Friday, November 22

One scoop to start: Donald Trump is considering appointing antitrust officials who may press on with the Biden administration’s crackdown on Big Tech’s market power, in what would represent a break with the Republican party’s traditionally business-friendly stance.

And a top Treasury job: Wall Street investors Scott Bessent and Howard Lutnick are the leading contenders to be Donald Trump’s Treasury secretary after hedge fund billionaire John Paulson dropped out of the race for the job.

Welcome to Due Diligence, your briefing on dealmaking, private equity and corporate finance. This article is an on-site version of the newsletter. Premium subscribers can sign up here to get the newsletter delivered every Tuesday to Friday. Standard subscribers can upgrade to Premium here, or explore all FT newsletters. Get in touch with us anytime: Due.Diligence@ft.com

In today’s newsletter:

  • Elliott’s $5bn stake in Honeywell

  • Nissan faces activist pressure

  • Distressed hedge funds stare down Verizon

Elliott’s biggest wager yet

Yesterday, some jaws were on the floor at Elliott Management’s London office after it was announced that the hedge fund’s golden boy of Europe, Nabeel Bhanji, was leaving for what the FT later reported was a top role at Citadel.

But the world’s leading activist firm has a penchant for being able to quickly change the conversation using its financial prowess and fearsome reputation.

Hours after DD unpacked Bhanji’s decampment to Ken Griffin’s hedge fund colossus, Elliott unveiled a massive corporate break-up push and the biggest single investment in the firm’s history.

The hedge fund, led by billionaire Paul Singer, has built a $5bn stake in industrial conglomerate Honeywell International and is pushing the $164bn company to break up into two businesses.

Armed with a 3 per cent stake, Elliott on Tuesday called for Honeywell to split its aerospace division, which supplies aircraft equipment, from its automation unit, which sells tools for warehouses and other plants.

The campaign follows a trend of other potential break-ups. Sometimes businesses are healthier — and more lucrative — as separate entities, as opposed to a hulking corporate giant.

This summer the FT broke the news that Warner Bros Discovery was drafting a plan to split its digital streaming and studio businesses from its legacy television networks. CVS Health also weighed a break-up before ousting its chief executive.

But a $5bn bet is a serious wager. Elliott manages $69bn in assets, and has this year embraced the approach of taking multibillion-dollar stakes, including a $2.5bn investment in chipmaker Texas Instruments and a $2bn stake in Southwest Airlines.

Part of Elliott’s playbook involves stealthily building a big stake before the target realises the activist has gotten a foothold.

Honeywell’s board and management “acknowledge and appreciate the perspectives of all our shareholders”, a spokesperson said. “Although Elliott had not made us aware of their views prior to today, we look forward to engaging with the firm to obtain their input.”

The North Carolina-based company is one of the last industrial conglomerates standing. Its American peers have shed businesses. Earlier this year, GE spun off its power and renewable energy unit, and 3M did the same to its healthcare division.

“The conglomerate structure that once suited Honeywell no longer does, and the time has come to embrace simplification,” Elliott’s Jesse Cohn and Marc Steinberg said in a letter.

Investors seem to agree — or at the very least think Elliott’s pressure might be for the best. The company’s shares rose about 4 per cent on Tuesday. The stock has lagged behind the wider market this year.

An activist investor takes on Nissan

Nissan is again in a crisis. With its market value falling below $10bn, it was a matter of time before it became an activist target.

It turns out a fund managed by Effissimo, one of Japan’s most famous activists behind the campaign that took Toshiba private, has acquired a 2.5 per cent stake in Nissan.

The market was excited by the news, pushing Nissan’s share price up 20 per cent.

Analysts say some activist pressure is probably a good thing for Nissan. Japan’s third-largest carmaker shocked investors last week by announcing emergency measures to stem its losses.

The entire car industry has been under pressure from slowing growth in electric vehicles and the cut-throat competition with the cheaper offerings from Chinese rivals.

But even against those challenges, the sharp deterioration in Nissan’s financial performance has been extraordinary. Following a quarterly loss, the group is cutting 9,000 jobs, slashing production capacity by 20 per cent and selling down its stake in Mitsubishi Motors by 10 per cent.

So what does Effissimo bring to the table?

The news immediately spurred market hopes that the fund would trigger a wider shake-up in Japan’s car industry.

As its alliance with France’s Renault fades, Nissan is seeking deeper ties with Honda, and speculation is growing that Nissan’s crisis may force Honda to take a stake in its struggling rival.

But according to what Leo Lewis, the FT’s Tokyo bureau chief, is hearing, Effissimo’s real target is more likely to be Nissan Shatai, a car assembly company half-owned by the carmaker.

The fund has a near 30 per cent stake in Shatai and bankers say its stake-building in Nissan may be an attempt to put more direct pressure on the carmaker to fully acquire Shatai.

The question is whether Nissan would have the money to convert Shatai into a fully-owned subsidiary.

Hedge funds circle a $20bn telco deal

Hedge funds that specialise in distressed situations don’t often find themselves at the centre of a $20bn deal. But that’s exactly what’s taking place with Verizon’s bid for Frontier Communications.

A group of investors that received equity through Frontier’s bankruptcy process are now in a position to vote on one of the biggest M&A deals of the year.

The transaction is probably headed for a showdown on Wednesday during the scheduled shareholder vote. Several big investors in the fibre network company have already said they plan to vote against it, and are instead demanding that Verizon bumps up its offer.

One significant flashpoint arrived last week with BCE’s proposed $3.6bn acquisition of Ziply — a telco with a fibre network similar to that of Frontier.

The Frontier investors have told Verizon and the Frontier board that the valuation in the Ziply deal implies a far higher purchase price because of the long-term growth prospects for fibre broadband service. (BCE was also a final bidder for Frontier, sources tell DD.)

The shareholders’ calculations show that the company’s projected growth makes its shares worth more than $50 a share — far higher than the deal price of $38.50.

Glendon Capital Management and Cerberus Capital Management are among the investors angling for a higher deal price, DD’s Amelia Pollard and Sujeet Indap report.

But it’s not entirely clear where another major shareholder stands.

Ares Management, the private credit giant and Frontier’s single-biggest shareholder with around a 15 per cent stake, hasn’t said which way it plans to vote. (It did hire boutique bank Houlihan Lokey to evaluate options.)

Meanwhile, Verizon doesn’t seem to be budging. When the deal was agreed in September, the offer represented a 44 per cent premium over Frontier’s trading range at the time.

Frontier, for its part, has said that if the deal doesn’t go through, it’ll return to its strategy as a standalone business. Today, we’ll be keeping a close eye on who blinks first — or if the vote’s postponed.

Job moves

  • Rajeev Misra, who structured and ran SoftBank’s record-breaking Vision Fund, is stepping down from his role as co-chief executive. He started his own investment fund OneIM in 2022.

  • Blackstone’s credit and insurance business has hired Jean King as a managing director to focus on private credit, a source familiar with the move told DD. She previously worked for Oak Hill Advisors and Antares Capital.

  • Nadhmi al-Nasr, the chief executive of Saudi Arabia’s $500bn futuristic development in the desert called Neom, has abruptly left the role after six years.

Smart reads

Bitcoin evangelism History often rhymes. Bitcoin-fixated MicroStrategy is an excellent example, as its stock soars much like the dotcom bubble days, FT Alphaville writes.

Unmarked assets No one’s quite sure how to actually measure the performance of private markets, Bloomberg reports. But there are huge rewards if someone can, and a small group of quant traders is giving it a try.

Property empires The cardinal rule of real estate goes something like this: never sell. The market downturn is pushing some of New York’s multigenerational scions to do so anyway, The Wall Street Journal reports.

News round-up

Wall Street bankers on course for up to 35% bonus bump (FT)

23andMe warns of ‘substantial doubt’ over its survival without new funding (FT)

SoftBank returns to profit as Indian IPO boost Vision Fund gains (FT)

BBVA bid for Sabadell dealt blow by antitrust watchdog (FT)

Fortress seizes control of art house cinema chain Curzon (FT)

Brookfield and Segro to split Tritax EuroBox in €470mn deal (FT)

Nuclear fusion start-up claims milestone with unconventional reactor (FT)

Justice Department sues to block UnitedHealth’s $3.3bn bid for Amedisys (WSJ)

Due Diligence is written by Arash Massoudi, Ivan Levingston, Ortenca Aliaj, and Robert Smith in London, James Fontanella-Khan, Sujeet Indap, Eric Platt, Antoine Gara, Amelia Pollard and Maria Heeter in New York, Kaye Wiggins in Hong Kong, George Hammond and Tabby Kinder in San Francisco, and Javier Espinoza in Brussels. Please send feedback to due.diligence@ft.com

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