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Gupta’s empire: beware of land M-INES

DD imagines it’s a busy time for Sanjeev Gupta.

The embattled industrial magnate is facing an investigation by the UK’s Serious Fraud Office into suspected fraud and money laundering at his metals empire GFG Alliance following the implosion of its main lender Greensill Capital.

But you only turn 50 once.

So as his difficulties piled up last month, Gupta arrived via private helicopter — emblazoned with GFG’s corporate logo and the call sign “M-INES” — to join guests for a lavish, multi-day fête celebrating the tycoon’s big 5-0 on the Greek island of Mykonos.

The itinerary included parties at exclusive beach bars and five-star resorts, people familiar with the event told DD’s Rob Smith, as well as a day trip to the uninhabited nearby island of Rineia.

While the event may seem a bit extravagant for a man whose businesses owe more than $5bn, it was Sanjeev’s father who sponsored the event, GFG told the FT. (We’ve previously highlighted Gupta’s taste for luxury, including the £42m home in London’s Belgravia, which he acquired last year.)

Meanwhile, as Gupta partied the night away, the US private equity group American Industrial Partners was plotting the final moves in seizing control of one of his most cherished assets.

Map showing Gupta’s properties span the globe

AIP claimed on Friday to have seized control of GFG’s Alvance aluminium smelter in Dunkirk, as well as two other French entities, after Gupta’s beleaguered conglomerate failed to make payments on outstanding loans.

GFG said it “will defend its position and its interests vigorously” and complained that it had offered “to repay AIP debt through a committed third-party financing” only for the private equity firm to use “its ‘loan to own model’ to orchestrate an asset takeover for what is well below market value”.

Gupta’s Mykonos hangover worsened last week, as Moody’s downgraded GFG’s Australian steel recycling business deeper into junk territory.

Separately, a plan to refinance Greensill debt related to steelworks and mines in Australia, which Gupta says will pave the way for new financing in the UK, has hit several speed bumps.

Sanjeev Gupta celebrated his 50th birthday with a multi-day celebration in Mykonos © FT montage; Bloomberg

There were a handful of conspicuous absentees from the Mykonos party, however.

Neither Jay Hambro, the London banking heir who until recently served as Gupta’s chief investment officer and right-hand man, nor traders for Glencore, which recently offered financial support for Gupta’s aluminium business, were in attendance.

Could the party be over for some?

Private equity: peaky, but not that peaky

Shareholders in Wm Morrison have been getting all excited in the past few months as two rival private equity groups have duelled for control of the UK supermarket chain.

They pushed its share price up from £1.78 in June to as much as £2.97 last week, suggesting they thought Clayton, Dubilier & Rice or Fortress Investment would contemplate a deal at around the £3-per-share mark.

That would’ve been a 30 per cent leap from the £2.30 that CD&R originally bid for the grocer back in June, and not far off a 70 per cent premium over the undisturbed share price.

Private equity is certainly willing to pay huge premiums at the moment (see also: ZooPlus), but it didn’t need to be that huge in the end.

The acquisition of Morrisons still needs to secure approval by shareholders at a meeting set for October 19 © AFP via Getty Images

In an auction on Saturday, Fortress walked away after making a single offer that was just a penny per share above its rival’s existing £2.85 bid.

As soon as SoftBank-owned Fortress realised CD&R wasn’t maxed out it was game-over, clearing the way for the latter’s £2.87 bid to triumph.

Cue talk in the Fortress camp — a firm better known for distressed debt deals — of being a disciplined investor.

Still, the competitive tension had generated a £9.97bn deal and a 61 per cent premium for shareholders.

At that price CD&R, which is likely to bring in former Tesco boss Sir Terry Leahy as Morrisons’ chair, “will have to squeeze a lot from Morrisons”, as Lex notes.

Sir Terry Leahy is a director of Motor Fuel Group, the CD&R-owned petrol station chain that is expected to feature in any expansion of Morrisons’ convenience store business © Bloomberg

That means asset sales — potentially of distribution centres, petrol stations and some stores — and a decent exit multiple in a few years’ time, Lex writes.

None of that will be easy. Most of the petrol stations are attached to stores, making them tricky to split off.

And CD&R has said it does “not intend to engage in any material store sale and leaseback transactions”, though this isn’t binding.

All of this at a time when the UK is sending in the military to tackle a fuel supply crisis amid a truck driver shortage.

The new private owners won’t be able to bank on hiding Morrisons from the limelight, even after removing it from the stock market. Remember, we told you last week: Britain and its newspapers have a particular obsession with supermarkets.

Is venture capital getting too excited?

In the throes of lockdown, one members-only haunt kept its doors open to an eager assembly of Silicon Valley insiders: Clubhouse, the buzzy audio-only app that received a $1bn valuation in a funding round led by venture capital group Andreessen Horowitz.

Downloads have wavered since then as Clubhouse struggled to amass an audience comparable to rivals such as TikTok and Twitter. But that didn’t stop Andreessen Horowitz from leading another round of financing that quadrupled the start-up’s valuation in April.

The platform’s heady valuation is yet another result of so-called insider rounds — an increasingly common phenomenon in venture capital where one backer leads multiple subsequent financings in a start-up, setting its valuation higher each time.

The practice comes as venture capitalists are raising start-up valuations at the steepest rate in the past decade, stoking fears that the market for emerging tech companies could be overheating, as reported by DD’s Miles Kruppa and the FT’s Patrick Mathurin and Chris Campbell.

One of the venture capital world’s most bullish investors is Tiger Global, which holds stakes in more billion-dollar private start-ups than any other firm and has, alongside its fellow disrupter SoftBank, helped spearhead a fast-paced style of investing that has shaken the status quo in Silicon Valley.

The data reflect a new reality in which few venture capitalists can resist a hot deal — even if it looks pricey by historical standards (and particularly within fintech, where valuations have increased by a median 2.4 times from venture financings this year).

Will the bubble soon burst, or can doubling down on the right start-ups produce the kind of relentless growth exhibited in Big Tech?

Tiger Global and its fellow bulls have placed their bets firmly on the latter.

Job moves

Amy Howe told the FT that the red-hot sports betting market is overcrowded and that certain players will fail
  • FanDuel has named Amy Howe as its chief executive, and she sat down for an interview with the FT. Howe was previously chief operating officer of Ticketmaster until she was appointed as interim chief of FanDuel in July after the unexpected departure of its previous boss Matt King.

  • Samir Assaf, one of HSBC’s longest-serving executives, is stepping down from a full-time position at the investment bank to become a senior adviser to General Atlantic. He will continue in a separate role in which he counsels HSBC’s chair Mark Tucker and chief executive Noel Quinn, and remain as non-executive chair of HSBC’s Middle Eastern subsidiaries.

  • Former US state department and National Security Council adviser Brian Egan has joined Skadden as a partner in Washington.

  • Deutsche Bank has hired Derek Shakespeare as M&A chair in Europe, Middle East and Africa. He joins from Barclays.

  • EQT has appointed Tetsuro Onitsuka and Masahiko Kato as heads of its Japanese private equity and infrastructure units, respectively, based in Tokyo. Onitsuka was previously a managing director at Japan Post Investment, while Kato was deputy general manager of Mitsubishi’s private equity and infrastructure division.

  • Andreessen Horowitz (a16z) has hired Katherine Boyle as a general partner. She was previously a partner at General Catalyst.

Smart reads

Let the games begin The suspension of a policy forbidding payment for US college athletes has unleashed a dealmaking free-for-all as players, sponsors, lawyers and licensees scramble to capitalise on a $14bn industry that has professionalised overnight. (FT)

Dubious diligence Carlos Watson and his digital media group Ozy sold an intoxicating vision of a bipartisan media powerhouse. It was enough for elite investors such as billionaire philanthropist Laurene Powell Jobs and hedge fund tycoon Marc Lasry to dive headfirst into the hype. (New York Times)

Back in the saddle Jay Newman, the former Elliott debt trader who extracted $2.4bn from Argentina, has been roused from retirement for one final battle. This time, he’s coming after India. (FT)

News round-up

Qualcomm, SSW Partners to buy Veoneer in $4.5bn deal (Reuters)

Ozy Media reverses course and will remain open, founder declares (FT)

Evergrande halts share trading ahead of possible sale of services unit (FT)

Bernard Tapie, French businessman, 1943-2021 (FT)

Bill Hwang acolyte Tao Li draws scrutiny after loss on big China bet (FT)

GM/ Engine No 1: endorsement from upstart may be jolt Detroit needs (Lex)

SoftBank is cutting more deals with fewer staff than ever (Bloomberg)

Volvo Cars announces IPO that could value group at more than $30bn (FT + Lex)

Ovo prepares bid for Bulb (FT)

Petrofac ordered to pay $95m after admitting Middle East bribery (FT)

African mobile mast operator IHS Towers seeks valuation of more than $7bn (FT)

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 due.diligence@ft.com

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