One thing to start: Alphabet’s first-quarter revenue jumped 15 per cent and it announced its first-ever dividend of 20 cents a share alongside a stock buyback of $70bn, buoyed by a rise in earnings across all its main business lines. | | Welcome to Due Diligence, your briefing on dealmaking, private equity and corporate finance. Was this forwarded to you? Sign up here to get the newsletter sent to your inbox every Tuesday to Friday. Get in touch at [email protected] or reply directly to this email. | | In today’s newsletter: BHP makes a bid for Anglo American Wall Street faces non-compete ban Rich Handler buys client’s yacht
BHP wants to create a global mining superpower | | |
BHP thinks it’s the right time to strike a mega-merger. Copper faces a looming shortage and diamond prices are down, creating a ripe moment for the mining giant to try to take over one of its biggest rivals: Anglo American. The unsolicited bid sent shockwaves through the industry this week when it made a £31bn offer for the company. It’s a welcome omen for M&A advisers and bankers, who have faced a slump since the post-pandemic rally. There are plenty of hurdles standing in the way of the deal, but if it goes through, it would be the largest tie-up in the mining sector since Glencore bought Xstrata more than a decade ago. BHP’s largely interested in Anglo American’s prized copper mines. They’re one of the most lucrative businesses for 107-year-old Anglo American, and their value has been overshadowed by poorly performing De Beers, its diamond business. Lab-grown diamonds have weighed on prices recently, making the entire company a more feasible takeover target. If Anglo American wants to avoid being bought, it’ll have to double down. “Anglo will need to create a compelling alternative if they’re going to defend this,” said one large shareholder in both companies. There are a lot of hurdles. And as we wrote earlier this week, with the US Federal Trade Commission suing to block Tapestry’s deal for Capri, regulators aren’t afraid to get in the way of big deals. Another problem is that Anglo American is known for having somewhat of a “poison pill”. Any deal for the company would have to get the approval of South Africa, which doesn’t seem keen on the prospect of BHP owning the company. Gwede Mantashe, South Africa’s minerals resources minister, told the FT that he opposed the bid because his country’s experience with BHP was “not positive”. That’s not the government’s official position, but it surely isn’t a vote of confidence for the mining giant’s prospects. The plan would be to break up the company, spinning off its South African-based platinum metals and iron ore divisions. Everything else — including its diamond unit — would undergo strategic review. We’re already taking bets on the odds of this mega-deal actually going through. Wall Street scrambles to deal with its long-beloved non-competes | | |
If you don’t have a non-compete, do you even work on Wall Street? That’s basically the sentiment in finance, where big banks, brokers, hedge funds and asset managers try to control where former employees go after they quit. So on Tuesday, when the US Federal Trade Commission voted to ban non-competes, Wall Street predictably called a lot of lawyers in an effort to figure out how the rule would apply to them. Some trade groups have already sued the regulator over the ban, so for a while at least, it’ll be held up in the courts. The ban is surprisingly broad. It prohibits all new non-compete contracts — regardless of rank or compensation — and only a small slice of existing contracts for what the regulator calls “senior executives” can stay in place. Non-competes for, say, bartenders or security guards don’t really make a lot of sense. In those cases, companies are keeping workers through contractual brute force, as opposed to using them to protect trade secrets. (“What trade secrets can a bartender possess?” wrote one bartender, who was sued $30,000 for breaking her non-compete.) On Wall Street, though, there’s a far more legitimate case for them. And already, lawyers are finding that there might be some workarounds. Gardening leave, for instance, might still be allowed if it’s structured a certain way. The FTC rule against non-compete clauses appears to outlaw the most common structure, but lawyers think it may be possible to rewrite contracts to allow for extended notice periods that could be used to sideline a departing employee. At pod shops, where traders are very well compensated and also highly specialised, non-compete contracts can be for as long as two years. “I’m really a fan of the FTC on this because [hedge funds] abuse these provisions,” said a quant trader, who asked not to be identified. “It’s really about the labour war and improving their position in negotiations with employees.” Smooth selling for Jefferies boss Rich Handler | | |
Almost 100 years after Fred Schwed first asked the question, Where Are The Customers’ Yachts?, we may finally have an answer. Jefferies chief executive Rich Handler raised eyebrows on Wall Street by selling $65mn of his stock in the investment bank to buy a luxury 164ft Westport yacht . . . from longtime client Tilman Fertitta. Handler described the sale as “a gift to myself and my family” and stressed he had no plans to sell any more of his stock, which is still worth about $800mn. The sale shines a light on the vast wealth Handler has amassed in his more than two decades running Jefferies. During his time running the investment bank it has had a there-and-back journey by selling out to the conglomerate Leucadia National Corporation before ultimately returning to its investment banking roots. While Handler has started to sell, others have instead scooped up the stock. The Japanese bank Sumitomo Mitsui has been buying up stock in Jefferies in recent years to become a leading shareholder as part of a strategic partnership. Jefferies has been hiring aggressively recently in an effort to move beyond the middle market deals it was known for to larger cap transactions where it competes against the likes of Goldman Sachs and Morgan Stanley. Bloomberg in 2021 labelled Handler a billionaire. But this deal also highlights how much things have changed since Schwed’s seminal book. Now, having skin in the game rather than acting as a middle man can be the true path to über wealth — the reason Fertitta is selling this yacht to Handler is because he has reportedly traded up for the even bigger 252ft Feadship boat. These days, it can be even better to be a customer of Wall Street. Stonebridge, the UK consumer investment firm, has hired Michael Mylonas as a partner. He previously led Jefferies’ consumer, food and beverage investment banking in Emea.
Tightening grip More than two dozen current and former employees described to the FT how ByteDance has built up its influence over the video sharing platform TikTok. ‘To the future’ Glitzy parties, super computers and high-power conferences: Saudi Arabia is pulling out all the stops to position itself as an AI superpower, the New York Times writes. Retire at 62 Americans are overly optimistic about what age they’ll be able to retire, the Wall Street Journal reports. Quant hedge funds enjoy bumper start to 2024 (FT) Copycats take bite out of AbbVie’s best-selling Humira drug (FT) The National Enquirer, reeling from Trump, still can’t find a buyer (NYT) Amazon, YouTube vie for NBA streaming rights as league’s media talks heat up (WSJ) Europeans ‘less hard-working’ than Americans, says Norway oil fund boss (FT) |