Lucid Spac deal makes Saudi wealth fund a big winner

One scoop to start: British industrialist Sanjeev Gupta is in talks to borrow hundreds of millions of dollars from Canadian asset manager Brookfield as one of his main lenders, Greensill Bank, faces pressure from German regulator BaFin to reduce its exposure to his businesses. More here from DD’s Rob Smith and the FT’s Michael Pooler.

In case you missed it: The FT’s media correspondent Anna Nicolaou hosted a DD forum discussion on the streaming wars. Go here to catch a replay on-demand.

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Why Saudi Arabia is one of the big winners in the Lucid deal

DD is starting to think about Spac deals as something akin to musicians dropping a new album. 

Build hype with well placed rumours that new music is coming, see excitement for the record ramp up, then release the album. 

Take the recent Spac deal between Michael Klein’s Churchill Capital IV (CCIV) and electric vehicle upstart Lucid Motors, which is majority-owned by Saudi Arabia’s Public Investment Fund. 

For months, rumours have been swirling that CCIV would merge with Lucid and shares in the Spac had soared by close to 500 per cent. Every incremental update from various outlets that the two companies were nearing a deal sent CCIV shares up higher to a peak of $65. That was all before a deal had been announced. 

This is a little crazy, even for Spacs. A blank cheque vehicle does not have operations, it’s only worth the money it has raised at the usual price of $10 per unit. Yet CCIV, which had listed at a $1.8bn valuation (having sold 180m units) was suddenly worth six times that number without anything to show for it. 

When the deal finally landed on Monday, it was met with a frosty reception. Shares in the Spac fell by as much 45 per cent. 

The transaction showed that Churchill sponsors had received shares in Lucid for $10 a piece and the so-called Pipe investors (private investment in public equity), which included institutional investors such as BlackRock and Fidelity, had been handed Lucid shares at $15 a piece.

Both were at a steep discount to where CCIV shares were trading, and where many retail investors had bought in. 

The PIF will roll in its stake at just $10 a share. In return it will receive two-thirds of a listed company theoretically worth about $60bn as of market close on Tuesday, trading at $35. 

Klein, as Spac sponsor, also gets a steal at $10 a share and the essentially free promote — the reward founders get for setting up the shell company — that is potentially worth billions. It’s important to note that, according to the presentation, Klein gave up 5 per cent of the founder shares to get the deal done. 

Klein and Saudi’s PIF are longtime collaborators. They’ve made a lot of money, sorry music, before. For years Klein has been an adviser to the key figures in Saudi Arabia and its sovereign wealth fund, which ranks among the largest in the world. 

But what happens to the investors who came in when shares in CCIV were soaring? They don’t get the “being in the know” discount. Depending on where they bought in, some are facing huge losses. 

As Lex explains: “By rolling over inexpensively, PIF and other Lucid backers have profited instantly and handsomely. That value creation has been powered by retail investors, some of whom may have been unclear what they are buying.” 

It’s when the music stops that investors should be worried. Go deeper with Alphaville’s take on it all.

Oatly: IPO, extra hot

Oprah Winfrey, Jay-Z, and executives at Blackstone likely haven’t stood in a Starbucks queue for quite some time. They have people for that.

But when they do sip on lattes, we’re betting they’re throwing that extra 50 cents to the wind for the dairy-free delicacy that is Oatly, the Swedish vegan “milk” capturing hearts from Hollywood to your local Whole Foods. (Cheers, Jeff Bezos.)

They’re among the VIP cast of celebrities and Wall Streeters backing the Malmo-based milk maker that have pumped its prospective valuation for a New York listing up to $10bn, insiders told the FT’s Judith Evans and Emiko Terazono.

Oatly declined to comment on the valuation, but said an offering was expected to take place following the SEC’s review.

The listing comes as environmental concerns and the growing perception of dairy-free diets fuelling a healthier lifestyle lure vegans and non-vegans alike to the “alternative milk” aisle. US rivals Chobani and France’s Danone are even springing to raise cow-free cash cows of their own.

But the Swedish company’s eco-friendly branding has caused a bit of a stir. 

Oatly was criticised on social media in September over its decision to accept funding from Blackstone, whose chief executive Stephen Schwarzman had donated large sums to Donald Trump. The move left consumers with a bad taste in their mouths given the company’s message of environmental sustainability.

Battle of the billionaires: Bezos vs Ambani

Amazon was given some breathing room by India’s Supreme Court on Monday when it ruled that Reliance Industries, the company controlled by Asia’s richest man Mukesh Ambani, couldn’t take over retailer Future Group until it hears the case.

The legal battle over the $3.4bn sale of Future’s assets has pitted two of the world’s wealthiest tycoons — Jeff Bezos and Ambani — against each other for a slice of India’s lucrative retail market.

But there are signs that Bezos may lose this round, writes the FT’s Stephanie Findlay in a dispatch from New Delhi, leaving Ambani with significantly more brands to entice Indian consumers. 

Quick recap: it all started when Reliance announced the deal in August to acquire Future, one of the country’s biggest brick-and-mortar retailers, which at the time was on the verge of collapse as a result of the Covid-19 pandemic. 

Following the news, Reliance managed to pull in more than $6bn from investors, including Silver Lake and KKR, for just over 10 per cent of the company.

But Amazon wasn’t having it, and headed to the Singapore International Arbitration Centre to complain that the transaction violated its contract with a Future subsidiary, barring Future from selling its retail assets without Bezos’ consent. The arbitrators made an emergency order in October for the deal to be put on hold pending its decision.

Fighting fire with fire, Future and Reliance went to India’s courts to contest the order, saying that the Amazon contract was only applicable to the subsidiary, not the whole group. The High Court of Delhi ruled in February that the deal could go ahead — a decision Amazon is challenging in the country’s highest court. 

Despite all the court drama, Future and Reliance have still won approvals from antitrust regulators to close the deal, and are just waiting for the greenlight from the National Company Law Tribunal and shareholders.

The showdown has cast a light on the risks foreign companies take when they enter complex corporate structures in response to India’s foreign direct investment and tax regulations.

What remains to be seen is how Reliance will use its dominance of India’s offline retail sector to chip away at Amazon’s 30 per cent share of the country’s ecommerce market.

It’s unlikely to be the last clash between the tech titans as their digital empires continue to swell.

Job moves

• Marriott International has appointed Tony Capuano, group president of global development, as its chief executive and Stephanie Linnartz, a group president overseeing consumer operations, as its president, effective immediately.

• Diageo general counsel Siobhán Moriarty will retire in September after 24 years at the distiller. She will be succeeded by Tom Shropshire, currently a partner and member of the executive committee at Linklaters. 

Smart reads

Double agent Convoluted dividend-tax practices peaked in Germany nearly a decade ago, bringing asset managers like Duet Group, which mastered such operations, to new heights. Now, a former star trader turned star witness in a $12bn tax scandal could spell trouble for many of the London company’s alumni. (BBG)

Penthouse fire sale Manhattan hedge funders are flocking south for warmer weather and lower taxes. They leave a trail of multimillion dollar listings with few prospective buyers in their wake. (WSJ)

Japanese Java In a city synonymous with long working hours and late, party-fuelled nights, it’s no surprise that Tokyo is highly caffeinated. Join the FT’s Asia business editor Leo Lewis for an unforgettable taste test. (FT Globetrotter)

News round-up

AT&T nears deal with TPG to sell minority stake in DirecTV, U-verse at $15bn valuation (CNBC) 

Carlyle’s Lee Aims to raise $130bn while ‘thinking bigger’ (BBG)

Wells Fargo agrees sale of asset management arm to private equity for $2.1bn (FT + Lex)

Estée Lauder agrees $1bn deal to buy owner of The Ordinary skincare (FT) 

Facebook strikes deal with Australia to restore news on its platform (FT)

HSBC shifts ‘heart of business’ to Asia in latest strategy revamp (FT)

Mitsubishi Motors set to reverse move to withdraw from Europe (FT)

Oil group Petrobras plunged into turmoil after CEO’s dismissal (FT)

UK M&A: the fence of the realm (Lex)