KKR, the firm that inspired Barbarians at the Gate, has announced the appointment of two high-ranking executives in their mid-forties to become the heir apparents to founders Henry Kravis and George Roberts.

The move has been widely seen as a bold one because the industry is usually known for keeping any plans about succession in the family. Now the pressure may be on for the rest of the industry to come out with their own succession plans.

Limited partners — pension plans and other institutions that lock up their capital in private equity vehicles for years — have grown increasingly concerned about succession, with just 12 per cent of funds set to close in less than a decade.

But succession at the large buyout funds has been the biggest taboo in the industry because no one wants to be the one to ask, for instance, Steve Schwarzman when he’s leaving Blackstone.

But KKR announced Scott Nuttall and Joseph Bae’s appointment as co-presidents and co-chief operating officers and members of the private equity firm’s board of directors.

Long rumoured to be favourites to fill the founders’ shoes, Nuttall, 44, and Bae, 45, will be in charge of day-to-day operations. Here are our profiles of Nuttall, who has been groomed for the job for years, and of Bae, who led KKR’s Asia push.

This is the first time KKR has openly indicated clear successors to the founders. The appointments were “about the future” as KKR looked to make sure it had the “right team” to serve its clients “for decades to come”.

But don’t expect any imminent change at the top of KKR. Kravis and Roberts, who are both in their early 70s, aren’t going anywhere: they will continue to lead the group as co-chairmen and co-chief executive officers for the foreseeable future. 

As one industry insider said of the appointments, with a hint of healthy scepticism, “what does it actually mean?”

Welcome to your curated briefing on deals and dealmaking by the Financial Times. Due Diligence is your gateway to the best M&A stories, insights, analysis and exclusives. Each day we expand on three topics and pick a series of smart reads from the FT and elsewhere. Lower down you’ll find the latest industry job moves and a round-up of key headlines. Get DD delivered to your inbox Tuesday-Friday at 5am UK time and see all previous editions here. Want to get in touch? Due.Diligence@ft.com

Does Dalian Wanda always pay its debts?

Is Beijing nervous about the state of Dalian Wanda’s finances?

That seems to be the implication of a new directive from Chinese regulators, who warned domestic banks against lending to the property-to-movies conglomerate that has been on a half-decade overseas dealmaking binge.

The Financial Times saw notes from a June 20 meeting in which regulators instructed banks to restrict exposure to Wanda, which declined to comment.

From our story:

“A person familiar with the discussions between banks and regulators . . . said six Wanda deals were discussed. The document cites two of the deals by name, giving strict instructions to banks not to finance them, accept their assets as collateral, list them in China or inject them into Wanda’s China-listed companies. Wanda was also told not to inject any of its own assets into the six acquisitions or sell them to other Chinese buyers.”

Wanda notched up over $7bn in spending during its overseas shopping spree over the past two years — including a probably-too-high $3.5bn for Hollywood studio Legendary Entertainment — though it’s been impossible to tell how the company financed the deals: its unlisted parent, which doesn’t publish information about its liabilities, made nearly all of Wanda’s foreign purchases. 

Analysts are pretty sure the money came from a run-up in high-interest debt — which would explain regulators’ alarm, especially after Beijing launched a probe into banks’ exposure into the biggest Chinese conglomerates making waves overseas, including Wanda.

According to a person familiar with the matter, these are the deals under scrutiny, along with the Legendary acquisition:

  • The purchase of AMC for $1.2bn

  • The $1.6bn investment in Sunseeker Yachts in the UK in 2013

  • The three purchases by AMC of cinema chains Carmike Cinemas in the US ($1.2bn), Odeon Cinemas in the UK ($1.2bn) and Nordic Cinemas ($650m)

Time for Hudson’s Bay to exit retail?

In 2013, Goldman Sachs, Morgan Stanley and Guggenheim advised department store chain Saks on its sale to Hudson’s Bay Corporation for $2.9bn. The implied premium for shareholders was 30 per cent. That result seemed pretty good . . . for about a year.

Hudson’s Bay, a Canadian chain that included Lord & Taylor, took out a mortgage then that valued the famed 5th Avenue location of Saks at $3bn alone. Richard Baker, the Greenwich, Connecticut, scion who put together Hudson’s Bay, burnished his relationship as a property wizard by essentially getting the rest of Saks for free.

But maybe free was too high a price.

Hudson’s Bay shares are down 70 per cent in the past two years as the prospects of a debt-heavy department store operator scares off investors.

But the company has an ace up its sleeve if it has the guts to play it, says former Wall Street analyst Jonathan Litt, whose activist fund owns 4 per cent of Hudson’s Bay. The flagship Manhattan stores of Saks and Lord & Taylor should be sold off, says Litt. Unlike other real estate/retail strategies, Litt argues that the best buyer could be Tesla or Apple or Amazon. Hudson’s Bay has the chance to ditch selling clothes altogether before losing hundreds of millions more.

As DD’s Sujeet Indap writes in the FT’s Inside Finance on Tuesday, some real estate experts still believe there is more value in being a retailer than simply a landlord. Maybe, but if Litt prevails on Hudson’s Bay, this time real estate bankers will be the ones getting the call, not consumer/retail ones.

Job moves

  • Mitheridge Capital Management, the private equity real estate firm, has appointed Jamie Ritblat, founder and chief executive of Delancey Real Estate Asset Management Limited, as its non-executive chairperson. Ritblat began his career at Morgan Grenfell, and before founding Delancey was a director of the British Land Company, with responsibility for real estate investment. 

  • Bank of New York Mellon has appointed former Visa head Charles Scharf as its new chief executive. Scharf’s appointment is effective immediately. He will be replacing 65-year-old Gerald Hassell, who is retiring but will continue to serve as chairman of the board until the end of the year. After that, Scharf will also assume the role of board chairman.

  • The Public Sector Pension Investment Board, a large Canadian pension fund, has recruited executives across its private markets investment teams in Europe, Financial News reported. Marco Strizzi has joined the €106bn pension fund as an investment manager in its private equity team from BC PartnersPSP has also hired Anita Das, an ex-Goldman Sachs banker, to its credit team. 

  • Three Hills Capital Partners has hired three new people — Joe Jefferies (ex-Montagu), Arjan Blok (ex-Vitruvian) and Ravi Savjani (ex-Apax), Private Equity Wire reported. Jefferies joins as investment manager, Blok joins as a senior associate and Savjani joins as investor relations manager.

Smart reads

  • The (next) big short For a small band of hedge funds that slapped down prescient bets against the tottering US housing market, the financial crisis was the biggest money-spinner in generations. Some investors think they have now found the next “big short” in the retail industry. (FT)

  • From $2bn to zero How a private equity fund went bust playing in the oil patch, and what it means for investors. (WSJ)

  • Nelson Peltz aims for P&G board seat The veteran activist investor launched a campaign to win a seat on the board of Procter & Gamble, the US consumer goods company in which his Trian Fund Management group took a stake of more than $3bn in February. (FT)

News round-up

Dominion Diamond agrees to higher offer from Washington (FT)

Carlyle to buy airfield lighting group ADB Safegate (Reuters)

Global shift into alternative assets gathers pace (FT)

France wants hardest Brexit, says City envoy to EU (FT)

Consumer-Focused Fund Raises $700 Million for New Deals (WSJ)

Aircraft suppliers race to fix problems in tie-up (FT)

Landis+Gyr set to opt for IPO over straight sale (Reuters)

New Toshiba chip sale doubts as US ruling delayed (FT)

Church & Dwight to buy Water Pik (Reuters)

Multi-Color to buy labels unit of Constantia for $1.3bn (Reuters) 

Follow the FT’s deals team

Arash Massoudi in London — @ArashMassoudi

Javier Espinoza in London — @JavierespFT

James Fontanella-Khan in New York — @JFK_America

Sujeet Indap in New York — @sindap

Don Weinland in Hong Kong — @donweinland

Source link

Add Comment

Your email address will not be published. Required fields are marked *