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Salesforce/ Slack: office romance | Financial Times



One scoop to start: 3G Capital is seeking more time from its investors to execute its next big takeover as the fund that famously invests alongside Warren Buffett has been put off making a large bet due to coronavirus-linked uncertainty and sky-high valuations. The Brazilian-US investment group behind Kraft Heinz and Burger King is currently sitting on about $10bn and seeking a target to buy. Read more.

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Salesforce: picking up the Slack

If you’re reading this newsletter, it’s likely you’ll at some point be interrupted by the familiar chorus of pops and pings emitted by whichever online platform your company has chosen to help navigate the challenges of remote working.

So in these times it may come as little surprise that the cloud software company Salesforce is in talks to purchase the work messaging app Slack, a seemingly perfect pandemic pairing that could result in one of the biggest software transactions to date. 

But a deal hasn’t always been a sure thing. 

Slack missed the work-from-home memo earlier this year, its shares dropping nearly a quarter in the 17 months since its lacklustre public listing as savvier rivals plugged ahead, before news of the talks led the shares to pop.

Line chart of Share price, $ showing Slack has had a disappointing 17 months on the stock market

After some due diligence on Slack’s less-than-explosive Wall Street debut, Salesforce and its chief executive Marc Benioff initially passed up on an acquisition, an insider told the FT’s Richard Waters. Its shares seemed overpriced at the time.

Meanwhile, Salesforce was riding the first coronavirus wave to new heights as demand for cloud software surged. Its shares have jumped 57 per cent since last June, even allowing for a 5 per cent fall on Wednesday on news of the talks. 

Now, Benioff finds himself in a prime position to strike a deal that will probably be paid for largely in stock. But is it worth it?

Slack has struggled to keep up with the legions of competition working to encapsulate the minutiae of corporate life, from team meetings to happy hours and water cooler chats.

Stewart Butterfield, chief executive of Slack © Reuters

Take Asana, the task-management software company led by Facebook co-founder Dustin Moskovitz, which successfully sidestepped the traditional IPO process via a direct listing last month, achieving a market capitalisation of more than $4bn.

While Wall Street may be worried a deal with Slack would drag down Salesforce’s earnings, both Benioff and Slack chief executive Stewart Butterfield have a common foe: Microsoft.

The company’s Teams feature recently hit 115m daily users, up from only 20m a year ago, enjoying rapid growth by offering free integration with Microsoft’s widely popular Office Suite, a vast level of reach that in part motivated Slack to file an antitrust complaint with the EU.

Over at Salesforce, the worry is that Microsoft Teams will continue to entice its users to other areas of Microsoft’s business — including its customer relationship management software, which competes directly with Salesforce’s core business.

And as Lex points out, Salesforce has utilised M&A to broaden its services before — snapping up cloud collaboration company Quip in 2016 and graphics software provider Tableau last year. 

The bottom line: Slack would add even more weight to the possibility of taking on a giant like Microsoft.

Indonesia’s new SWF courts the American dream

Indonesia has gone on a charm offensive to woo US investors — including private equity groups Blackstone and Carlyle — for a new sovereign wealth fund that is part of one of the country’s most ambitious economic reforms yet.

The fund, called Indonesia Investment Authority, is part of a sweeping omnibus law Jakarta passed in October that will overhaul several dozen tax and labour market laws as it seeks to attract foreign direct investment and revive an economy pummeled by the coronavirus pandemic. 

Boosting infrastructure investment in south-east Asia’s largest economy has defined the presidency of Joko Widodo. And the fund — which aims to raise $15bn — is designed to facilitate just that, targeting sectors such as toll roads and electricity networks.

Jakarta will seed it with $5bn. It hopes to secure the balance from sources including government agencies such as the US International Development Finance Corporation as well as the private sector.

Luhut Pandjaitan, Indonesia’s minister of maritime affairs and investment

The ministry of maritime affairs and investment is helping to set up the SWF and its minister Luhut Pandjaitan has led discussions with US groups including BlackRock, EIG Partners, I Squared Capital and JPMorgan Chase.

Some of them told DD they were interested, but not without scepticism about investing into emerging market funds after the fiasco at 1MDB. (Read our breakdown of the scandal here.)

The fund’s governing laws — to be determined — could be key to its success. But for now, analysts point to the fact that pooling funds already helps cut risk.

Wellian Wiranto, economist at OCBC, says: “If I were to invest in one specific project [which] doesn’t take off, then all my money is stuck there. If I were to co-invest in this fund, maybe I can get better deal terms.”

Swiss banks: neutrality bites

Switzerland’s two biggest banks have found themselves in the middle of a legal and political row involving Bill Browder, the prominent Anglo-American investor turned anti-Vladimir Putin activist, and their Russian clients. 

It started last week when Swiss prosecutors controversially dropped legal proceedings against a trio of Russians who bank with UBS and Credit Suisse.

Bill Browder © AFP/Getty Images

That should have paved the way for the banks to unfreeze the $24m or so belonging to the three — Denis Katsyv, Dmitry Klyuev and Vladlen Stepanov

But Browder alleges the men were at the centre of a massive fraud against his investment company, Hermitage Capital, in 2007. 

He says the $24m was gained from that fraud — and he doesn’t want banks to release it. The men say the money is unconnected to Hermitage and have rejected Browder’s allegations.

In letters seen by the FT, Browder has threatened to bring down the full force of US sanctions legislation against the two banks if they unfreeze the accounts. Read up here

Browder has proven a formidable opponent to the Kremlin and the financial networks used by corrupt Russian officials. 

He was the driving force behind the 2012 “Magnitsky Act” in the US, which gives Congress the power to impose asset freezes on human rights abusers. 

The act is named after Sergei Magnitsky, Browder’s former lawyer, who died in custody in Russia after being maltreated in prison where he was held without trial. It has been a particularly sharp diplomatic and legal tool wielded against Russia in recent years.

But as the latest development shows, it is also a big headache for many non-American financial institutions. 

The Magnitsky Act has significant extraterritorial reach beyond the US — any institutions that do business in the US can be accountable to its obligations. 

The legal tangle is likely to become even more onerous for bankers to the wealthy as the UK has now introduced similar legislation, in which foreign citizens will face visa bans and asset freezes for alleged human rights abuses under Britain’s new post-Brexit sanctions regime.

The EU Commission has followed suit, announcing its proposals for the “EU Global Human Rights Sanctions Regime” last month as it moves towards a Magnitsky-style act of its own.

Job moves

  • Brian Sheth, who co-founded Vista Equity Partners alongside Robert Smith, is leaving the software buyout group. His departure comes after Smith admitted to evading taxes on hundreds of millions of dollars in investment profits. More here from Forbes.

  • Boris Johnson has appointed Dan Rosenfield as his new chief of staff. He joins from advisory group Hakluyt, where he worked as global head of corporate clients and head of the company’s UK business since 2016. He also held roles at Bank of America and the UK Treasury. More here.

Smart reads

Heavy traffic A myriad of electric vehicle start-ups are revving up to become the next Tesla, and there’s no shortage of fuel thanks to the billions of dollars staked on the race by BlackRock, the Saudi PIF, Apollo and ByteDance, to name a few. But there’s no way they’ll all make it past the finish line. (WSJ)

Kicked to the curb Once courted to abandon their home countries for far-flung destinations like Singapore, Kuwait and the UAE, expats are increasingly being shown the door as the pandemic pressures governments to favour locals amid dwindling jobs. (BBG)

Speed bumps ahead Japan’s misguided spending on infrastructure offers a lesson to other countries launching spending sprees in an effort to reboot their pandemic-ravaged economies — stimulus projects don’t guarantee a smooth road to recovery. (FT)

News round-up

German watchdog reports EY to prosecutors over Wirecard audit (FT) 

Spanish banks seek firmer footing with round of mergers (FT)

Deutsche Bank accounting head probed over EY’s Wirecard audit (BBG)

Outside monitors urge Deutsche Bank to quit Russia (WSJ)

Japan’s Kirin strikes new deal to sell Australian dairy business (FT)

Norway Wealth Fund CEO Tangen tests positive for coronavirus (BBG)

LG to spin off affiliates as break-up looms at South Korean conglomerate (Reuters)

Saudi, Abu Dhabi wealth funds team up on Egyptian drugmaker deal (BBG) 

Evergrande Property’s Hong Kong IPO meets with lukewarm reception, raises $1.8 billion (Reuters)

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Should the UK change its listing rules to attract more overseas companies?




Yes — Free float and dual-class share structures need reform

Late last year, the UK launched a review of its rules for stock exchange listings as part of a broader effort to strengthen London’s “position as a leading global financial centre”, writes Lorna Tilbian.

Brexit and the pandemic make it critical for the UK to seize this chance to reshape our rule book. The listings market must be made more attractive to fast-growing tech and other new economy companies that will create the growth and jobs of the future. 

This would put Britain at the forefront of the fourth industrial revolution, as it was at the first, and cement London’s reputation as a world-class market with high standards of governance, shareholder rights and transparency. 

Here are two key areas where change is needed to make the UK more competitive: the rules on free float and dual-class share structures. The UK requires listed companies to have at least 25 per cent of their shares in public hands, as opposed to insiders. US rules do not preclude free floats as low as 10 per cent. Similarly, the US and Hong Kong allow companies to list with multiple classes of shares with different voting rights, while the UK does not.

These firm rules are major obstacles to the London Stock Exchange’s efforts to attract fast-growth businesses. Many founders worry about retaining control of their businesses after an initial public offering and early investors are concerned the free float requirements will force them to sell shares earlier — and cheaper — than they would like.

Most founders want the higher valuation and liquidity that are seen to be part of a “premium” listing, as well as membership in the FTSE indices. So, it would do little to create another type of listing with looser rules. The dual-class share issue is also a problem for founders who want enhanced voting rights to help guard against a hostile takeover.

The UK has an interest in strengthening founders’ rights as well, as it would make listed companies less vulnerable to acquisition early in life by a foreign company. Such purchases impoverish the British ecosystem of tech companies and listed companies more broadly. Not all dual-class shareholder systems are alike, and a balanced conversation about types and limits is welcome.

Many UK founders would like a home listing, to be famous here and give back, but they feel pulled to the US, where tech founders are feted on Wall Street, Main Street and in the media and can obtain higher valuations.

Indeed, valuation is London’s overarching challenge. For most companies contemplating an IPO, the major goal is to achieve the highest price, to reward employees and investors, and facilitate future growth. Until the UK has a critical mass of businesses with attractive valuations, we will need rules that actively draw them here.

We need an ecosystem and potentially new FTSE sectors to attract entrepreneurs, bankers, analysts and investors. The media sector was created after the early 1990s recession by merging agencies with broadcasting and publishing, plucked out of other sectors. This helped spawn a dozen FTSE 100 media companies by 2000, including Sky and WPP.

The debate over listing rules is often framed as high regulation versus cutting rules to win IPOs, but it is really about striking the right balance. The dilution of shareholder rights should be minimised, but anything that deters listings will be a pyrrhic victory.

UK public markets must embrace founder-led businesses and celebrate fast-growth companies that represent jobs and the future of an independent Britain. The US’s Nasdaq must not remain the natural destination for aspirational tech companies and London must stave off increasing competition from European exchanges.

If we miss this opportunity, the UK’s pipeline of growth companies could go to the US or be sold to private equity or competitors. London already has a time and language advantage; we must create a regulatory advantage to attract these IPOs before it is too late.

The writer chairs Dowgate Capital

No — Britain’s high standards must not be sacrificed

Re-energising the UK’s capital markets has never been more important, but it requires more than reassessing the listing rules, writes Chris Cummings. We need a wider look at the capital market ecosystem for fast-growing companies. Only then will we boost our reputation as an attractive centre for companies to list and investors to do business.

The Covid-19 pandemic has highlighted the importance of public markets and the role investment can play in delivering benefits for the economy, society, and the planet. By attracting high-growth companies of the future to list, a healthy public market which embraces innovation will deliver the long-term returns that savers and investment managers need. We want these companies to list and locate their operations here, bringing new jobs and much-needed tax revenue.

But success is not just about increasing the number of initial public offerings. We must be confident in the quality of companies looking to list and their ability to provide long-term value. The UK’s ambition to be a global leader in stewardship and sustainability must also be reflected in the listing requirements and they must give shareholders sufficient ability to hold companies to account. If we make any changes to attract high-growth, innovative companies, we must keep the rules sufficiently robust to protect savers’ money.

For the “premium” segment, which has the highest standards, this is particularly important, as tracker funds must buy shares in these companies to replicate the FTSE index. With more than £250bn invested in these funds, it is paramount that investors have the powers they need to oversee these companies and confidence in their governance.

A 25 per cent free float requirement protects investors by guaranteeing liquidity and ensuring there are enough minority shareholders to raise concerns with the management. There is an argument for reducing the free float if the company’s market capitalisation is sufficiently large, but such flexibility would need to include voting safeguards for independent shareholders.

The current listing regime offers flexibility for companies that want multiple classes of shareholders in the “standard” segment, but it is perceived to be a poor relation. By rebranding it, we can increase its appeal to entrepreneurs. Founders could maintain voting control, while at the same time using a standard listing as a springboard to a premium listing.

Attracting more companies to this segment and making it easier for groups to move between segments will increase the UK’s appeal as a place to list. More work also needs to be done to promote the flexibility offered by the current system and categories — done well this can be a selling point for the UK. There should be a proactive unit which brings resources from within government and the regulators to help achieve this.

The pandemic has also highlighted areas where the UK should look to reduce more onerous listing requirements. Between March and the end of November, 73 members of the FTSE All-Share index raised more than £22bn of additional capital using mainly trading updates rather than full prospectuses. This suggests that prospectus and record requirements can and should be cut, making it easier for companies to list and raise additional capital.

There are also lessons to be learnt from wider trends. The number of IPOs globally dropped in the 2010s as more companies opted to stay private and is only beginning to recover. For public markets to flourish, we need to tailor our listing regime to support companies in different phases of growth, restructuring and into maturity.

The listing rules are not the only barrier on companies’ appetite to list in the UK. Companies also consider the wider ecosystem. The UK needs to grow the pool of specialist tech-focused lawyers and advisers who can support the high-growth companies we wish to attract.

The listing review is important, but we need to consider it in the context of much wider issues and not sacrifice the high standards for which the UK is known. The prize — wider access to capital for UK and international businesses, more high-growth companies operating in the UK and robust governance delivering long-term returns for British savers and the wider economy — is one we can all agree is worth striving for.

The writer is chief executive of the Investment Association

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Vegan milk maker Oatly targets $10bn IPO




Oatly, the Blackstone-backed Swedish vegan milk maker, is eyeing a valuation as high as $10bn in a US listing that would tap into both the IPO boom and consumers’ growing thirst for plant-based alternatives to animal products.

The Malmo-based group said on Tuesday that it had submitted a confidential filing for an initial public offering with the US Securities and Exchange Commission, less than a year after a funding round led by Blackstone also brought in Oprah Winfrey and Jay-Z’s Roc Nation company as investors, valuing Oatly at about $2bn.

Two people briefed on the situation said it was looking at a New York listing with a valuation as high as $10bn. Oatly declined to comment.

The offering is expected to take place following the SEC’s review, subject to market conditions, Oatly said.

The main aim of the float would be to raise money to fund growth, said one of the people, but a listing would offer a chance to cash in for investors who range from Blackstone to the Hollywood actor Natalie Portman and the Belgian family investment group Verlinvest, which bought a majority stake in Oatly five years ago.

Oatly had revenues of about $200m in 2019, roughly double the previous year, and had aimed to double sales again in 2020, though no figures have been made public.

The oat milk specialist, which also makes plant-based ice cream and yoghurt, has tapped into growing demand for plant-based equivalents to dairy, fuelled by environmental concerns — especially around emissions from cattle — and a perception of such foods as healthy.

In the US, total retail sales of non-dairy milks rose 23 per cent to an estimated $2.2bn in 2020, according to market researchers SPINS.

That was dominated by almond milk, which accounted for $1.3bn. But consumers have embraced a growing range of plant-based dairy ingredients including seeds, legumes, pulses, grains and nuts. Sales of oat-based dairy products tripled in the US in 2020, to $288m, overtaking soyamilk as the number two plant-based milk. 

Oatly’s signature oat milk was especially successful ahead of the pandemic with a “barista edition” used in cafés that produces a froth similar to that of cows’ milk for cappuccinos and macchiatos. 

Rival Chobani, a New York-based company that built its reputation on plant-based yoghurts, has also reportedly been considering a listing, while Oatly competes with companies such as France’s Danone, which has branched out from a history in dairy to produce plant-based alternatives such as the Alpro brand.

Oatly faced a customer backlash on social media over its decision to accept funding from Blackstone last year, with consumers criticising the private equity group’s sustainability credentials and a history of support for Donald Trump by its chief executive Stephen Schwarzman.

Oatly said at the time: “Our bet is that when Blackstone’s investment in our oat-based sustainability movement brings them larger returns than they would have been able to get elsewhere . . . a powerful message will be sent to the global private equity markets, one written in the only language our critics claim they will listen to: profit.”

Companies have been rushing to list in recent months and take advantage of an equity market rally that has bolstered IPOs such as that of Blackstone-backed dating app Bumble, which raised $2.15bn in a Nasdaq listing this month, and Israeli mobile games company Playtika, which raised $2.2bn in January.

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Dumped WeWork co-founder could reap $500m from Spac deal




Adam Neumann could reap almost $500m in cash from his holdings in WeWork and emerge with a stake in a public company, less than 18 months after the high-profile failure of its initial public offering cost him his job as chief executive. 

SoftBank is in advanced talks with WeWork’s co-founder and other shareholders to settle a bitter legal battle stemming from the Japanese group’s October 2019 rescue of the office group, which was needed to help it avert bankruptcy in the wake of the IPO’s collapse, people familiar with the negotiations said. 

Cleaning up the litigation brought by Neumann and a special committee of the group’s independent directors would clear the path for WeWork to be bought by a special purpose acquisition company, giving it the public listing it tried and failed to get in 2019. 

People familiar with the matter said BowX Acquisition, a blank cheque vehicle that raised $420m in an IPO in August, had approached SoftBank, WeWork’s largest shareholder, about a deal that could value WeWork at about $10bn.


The price tag SoftBank put on WeWork in its last private funding round before the failed IPO

Talks between the two groups are continuing and a deal could be reached in the weeks ahead, although the negotiations could still fall apart. Resolving the legal fight with Neumann and others has been seen as critical to completing a merger with BowX, given the new public company must attract investors to its shares.

The mooted valuation would be well below the $47bn price tag SoftBank put on the company in its last private funding round before the failed IPO, which Neumann and his Wall Street bankers once hoped would match or eclipse that level. 

But it would represent an unexpected rebound in Neumann’s fortunes, an endorsement of a business model that appeared imperilled as the Covid-19 pandemic emptied offices and another indication of how the Spac boom has transformed capital markets. 

SoftBank is said to have approached Neumann and the special committee within the past two weeks with a proposal to settle their dispute over a $3bn tender offer that formed part of its October 2019 rescue. The Japanese group had pulled out of the agreement to buy the stock from Neumann and other investors, saying conditions in the deal had not been met.

The opposing sides were due to face off in court next week over the tender offer after an earlier trial gave the special committee and Neumann standing to bring their case against SoftBank.

The settlement under discussion would result in SoftBank paying $1.5bn — half the sum under dispute — to Neumann and other investors including Benchmark Capital. Neumann would receive about $480m for 25 per cent of his holdings, rather than double that for the 50 per cent he could have tendered. He would also retain three-quarters of his current holdings in the public company. 

WeWork has retrenched staff and exited more than 100 open and planned locations since its fortunes shifted drastically last year. Under the leadership of chief executive Sandeep Mathrani, the company has dramatically reduced costs, although it continues to lose money.

The talks are continuing and the exact sum Neumann and others receive could change.

BowX is led by Vivek Ranadivé and Murray Rode, two former executives of Tibco Software and backed by Bow Capital, the venture capital fund Ranadivé founded with support from the University of California. In listing documents last year, it said it intended to scout for telecoms, media and technology companies. 

Ranadivé also owns the Sacramento Kings basketball team.

The Wall Street Journal earlier reported on the settlement talks.

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