Coming soon: the €6bn AHO telco LBO?

One thing to start: Warner Bros Discovery and Paramount Global are in early talks to merge, in a media deal that would combine the owner of HBO and CNN with the studio behind the Mission Impossible films and CBS News.

In today’s newsletter:

‘As Nelson Mandela said . . . ’

Yesterday, DD formally bid farewell to Credit Suisse. But the bank’s former chair has resurfaced in an unexpected way. 

António Horta-Osório has teamed up with private equity group Warburg Pincus to bid for Altice’s Portuguese telecoms assets. 

The Portuguese banking executive, known in some circles as AHO, is working on the deal as partner to the US private equity firm and not acting in his capacities as an adviser at Italian investment bank Mediobanca and private equity firm Cerberus Capital.  

The more than €6bn bid puts Horta-Osório and Warburg Pincus squarely in the race to buy the assets, previously known as Portugal Telecom, from the flailing empire of debt-strapped billionaire Patrick Drahi. 

Horta-Osório, best known in the UK for his time as chief executive of Lloyds Banking Group, is likely to bring some high-level connections in Portugal to the bid. Warburg Pincus also has telecoms expertise in the form of former Deutsche Telekom chief executive René Obermann, the firm’s co-head of Europe. 

To win, however, they’ll need to satisfy the demands of Drahi, who needs to achieve as frothy a valuation as possible given the stress Altice is under. And don’t forget Portugal is ground zero for a corruption scandal that has ensnared some of Drahi’s inner circle. 

Any success in striking a deal would put Horta-Osório back into the spotlight after he had kept a low profile for nearly two years. That, of course, comes after his unedifying exit from Credit Suisse in January 2022 after just a brief tenure as chair. 

His departure came after the board of the Swiss bank found that he made repeated breaches of coronavirus quarantine rules to attend high-profile sporting events, including the Wimbledon tennis finals. 

With the possibility of a comeback for Horta-Osório, DD is reminded of the sage words he shared in his Lunch with the FT in 2021: “As Nelson Mandela said, the point isn’t not to fall, it’s to rise every time, learn your lessons and always be better and do better.”

Private equity ends 2023 with a giant windfall

It’s been a tough year for dealmaking, especially for private equity. But a few notable investors are set to enter 2024 on a high note thanks to corporate buyers flush with cash.

On Wednesday, insurance brokerage Aon struck a deal to acquire NFP, a private equity-backed midsized property and casualty broker, for $13.4bn.

The cash and stock deal will mint a multibillion-dollar windfall for NFP’s backers, Madison Dearborn Partners and HPS Investment Partners.

While investors in both firms’ funds will rejoice, Aon shareholders appear circumspect. Aon is paying a rich 15-times multiple of what it said was “seller-adjusted estimated ebitda” and its stock sank more than 6 per cent.

Aon has tried big deals in recent years, but some efforts were thwarted by antitrust regulators. In 2020, Aon attempted to buy Willis Towers Watson in a $30bn takeover. But the combination was blocked by antitrust regulators and Aon was forced to pay a $1bn break-up fee. 

It’ll pay the same figure to NFP if regulators thwart Wednesday’s deal.

A few corporate buyers have helped private equity LPs this year. Broadcom’s $92bn takeover of VMware made Silver Lake investors billions, while Thoma Bravo in November closed a $10.5bn sale of Adenza to Nasdaq. 

If it closes, the deal may offer a positive read on the wider buyouts universe. 

After taking NFP private in a $1.3bn sale planned by then-chief Jessica Bibliowicz, the daughter of Citigroup architect Sandy Weill, Madison Dearborn sold a minority stake in 2017 to HPS. Five years later, it sold the investment to a new “continuation fund” also managed by Madison Dearborn. 

Some private equity sceptics have criticised these deals as having elements of a Ponzi scheme, since one fund managed by a private equity firm is cashing out a prior fund.  

But NFP has become a massive success. Another such deal paid out when TPG sold CAA to the Pinault family’s holding company for more than$7bn, minting another multibillion-dollar windfall. 

The $15bn deal that could revive Japanese dealmaking 

Nippon Steel’s $14.9bn purchase of US Steel has ruffled feathers on both sides of the aisle in Washington, in part because the United Steelworkers union hadn’t been consulted or notified before the deal with the Japanese group was announced.

Not everyone is perturbed, though. Dealmakers on both sides of the Pacific have reason to celebrate as Nippon’s all-cash takeover bid sparks hope for a wave of M&A as cash-rich Japanese corporations look to expand beyond their shrinking domestic market.

“Nippon Steel’s ambitious acquisition of US Steel may act as a catalyst to encourage other Japanese companies to finally act on their long-term strategic plans to grow overseas,” said Ken Lebrun, a Tokyo-based M&A partner at Davis Polk & Wardwell.

Japanese buyers looking to do deals in the US have an advantage, said one Tokyo-based lawyer. Chinese companies aren’t competing for as many American companies given rising tensions between Washington and Beijing, while high US interest rates have led to private equity firms pulling back on deals until the financing environment improves.

Nippon’s offer for US Steel — nearly double that of US bidder Cleveland-Cliffs in August — is one example of a strategic buyer taking advantage of that window while it is open. 

The deal, which would form the world’s third-biggest steel producer, still needs to be put through the regulatory gauntlet in addition to resistance by US lawmakers.

Job moves

• BASF has appointed Markus Kamieth to take over as chief executive, an executive who’s closely associated with the world’s largest chemical group’s expansion plans in China.

• Charif Souki, a pioneer of the US liquefied natural gas industry, has been ousted from project developer Tellurian and will receive a payout of more than $8mn. 

Smart reads

Crypto carcass Investors are spending hundreds of millions of dollars on FTX bankruptcy claims, betting that the cryptocurrency exchange will recover the money Sam Bankman-Fried misappropriated, The New York Times reports. 

The basis trade A small bunch of hedge fund traders dominate the massive basis trade. They’ve made billions for their firms — and alarmed financial supervisors, Bloomberg writes.

Hedge fund wunderkind Spruce House, founded by two friends from The University of Pennsylvania, expanded to bet on growth stocks. The strategy flopped last year, and the hedge fund is still making its way back, a Wall Street Journal investigation found.

News round-up

Japan’s crisis-plagued Toshiba delists and enters era of private ownership (FT)

Warner Bros Discovery and Paramount CEOs hold early merger talks (FT)

LVMH’s Antoine Arnault defends incremental approach to emissions (FT)

H2O Asset Management hit with investor lawsuit claiming €700mn losses (FT)

Electric scooter rental pioneer Bird files for bankruptcy (FT)

Germany moves to seize €720mn of Russian group’s assets (FT)

BP CEO: curtains for Looney should not open wide window of opportunity (Lex)