One introduction to start: Amelia Pollard has joined DD to oversee the day-to-day production of the newsletter. Pollard joins from Bloomberg, where she recently covered distressed debt. She is a member of the purported “Middlebury Mafia” taking over Wall Street.
And one thing to start: Adam Neumann, the co-founder of WeWork, has submitted a conditional bid of about $600mn for the bankrupt co-working company he led until 2019, according to three people briefed on the matter.
In today’s newsletter:
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The dealmakers behind the $1tn infra boom
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PE’s insurance bet under scrutiny
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Billionaire investor Peltz talks Disney
The dealmakers behind the rise of infrastructure investments
Few areas in finance are as hot as infrastructure. Once a backwater strategy offering lower returns than corporate buyouts, it has emerged as the trendy business to own for many of the world’s largest investment groups.
In recent months, BlackRock, CVC Capital and General Atlantic have all bought infrastructure managers, and a further wave of deals is brewing. Any private equity firm considering going public in the next few years will probably need to acquire or build an internal infrastructure arm to appease public shareholders.
But as DD’s Antoine Gara reports in this deep dive, the industry is dominated by a small group of dealmakers who cut their teeth competing on arcane deals in the US in the early and mid-2000s when the asset class barely had a following.
Stonepeak, a New York-based group now managing more than $60bn in assets, was founded by Michael Dorrell and Trent Vichie. The two dealmakers from Macquarie came to the US in 2000 to replicate its success in privatising toll roads and airports in Australia. They almost returned home after discovering a dearth of privatisations, then began to target privately owned assets such as pipeline networks, energy grids and cellular towers.
Dorrell and Vichie’s insight was shared by a handful of competitors at large investment banks, including Credit Suisse, Morgan Stanley and Goldman Sachs, which spurred the first wave of infrastructure investments before the great financial crisis.
While many soured during the 2008 meltdown, the likes of Adebayo Ogunlesi and Raj Rao ventured out on their own to create specialised infrastructure investment groups and have become fabulously wealthy as industry-wide assets have risen sixfold to $1tn.
Stonepeak, which was seeded inside Blackstone and spun out in 2011, last year took in a $2bn minority equity investment at a valuation of about $15bn.
Ogunlesi and Rao’s Global Infrastructure Partners in January struck a deal to sell itself to BlackRock for $12.5bn. Had GIP insiders not retained sizable economic interests, it would have been worth more than $25bn, sources tell DD. Former Morgan Stanley banker Sadek Wahba’s I Squared Capital is worth billions.
“Infrastructure investment came to the US in the early 2000s and it was dominated by a handful of people who were mostly project finance, utilities and municipal bankers,” says one senior industry executive. “They saw it as a trend and capitalised by making big early bets around the crisis. Many of the people who didn’t get washed out became billionaires.”
Today, the market is more crowded and an era of low interest rates has passed. Recent investments into data centres, renewable energy and fibre networks will also be tested, with the potential that some lose money.
For now, though, it is a great time for those who figured out infrastructure two decades ago, as any number of bidders on Wall Street arrive with large cheques to get in on the action.
PE-backed insurance blow-ups attract scrutiny in Europe
It’s “one step forward, three steps back”, said one adviser to private equity on the impact of Italian life insurer Eurovita’s collapse last year on buyout groups’ attempts to trust-build with prudential regulators.
Events since at 777 Re, a Bermuda reinsurer linked to the Miami investment firm and Everton Football Club bidder, probably make it four steps.
Private capital groups such as Apollo, KKR and Brookfield have swept into the life insurance sector since the financial crisis, buying insurers and reinsurers or striking asset-management partnerships.
But some blow-ups in Europe are drawing attention from regulators, report the FT’s Ian Smith and Samuel Agini and DD’s Will Louch.
UK PE group Cinven owned Eurovita and Viridium, a German life consolidator that had a big deal flounder in January on “considerations relating to [its] current ownership structure”.
“All EU regulators are really down on PE fund owners right now,” one insurance executive told the FT.
A body representing global insurance regulators has called for “enhanced supervision” of private capital-owned life insurers, citing potential “conflicts of interest” and “increased risk-taking”.
Crucial for buyout executives — such as those looking for an entry into the UK market for corporate pensions deals — will be the extent to which the problems already experienced in Italy and Bermuda are judged to be idiosyncratic.
Disney makes a meal out of Nelson Peltz’s lunch with the FT
Nelson Peltz, the billionaire investor who made his fortune as co-founder of Trian Partners, recently sat down with the FT’s Harriet Agnew for lunch in Palm Beach.
Over burrata Pugliese, he weighed in on everything from his probable backing of Donald Trump to his take on recent Marvel films (“Why do I need an all-Black cast?” he said.)
In response to a lawsuit that called him a “bully billionaire”, he quipped: “What sense is being a billionaire if you’re not a bully?”
His comments caught the eye of investors pushing back on his proxy fight against Disney. In November, armed with a $3.5bn stake in the company, a significant chunk of which belongs to his friend and former Marvel chair Ike Perlmutter, he started pushing for board seats — his second fight against the company in as many years.
He doesn’t want to fire Bob Iger, he insists, but he is critical of bloated executive compensation over the past decade as shares underperformed.
Some of Peltz’s adversaries in the Disney fight seized the opportunity to criticise his tactics and his firm’s record. In a letter to shareholders, Blackwells Capital, which has a tiny stake but is pushing for its own members for the board, called Peltz’s comments from the interview “disturbing”.
Disney’s own response was equally cutting. “Peltz brings no additive skills to the Board, doesn’t understand our business and has no plan to create shareholder value,” the company wrote in a letter to shareholders on Monday.
Peltz will have to face off against Disney and other investors at the fast-approaching annual meeting on April 3. The lines are already drawn: JPMorgan Chase’s Jamie Dimon and proxy adviser Glass Lewis have backed Iger, while ISS, the other main proxy adviser, has thrown its weight behind Peltz.
Job moves
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Dave Calhoun, chief executive of Boeing, is to step down at the end of this year, as part of a sweeping overhaul at the embattled US aircraft manufacturer. Larry Kellner, chair of the company, will also not stand for re-election to the board. He will be replaced by former Qualcomm chief executive Steve Mollenkopf.
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Pimco has appointed Giorgio Cocini as a managing director overseeing its business in Italy, France and Iberia. Cocini has been co-head of Bank of America’s global financial institutions group, which will continue to be led globally by Gary Howe, and in Emea by James Gill.
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Hakluyt has named Bharti Enterprises founder Sunil Bharti Mittal and the senior vice-president of corporate development at Mars, Valerie Mars, to its international advisory board.
Smart reads
Everything adviser There’s a cadre of CEO-whisperers behind the rise of the everything adviser — but there are risks to doing it all, the FT reports.
‘Khanservative’ Lina Khan, the chair of the Federal Trade Commission, has a new group of unlikely supporters, The Wall Street Journal writes.
China experts Bankers with Chinese expertise were once a hot commodity. That job security is starting to fade as deals disappear, Bloomberg reveals.
News round-up
Amanda Staveley faces £3.5mn payment to shipping tycoon after court loss (FT)
Thiel, Bezos and Zuckerberg join parade of insiders selling tech stocks (FT)
In a bumper year for CEO pay, one chief’s $161mn award swells to $1.3bn (WSJ)
Elliott builds stake in Scottish Mortgage Investment Trust (FT)
Crosbie puts Nationwide’s reputation on the line with Virgin Money bet (FT)
US investment funds pull $13.3bn from BlackRock in anti-ESG campaign (FT)
Advent and CVC make joint bid for European pet food business (FT)
Blowout Reddit debut raises hopes of revival in dormant IPO market (FT)
US places bets on European companies in $6bn effort to clean up its heavy industry (FT)
Luiz Inácio Lula da Silva steps up interventions in Brazil’s largest companies (FT)
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