Playing the M&A Trump card

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In today’s newsletter: 

• Nippon Steel turns to lawsuits

• Corporates brace for a year of activists

• Wall Street’s US blacklist dilemma

Steel groups cry foul and bet on Trump

Nippon Steel has spent more than a year playing nice.

The Japanese group’s executives have courted Washington power-players and dined alongside Pennsylvania steelworkers in far-flung towns, all with one goal: to garner support for the company’s $15bn deal to buy US Steel.

But it’s now become a legal battle. They have sued President Joe Biden for allegedly blocking the transaction in exchange for union support in the swing state of Pennsylvania during last year’s election.

They’re betting Donald Trump and his incoming administration will approve their deal, even though he has repeatedly said he would block it.

What triggered the abrupt shift? Biden officially blocked the deal last Friday, citing national security concerns, after months of indicating he wanted the company to remain American-owned.

But Nippon and US Steel aren’t walking away from their merger.

Although Trump has vowed to block the deal, he’s notoriously mercurial, and has changed his mind on high-profile commercial issues before, such as banning TikTok.

Now, by suing Biden, the companies hope to be granted a do-over of the national security review by the Committee on Foreign Investment in the US, which couldn’t come to a decision by the December 23 deadline.

The two steelmakers are positioning themselves to benefit if Trump changes his mind.

“You could see a scenario where president Trump doesn’t want to defend the corrupt practices of his predecessor,” said a person familiar with the litigation. “In that scenario, this deal shouldn’t even end up on the president’s desk.”

But the companies face a time crunch. In his order blocking the deal last week, Biden stipulated they had 30 days to abandon the deal. The companies are hoping that either Cfius or the court will grant them more time to fight for the deal’s survival.

Europe, brace for the activists

Brace for impact: as European economies navigate political instability, slowing growth and unpredictable geopolitics, activist investors are gearing up to be even bolder and louder in 2025.

Some 86 per cent of corporates expect activism to tick up in 2025, according to a new study by top law firm Skadden Arps, with just under half expecting that increase to be “significant” — double the expectation from last year.

This follows years of consistent increases in the number of campaigns in Europe and a trend towards going public earlier, ratcheting up the pressure on boards.

Activists see Italian companies as most ripe for the picking, followed by the UK, Germany and France, according to Skadden.

While technology, media and telecoms were seen as offering the most opportunities in 2024, industrials are expected to be the big target in activists’ sights in 2025 — a major change from last year, when the sector was ranked fifth.

That prediction comes as Europe’s carmaking supply chains, for instance, are expected to continue to suffer this year.

“If you have different activists telling you . . . we’re going to target mainly industries and chemicals, it helps those companies to get prepared,” Armand Grumberg, the head of Skadden’s European M&A practice, told DD.

He added that while European companies previously lagged behind UK counterparts on planning to defend against activists “preparedness is now much, much higher than it used to be”.

Mid-sized companies with market value of €1bn to €2bn were also increasingly targeted in 2024. “When we speak to our mid-sized company clients, they say: ‘we’re not so much on the radar’. Well, guess what? You’re going to be,” he said.

That’s not to say all is smooth sailing for activists.

Bluebell Capital Partners — which made waves targeting oil company BP, pharmaceutical company GSK and yoghurt maker Danone — closed its activist hedge fund in December after struggling to raise funds.

And Paul Singer’s feared activist hedge fund Elliott Management has lost a string of top staff in its London office since autumn 2023, including star fund manager Nabeel Bhanji, who is decamping to Citadel.

But for European companies with vulnerabilities such as governance issues or non-core businesses creating drag: watch out.

Can Wall Street underwrite shares for a blacklisted company?

An array of Wall Street names — Goldman Sachs, JPMorgan, Morgan Stanley and Bank of America — have been pitching for roles on what could be one of Hong Kong’s biggest listings in years, a plan by the Chinese electric vehicle battery giant CATL to raise offshore funds.

So far, so normal. Until this week, when the Pentagon put CATL, a supplier to Tesla, on a list of companies deemed to have links to China’s military.

It comes just as Shenzhen-listed CATL prepares to pick underwriters for the secondary listing, ahead of a shareholder meeting on January 17 at which the size and date of the offering are due to be discussed.

The US’s move does not introduce legal restrictions on the banks’ ability to work for the companies added to the list — which also include Tencent, a tech giant and lucrative client for global banks.

But, as DD’s Kaye Wiggins reports, it forces them to ask a reputational question: can you underwrite shares for a company the US has said is linked to China’s military?

(The companies have said they are planning legal action to challenge the listing, if talks with the US defence department fail.) 

It’s just one more reminder of how US-China tensions are increasingly throwing deals into uncertainty. 

In 2023 US banks agonised about whether they could work on Swiss agricultural giant Syngenta’s planned IPO because the US had put its owner ChemChina on a “Chinese military companies” list. Syngenta later called off the listing plan.

“Unfortunately, client names randomly appearing on blacklists is becoming a more common feature of banking these days, and that adds risk,” said Han Shen Lin, China country director for US consultancy The Asia Group. 

Inclusion on the list “doesn’t carry the same weight as a sanction, but it’s close enough that banks [may] pre-emptively cut exposure to the names just to avoid negative headlines,” Lin said.

But if banks were to distance themselves from companies on the list, it could prove costly. 

Tencent has been a big fee-payer to the street, racking up $524mn in investment banking fees in the two decades since its listing, figures from the London Stock Exchange Group show. 

The biggest winners? Morgan Stanley, Bank of America, Goldman Sachs and Citi have been the top four recipients. 

Job moves

• Mustafa Siddiqui, Blackstone’s former global head of GP stakes, has launched private equity secondaries firm SQ Capital. The firm, which plans to focus on secondaries in the US and European middle market, hired Naiel Iqbal as operating partner and Michael Petryczenko as chief financial and compliance officer.

• Point72 has hired Todd Hirsch to lead a new private credit strategy. Hirsch spent 12 years at Blackstone and most recently co-led its retail private equity strategy, in addition to working as a senior managing director in its tactical opportunities group. 

• Portland, the UK-based communications firm, named Simon Whitehead as its new chief executive. Whitehead previously led Burson UK. 

• Sir Olly Robbins was named the new permanent under-secretary at the Foreign, Commonwealth and Development office. He will leave his role as a partner and head of Emea at corporate intelligence firm Hakluyt.

• AIC, the private equity industry lobbying group, has hired Lee Slater as the new senior vice-president of government affairs. Slater previously worked as deputy assistant to Biden and worked in the House of Representatives for 10 years prior to the White House.

Smart reads

Consumer (un)protection Meta exempted top advertisers from its standard content moderation process, which are their “guardrails” intended to “protect high spenders”, the FT reports.

Blacklist woes For China’s industrial giants, being placed on US blacklists doesn’t carry specific penalties or immediate bans, Lex writes. So how damaging is it?

Big gamer Elon Musk recently vaulted to the top of a popular video game — a feat that gamers say would have required playing “all day, every day”, The Wall Street Journal reports. How did he find the time?

News round-up

Constellation Energy in talks to buy Calpine in near-$30bn US power sector deal (FT) 

Meta exempted top advertisers forms standard content moderation process (FT) 

Leon Black in talks about backing Dovid Efune’s Telegraph bid (FT) 

Fed officials saw need for ‘careful approach’ to future rate cuts (FT)

GSK nears $1bn deal for biotech developing drug for rare tumour (FT)

Lloyd’s of London chief John Neal to move to Aon (FT)

Indonesia says $1bn offer from Apple not enough to lift iPhone 16 ban (FT)

Piers Morgan targets US after YouTube venture buyout from Murdoch’s News UK (FT)