M&A behind bars: the heir fighting to revive a leading conglomerate

One invitation to start: join the FT’s Anna Nicolaou for the first gathering of the Due Diligence Forum this year. The discussion will look at the heavyweight battle between big media groups seeking to dominate the streaming landscape. Details below for the event, which is free for all DD readers to attend. Register here. 

One more thing: Last year, SoftBank founder Masayoshi Son compared himself to Jesus Christ. Presenting his company’s latest results on Monday, the billionaire investor whipped out this doozy of a graphic. Go deeper on SoftBank’s latest results, with this feature on how the $100bn Vision Fund bounced back and if you missed it, our FT film. 

Welcome to the Due Diligence briefing from the Financial Times. Not a subscriber to DD? Sign up here. Drop us a line and join the conversation: Due.Diligence@ft.com

Samsung is in need of an upgrade 

A tycoon donates horses to an equestrienne daughter of a presidential adviser — the aide happens to be known for shamanism. 

The heir to one of the world’s biggest technology groups runs his empire from behind bars. The surviving wife and children of the country’s richest man carves up an estate while the government slaps them with an eye-watering inheritance tax of $10bn.

This story from Seoul, brought to you by the FT’s Edward White, might read like a screenplay for one of Netflix’s slickly-produced South Korean serials. But the events embroiling Samsung’s founding Lee family are the latest twists in a decades-long saga. 

At its heart is Lee Jae-yong. The 52-year-old Harvard-educated business leader, who goes by JY or Jay, has been at the helm since his father Lee Kun-hee suffered a heart attack in 2014. 

Now, as the palace intrigue and legal drama rages around him, Lee — from his prison cell — needs to guide Samsung through a series of existential challenges from overseas rivals with deep pockets. 

Threats lurk in smartphones, chips and displays. Samsung is the world’s biggest producer of each but its dominance is being threatened by the likes of Apple, Huawei and TSMC, among others. 

The same is true in fledgling, fast-growing markets like 5G networks and driverless cars.

Pressure is building on Lee over Samsung’s long-term growth drivers. Analysts are asking why the company has gone four years without a chunky acquisition, despite sweeping global technology transformations. Speculation in Seoul is mounting that an aggressive period of M&A could be on the cards as Samsung tries to get its swagger back.

Go deeper with this FT feature looking into the company. 

Will big oil turn to big M&A?

In case you haven’t figured it out, the big oil majors are in big trouble. The market has turned on the industry that was for decades among the primary sources of corporate and geopolitical power in the world. 

Now, as companies including ExxonMobil, Royal Dutch Shell and BP are trying to navigate an existential crisis brought on by climate change and the impact of the pandemic, the question is whether we will see a new round of blockbuster mergers that will remake the sector. 

The subject of big oil M&A is the focus of this piece by our colleagues, which found that the regulatory and political hurdles to any transaction appear to be the biggest challenges, as well as who they can partner with to sell off assets needed to get clearance on a deal. 

Already, this year it has been reported that ExxonMobil and Chevron held failed discussions in 2020 to create a massive US oil company that would have been the largest M&A deal in history. 

A combined Exxon and Chevron could produce about 6m barrels a day, more than any Opec country other than Saudi Arabia and provide critical scale to achieve a sort of “last man standing” status that would allow it to thrive even as demand for oil shrinks.

Is it possible that in the coming months, we will be discussing other mooted combinations such as BP merging with Shell or BP merging with Norway’s Equinor? DD thinks it is entirely possible. 

But one thing to think about is how will these companies win over politicians to any of these deals. ExxonMobil, for instance, is far behind its European peers in discussing how it will participate in the energy transition. 

Does running around Washington extolling the benefits of being a big oil provider, as everyone else races to change, seem like the sort of pitch that will make its case for consolidation more palatable? It appears unlikely. 

Go deeper on the topic with this look at ExxonMobil’s woes from our energy team.

Veolia: troubled water

Is Veolia versus Suez becoming Veolia versus the French state? 

That‘s the suggestion of some Suez insiders after Bruno Le Maire, the French finance minister, weighed in in what is now an openly hostile takeover attempt, reports the FT’s David Keohane from Paris. 

Until Sunday night Veolia had been at pains to present its bid to buy Suez as friendly, or at least as friendly as possible considering its target was decrying a “particularly hostile” attack and refusing to talk.

The problem for Suez chief executive Bertrand Camus is that he’s been fighting a rearguard action ever since Veolia bought a 29.9 per cent stake in his company in October, from energy group Engie, where the French state is the largest shareholder.

Camus has put in place a poison pill to protect crucial French water assets, brought Veolia to court over a failure to consult Suez unions and is in conversation with two private equity funds (France’s Ardian and Global Infrastructure Partners in the US) over an alternate proposal. 

The two sides met last Friday to try to see if a middle-ground could be found, presenting two competing visions of the future for the groups.

The answer landed on Sunday night when, frustrated with what it sees as months of stonewalling from the Suez board, Veolia decided to go straight to shareholders with its €18 per share offer.

The openly hostile move undoes a commitment to finding a friendly deal, which Veolia had reaffirmed when buying the Engie stake, as a way to placate the French state. Needless to say, the government doesn’t want to be involved in a hostile situation. 

Le Maire wasn’t impressed, saying on Monday morning that he would ask the market regulator to look into the matter. “This offer is not friendly and it contravenes the commitments made on several occasions by Veolia,” he said. 

As Suez’s options narrow, they will want to hear Le Maire’s voice getting louder.

Job moves

• SoftBank’s Vision Fund has hired Nagraj Kashyap as a managing partner in the San Francisco area, following a number of departures from the fund. Kashyap previously led Microsoft’s corporate venture capital arm, M12.

• Private equity group L Catterton has hired Yock Siong Tee in its Singapore office to oversee its business in south-east Asia, beginning in March. He joins from Affinity Equity Partners. Anjana Sasidharan will join its Mumbai office this month after nearly a decade at Sequoia Capital. 

Smart reads

Missing Link Many of you wanted to read the piece we discussed last week on Vista Equity’s Robert Smith and how he avoided criminal charges for years of tax evasion. We’ve posted a fixed link that you can pair with this Forbes deep dive into the relationship between Smith and the secretive billionaire Bob Brockman. (Bloomberg, Forbes)

Fast fashion As coronavirus wreaked havoc on the already struggling British high street, online fashion brands Asos and Boohoo have emerged triumphant. (FT) 

Crypto cowboy To his fans, bitcoin billionaire Arthur Hayes is a brilliant pioneer. To the Feds, he’s built an illicit empire in the “shadows of the financial markets”. Villain or victim, he’s had a wild run. (Vanity Fair)

News round-up

Tesla sends bitcoin to record high with $1.5bn investment (FT) 

Renesas to buy Apple supplier Dialog for $6bn (FT + Alphaville + Lex)

Bain, Cinven agree $4.4bn deal for Lonza ingredients unit (Bloomberg)

Black Cube executive says UK austerity helped business (FT) 

BofA divided as bankers cry foul over special bonus treatment (Bloomberg)

Reddit-led market turmoil hits big quant hedge funds (FT) 

Melvin Capital, GameStop and the road to disaster (FT) 

Private equity firm TDR Capital ups bid for Arrow Global (Reuters)

Consortium approaches Aggreko to power up £2bn takeover bid (Sky News)

Jeff Immelt oversaw the downfall of GE. Now He’d Like You to Read His Book. (NYT)