Two scoops to start: First, Gautam Adani has hired Wachtell, Lipton, Rosen & Katz, Wall Street’s fiercest activism defence law firm, to fight back against claims made by short seller Hindenburg Research.
Next, Tiger Global, the technology-focused hedge fund, has defended the way it values its $40bn portfolio of privately held “growth” companies amid investor unease over how much such unlisted investments are worth.
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In today’s newsletter:
Michael Klein’s winning streak
Peltz backs down from Disney
Carlyle’s new hard-charging CEO
Credit Suisse’s new dealmaker in chief
Credit Suisse, which has racked up its worst performance since the financial crisis, has said it is preparing to axe as many as 9,000 staff, and has slashed its group-wide bonus pool in half, with many senior managers expecting to miss out on bonus season altogether.
Yet as heads roll in the aftermath of what the bank’s chair Axel Lehmann has described as a “horrifying” 2022, one executive has profited from the pandemonium: Michael Klein, Credit Suisse’s new chief of banking and head of the Americas, has just inked the deal of a lifetime.
After cementing the sale of his advisory boutique M Klein & Company to the Swiss lender for $175mn, the ex-Citigroup dealmaker and former Credit Suisse board member is set to run the soon-to-be-carved-out CS First Boston.
The Zurich-headquartered bank has a lot more riding on it than its nine-figure investment: the plan to merge its spun-off capital markets and advisory business with Klein’s firm could be its last hope for a profitable future after years of scandal and strife.
Since leaving Citi in 2008 with a $42mn payout and a new nickname (“the most highly paid banker in the world”), Klein took on the lucrative role of being an independent go-between on megadeals, most notably serving as an “honest broker” on the $88bn merger between Glencore and Xstrata.
His mediation skills will be tested again at the helm of CS First Boston, as he looks to build out a nimble operation that can compete with Wall Street’s most established advisers and win over Credit Suisse’s board and management.
“The idea is to create a big boutique, two to three times the size of the next largest, but with the firepower of the monster investment banks,” says a person involved in planning the restructuring. “To me, this model is the future of banking.”
Not everyone is sold on Klein. There have been accusations of conflicts of interest: the veteran dealmaker was part of the small subset of board members tasked with finding a solution for the investment bank last summer, but stepped down from his position in October. He also recused himself from final decisions on his personal involvement.
But Credit Suisse insiders insist that the decision to place Klein in the top job was made by CEO Ulrich Körner, a key architect behind the restructuring.
That’s not to say it was an entirely smooth process. Negotiations over the deal were “quite adversarial” at times, a person involved told the FT. Klein hired law firm Paul Weiss, which has also worked for Credit Suisse recently.
The US law firm authored the independent report into the trading fiasco that caused the bank to lose $5.5bn during the collapse of Archegos, concluding that there was a “fundamental failure of management and controls” at its investment bank and a “lackadaisical attitude towards risk”.
When all was said and done, Klein did what he does best. “Klein has negotiated a terrific deal for himself,” says the head of a rival investment bank. “This is a great deal for the banker, but not so much for the bank.”
Given the deal he’s pulled with Körner, DD’s dubbing Klein “the master of the Uli-verse”.
Peltz gets off the Disney ride
Nelson Peltz has hung up his mouse ears, for now.
Less than a month after declaring war against the house of mouse, the billionaire activist is dropping his campaign for a seat on Disney’s board after the company unveiled a sweeping restructuring.
The plan by Disney’s recently reinstated CEO Bob Iger to save $5.5bn over the next few years contained one crucial selling point, according to Peltz: it would free up enough cash to reinstate the dividend that had been suspended during the pandemic.
The dividend is likely at the heart of what Peltz and his fellow billionaire, Marvel chair Ike Perlmutter, were hoping to secure from Disney. “This was a great win for all the shareholders. Management at Disney now plans to do everything that we wanted them to do,” Peltz told CNBC.
It’s rare for Trian, which owns a $900mn stake in the entertainment behemoth, to back down so easily. To Iger’s credit, the cost-cutting plan was quite a downer for a company hawking tickets to the happiest place on earth.
Disney intends to cut 7,000 jobs and rein in spending on film and television content after its streaming business proved not to be the champion his successor-turned-predecessor Bob Chapek had attempted to turn it into.
It’s too early to say whether those measures will be enough to produce the sort of dividend Peltz is hoping for.
Peltz is walking away with a nice short-term gain on his investment nonetheless: Disney shares are up about 15 per cent since he announced his intention to join the board less than a month ago.
Even if shareholders are satisfied by future payouts, there’s still a lot of work to be done to bring back the Disney magic, as Lex writes.
Disney’s direct-to-consumer business, which includes Disney Plus, Hulu and ESPN Plus, has lost $8.6bn over the past three years. Curbing spending and jacking up subscription prices will help, but rivals with higher operating margins such as Netflix are doing the same.
General entertainment content, which could be interpreted to mean the type of programming Hulu specialises in, would be “aggressively” curated, Iger noted on Wednesday.
DD is curious to see whether that will mean siphoning off the streaming service or other non-core offerings.
Goldman’s ‘street fighter’ takes a swing at Carlyle
After losing out to David Solomon for the top job at Goldman Sachs in 2018, the bank’s former finance chief Harvey Schwartz — described by one of his former employees as a “street fighter” unafraid to rule with a strong fist — is now punching towards his biggest payday yet.
The hard-charging Goldman veteran has won the CEO title at US private equity firm Carlyle, a position that has sat empty since his predecessor, Kewsong Lee, lost a bitter power struggle with the group’s co-founders, David Rubenstein and William Conway. (DD’s Antoine Gara breaks down the saga in this video.)
Schwartz’s former colleagues who spoke to the FT painted a picture of an intelligent and ruthless leader who’s up for the challenge of reviving the group’s fortunes by removing the uncertainty of a power vacuum, while also clarifying strategy and making use of billions in cash sitting on Carlyle’s balance sheet.
To do that, Schwartz will have to maintain the confidence of the group’s co-founders — who have been hesitant to relinquish control in the past and will still loom large — as well as the two internal candidates he beat out for the role: private equity investment chief Peter Clare and head of credit Mark Jenkins.
The upside for Schwartz is potentially immense. If he can shepherd Carlyle in a positive direction he stands to make more than $180mn over the next five years — if he can more than double its share price or spruce the group up and sell it to a competitor.
Bain Capital has appointed Muriel Pénicaud, the former French minister of labour and ambassador to the OECD under president Emmanuel Macron, as a senior adviser.
Jon Thompson is set to step down as chief of the UK’s Financial Reporting Council to become the new chair of the HS2 high-speed rail link project.
Rolls-Royce has appointed former Ford executive Birgit Behrendt as a non-executive director.
Pedro Urresti, the former co-head of HSBC’s European financial institutions group, has joined boutique investment bank Alantra as a managing director in Madrid.
SBF unfiltered As the FT’s Joshua Oliver catalogued FTX’s final chaotic hours, most employees of Sam Bankman-Fried’s imploded crypto exchange spoke to him on condition of anonymity, for fear of legal repercussions — except for SBF himself, of course.
Gaming the system The ultra-wealthy have a secret weapon to save billions on taxes, ProPublica reports: selling stocks at a loss and replacing them with nearly identical investments.
Closing up shop The reeling back of Amazon’s brick and mortar ambitions shows that disruption is harder than it looks — even for tech giants, the FT’s Brooke Masters writes.
Toshiba receives $15bn buyout proposal from private equity group (FT)
Robinhood seeking to buy back stock seized from FTX founder Sam Bankman-Fried (FT)
Billionaire Jim Ratcliffe taps JPMorgan, Goldman to advise on Man United bid (Bloomberg)
Tainted Yeezy sneaker stocks could push Adidas to first loss in 31 years (FT)
Trafigura faces hit of up to $577mn over alleged nickel fraud (FT)
OK, but what’s the deal with this StanChart-FAB bid story? (Alphaville)
Tesla: resilient carmaker gives shorts $7bn headache (FT)
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