market and then go hunting for a company to buy, say they are struggling to find so-called Pipe financing to complete their planned acquisitions. Pipe is short for private investment in public equity.

Institutional investors such as Fidelity and Wellington Management have ploughed billions of dollars into Pipe deals since the Spac boom emerged last year, providing a route to the public markets for businesses ranging from established software and entertainment companies to speculative developers of flying taxis and electric vehicle technology. 

But people involved in arranging the deals say Pipe investors are overwhelmed by the sheer volume of transactions and put off by rising valuations. 

“There is a lot of indigestion,” said one senior bank executive. “The pendulum has swung to where if you’re in the market with a Pipe right now, it’s going to be really hard and painful. A Spac goes back into the ocean if you can’t get a Pipe done.”

Spacs raise money when they first list on the stock market but they typically require more capital to fund their acquisition. Large institutional investors also act as a form of validation of the target company’s business prospects and its valuation.

There have been 117 deals announced this year, but the growing backlog in Pipes could prove to be a big roadblock for the 497 blank-cheque companies that are still looking for a deal, according to Refinitiv data.

Only about 25 per cent of Spacs listed since 2019 have completed deals so far. Sponsors typically have two years to complete a merger, otherwise they have to return the capital they raised to investors.

Several market participants said the slowdown would lead to a “flight to quality” and put downward pressure on the valuations of acquisition targets, which have skyrocketed in recent months.

Almost all of the executives the Financial Times interviewed said they were seeing Spac deals recut to offer more favourable terms to Pipe investors. One said: “It’s called the buy side for a reason.” 

Because Pipe investments are considered illiquid — the money is tied up at least until the deal closes and there may be a lock-up period after that — investors can usually get favourable terms. They can see the deal before it has been announced to the public and are almost always able to buy in at the Spac listing price of $10.

But earlier this year, Pipe investors were clamouring to get in on Spac deals. The group of institutions that backed Churchill Capital IV’s acquisition of electric carmaker Lucid paid a 50 per cent premium to the Spac listing price to get a stake, almost unheard of at the time.

The recent reversal has Pipe investors negotiating lower valuations for businesses, giving them larger stakes for the same amount of money, and better pricing terms.

“There’s only so much illiquid exposure investors are going to want to take,” said another bank executive who has worked on numerous Spac deals.

The Pipe slowdown is bad news for banks, which are unable to collect on advisory fees if they cannot sell a deal to investors.

It is also starting to affect the pipeline of Spac launches, lawyers and bankers said. In the first seven days of this month, only four blank cheque companies have gone public. That compares with 41 during the first week of March and 28 in February, Refinitiv data shows. 

“Where we had been at a crazy, mad, rush pace in January and February, we’re kind of at a standstill right now on the IPO side,” said Ari Edelman, partner in Reed Smith’s corporate practice.

For those that already went public and are looking for a target, he added, “the hope is this is just a bump in the road. And then ultimately the deal gets done.”



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UK-backed vaccine maker warns of export restrictions in IPO filing

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Valneva, the French Covid-19 vaccine maker backed by the UK government, has filed for a US initial public offering seeking to take advantage of investor appetite for biotechnology during the pandemic. 

The Paris-listed company, with a market cap of more than €1bn, filed to raise $100m in American Depositary Shares, the day after Vaccitech, the Oxford spinout that owns the platform behind the AstraZeneca vaccine, published its filing

Valneva has a deal worth up to €1.4bn to supply Covid-19 vaccines to the UK, manufacturing the doses in a Scottish factory expanded with government funds. The UK has already agreed to buy 100m shots and has an option to purchase 90m more by 2025. Valneva has already received almost £100m from the government. 

But in its filing, Valneva warned that any restrictions on importing or exporting vaccines out of the EU could have a “substantial” risk to its operation. The vaccine is due to be manufactured in the UK but put into vials and packaged in the EU, it said. 

Shortfalls in supply of vaccines to the EU have led to tensions between the UK and the EU over importing shots and raw materials for the current approved jabs from Oxford/AstraZeneca and BioNTech/Pfizer.

Valneva’s filing comes after it announced positive early stage trial results for its Covid-19 earlier this week, planning to launch a later stage study this month and apply for a UK approval in the autumn.

The phase 1 and 2 study showed the shot elicited more antibodies in the participants receiving the highest dose than are usually seen in recovered Covid-19 patients, with over 90 per cent producing significant levels of antibodies. The jab also induced a response from another key part of the immune system, the T-cells. 

The vaccine, which uses a whole inactivated virus, a more traditional approach than the currently approved shots, could be used as a booster for the vaccinated or to tackle variants of the virus.

Valneva said even though it would be approved much later, it could have a competitive advantage against its rivals. 

“We believe that, if approved, our vaccine, as an inactivated virus vaccine, could offer benefits in terms of safety, cost, ease of manufacture and distribution compared to currently approved vaccines and could be adapted to offer protection against mutations of the virus,” it said in the filing. 

But it also said that it did not yet have the rights to use the strain of virus in the vaccine on the commercial market. It is in the process of negotiating a commercial agreement with the World Health Organisation and the Italian National Institute for Infectious Diseases. 

Valneva is also developing vaccines for Lyme Disease and chikungunya, a virus transmitted by mosquitoes. Total revenue was €110m in 2020, down from €126m in 2019, as sales of its travel vaccines were hit by restrictions on travel during the pandemic. 

It made a loss of €0.71 per share last year, after it had to make a €7.4m writedown, partly because of the limited shelf life of the products. Valneva also had to renegotiate a debt financing agreement last year as it was at risk of not meeting the minimum revenue covenant.



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