The $20 billion deal is taking place in the midst of a sour Spac market.
One invitation to start: join the DD team on October 14 at the FT Business of Sport US Summit. As a DD subscriber, claim your free digital pass using the promo code “Premium21” or buy a ticket to join us in person for dinner and more at the Lotte New York Palace.
Relevant to the event: Creative Artists Agency said on Monday it would acquire the rival talent group ICM, combining two powerful stables of agents amid sweeping changes in Hollywood and the global sports industry. Read more here.
Welcome to Due Diligence, your briefing on dealmaking, private equity and corporate finance. This article is an on-site version of the newsletter. Sign up here to get the newsletter sent to your inbox every Tuesday to Friday. Get in touch with us anytime: [email protected]
Can Polestar outshine the fading Spac market?
Special purpose acquisition companies may be going through a tough phase, but serial sponsor Alec Gores is unfazed.
On Monday the private equity billionaire announced a deal to take the European electric vehicle start-up Polestar public at a $20bn valuation.
That makes Polestar one of the most valuable electric vehicle companies to go public through a Spac.
It technically tops Saudi-backed Lucid, which listed through a deal with Michael Klein’s Churchill IV at a $12bn valuation — although its $15-a-share private investment in a public equity deal, known as a Pipe, set a valuation of $24bn.
Polestar’s deal with Gores Guggenheim comes at an interesting time for both electric vehicles and Spacs.
The two found a symbiosis at the height of the boom, where both institutional and retail investors ploughed cash into companies making big promises before they generated any revenue in the hopes of finding the next Tesla.
Gores says Polestar is different. The Swedish company is already manufacturing vehicles and has projected $1.6bn in revenue for 2021. That figure is expected to double next year as it ramps up production on its flagship vehicle Polestar 2 and launches its sport utility vehicle model Polestar 3.
Plus it has the backing of Volvo Car Group and the Chinese car manufacturer Geely, which are majority owners. But it’s ultimately up to the Spac’s shareholders to decide whether Polestar will be different than the electric vehicle makers before it.
The market has fallen out of favour with investors, who are redeeming cash at increasingly higher rates.
There are two dynamics at play here. One is that Spac shareholders, due to a rule change that came into effect after the financial crisis, can choose to redeem while also voting in favour of a deal. So most Spac transactions are still getting approved but the money in the trust is depleted.
The second is that the initial share price pop we got used to seeing when Spac fever was at its height has dissipated. Investors are better off redeeming their cash up front than waiting to see how the company performs.
That throws a real spanner in the works for Spac sponsors who say the vehicles offer greater certainty than doing a traditional initial public offering. Companies are now getting a fraction of the cash they expected when they agreed to a deal.
Gores isn’t worried. He cites the nine transactions he has already done, worth about $60bn, as proof of execution and said none of his deals have had more than 5 per cent redemption rates.
Let’s see what happens. Polestar has put in place a $950m minimum cash requirement for the deal to complete. With the company set to receive just over $1bn from the transaction, that leaves little room for redemptions.
‘Daddy Monte’: the battle for Italy’s oldest bank
Andrea Orcel is a man used to getting his own way.
The tenacious Italian banker slid into his “dream job” at Italy’s UniCredit just after its chief executive Jean Pierre Mustier quit in a heated clash with the bank’s board. To top it off, Orcel secured a €7.5m ($9m) pay package that made him Italy’s highest-paid banker despite a shareholder revolt.
Orcel’s next test arrives as a tussle over the fate of Italy’s ailing Monte dei Paschi di Siena, the world’s oldest bank, which positions him to pull off the first big deal as UniCredit’s new chief, the FT’s Davide Ghiglione and Owen Walker report.
His plan: seize the most lucrative parts of the 549-year-old Tuscan lender, affectionately known as “Daddy Monte” in its hometown of Siena, and leave the government to deal with its precarious balance sheet.
A UniCredit takeover of MPS, which has been state-owned since it was bailed out in late 2016, has been central to the vision of its new chair, the former Italian finance minister Pier Carlo Padoan.
Discussions between Italy’s treasury and UniCredit had made little progress until Orcel, whose flair for domestic mergers and acquisitions jived better with Padoan’s strategy than his globally-focused predecessor, arrived in April and revived the negotiations.
His demands, which stipulate that a deal shouldn’t negatively affect UniCredit’s common equity tier 1 ratio — a measure of its financial strength — and that it be protected from certain credit risks and litigation surrounding MPS’s bailout, were originally balked at by the Italian government.
But Rome, which faces a swiftly approaching deadline from the European Commission to sell its stake in MPS by the end of the year, has had little choice but to cede to Orcel’s terms.
The deal could also spark consolidation in the country’s banking sector. A UniCredit-MPS tie-up would place it in direct competition with Intesa Sanpaolo, which became Italy’s largest bank after it bought rival UBI in July last year. Smaller banks are expected to forge alliances to keep up.
As for MPS’s trove of bad loans, the government would likely enlist its “bad bank” manager AMCO to take on the riskiest ones, while state-owned bank Mediocredito Centrale picks up MPS’s southern branches.
But it’s the residents of Siena, who have endured years of job cuts, scandal and economic uncertainty at the hands of the city’s largest employer, who are left feeling like they have received the raw end of the deal.
A Swedish private equity firm now finds itself in the public eye
Sweden is known as a land of low inequality where displays of flashiness are still often frowned upon.
So the decision by EQT to allow its top partners, both past and present, to sell $2.7bn of shares only two years after its stock market listing was always likely to raise eyebrows in Stockholm.
But what may have landed the Swedish private equity firm in hot water is allowing a share sale a year earlier than stated in its lock-up agreement, the FT’s Richard Milne reports. The move has damaged EQT’s reputation in the eyes of some shareholders and has now led to a regulatory investigation.
Sweden’s Financial Supervisory Authority announced on Friday that it had launched a market abuse investigation into whether EQT broke insider information rules over the disclosure of the early end to the lock-up.
Following the market close on September 7, EQT announced that it was allowing the sale of some shares early, while also locking others up for longer.
The latter marked an attempt to increase liquidity and diversify ownership at the firm, which is still mostly owned by its partners and the investment vehicle of the billionaire Wallenberg dynasty (watch their 2017 interview with the FT here.)
EQT insists it believes its position will eventually prevail, but the regulatory investigation is still hurtful. Its shares fell by a combined 6 per cent on Friday and Monday.
Amid a flurry of IPOs in Sweden that is pushing the Nordic country into the top league of European listings, authorities are keen to ensure that shareholders can trust the information they’re given.
Deep Nishar, the sole managing partner of SoftBank’s Vision Fund, is leaving his role at the end of the year, according to a LinkedIn post.
Citigroup has hired the former US Treasury official Brent McIntosh as its new general counsel and corporate secretary, per Reuters.
Bank of Ireland chief financial officer Myles O’Grady is quitting the lender in March to take up a better-paid job outside banking.
Canadian Imperial Bank of Commerce has appointedNavdeep Bains, Canada’s former minister of innovation, science and industry, as its new vice-chair of global investment banking.
UBS has recruited Laurent Bouvier as global head of its environmental, social and governance advisory team, based in London. Philippe Chryssicopoulos will replace Bouvier as co-head of the bank’s global industries group.
The US Securities and Exchange Commissionhas namedErik Gerding as its deputy director of legal and regulatory policy within its corporate finance division. He was previously a law professor at the University of Colorado Law School.
Cleary Gottlieb has hired Lillian Tsu as a partner in New York, focusing on capital markets, corporate governance and compliance. She joins from Hogan Lovells.
OzyMess This is the best media story so far this year. If you haven’t already read it, we won’t spoil any details. It features a start-up media company, Goldman Sachs and the incredible power of hype and misdirection. Drop everything and read. (New York Times)
Deals on-demand European instant grocery start-ups such as Gorillas and Flink are on a mad dash to raise funds and strike deals as they aim to take on leading rival Getir in a transatlantic battle for technology industry’s frothiest sector. (FT)
Tour de Wall Street Peloton has teamed up with the consumer lender Affirm to peddle its fitness bikes to the masses and sell hundreds of millions of dollars in loans in the process. (FT)
Al Gore fund to take stake in UK energy supplier Octopus (FT)
Blackstone hits jackpot with $5.7bn Cosmopolitan casino sale (FT)
Wells Fargo to pay $37m over foreign exchange fraud allegations (FT)
Hollywood agency CAA acquiring rival ICM to create movie powerhouse (FT)
West Virginia governor offers $300m to settle Credit Suisse debt (FT)
SoftBank bets on live music revival by backing UK-based ticketing app (FT)
Rolls-Royce repairs balance sheet as it agrees €1.7bn sale of ITP Aero (FT)
Grant Thornton fined £2.3m for Patisserie Valerie audits (FT + Alphaville)
Evergrande electric car division cancels Shanghai listing (FT)
Jony Ive teams up with Ferrari to develop electric car (FT)
The tale of Ray Dalio, Chinese officials and the $10 ‘miracle devices’ (FT Asset Management newsletter)
Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Francesca Friday in New York and Miles Kruppa in San Francisco. Please send feedback to [email protected]
Recommended newsletters for you
Scoreboard — Key news and analysis behind the business decisions in sport. Sign up here
Unhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here