The new era at Moelis

One scoop to start: Activist hedge fund Parvus Asset Management is building a stake in Ozempic-maker Novo Nordisk as it hunts for a new chief executive following a share price slump. 

Remembering a Wall Street legend: Dick Beattie passed away on Friday at the age of 86. He spent six decades at corporate law firm Simpson Thacher, where he advised on several landmark deals including JPMorgan’s acquisition of Bank One and the combination of AOL and Time Warner. But Beattie is best known for his close relationship with KKR co-founder Henry Kravis. In Barbarians at the Gate, Beattie, a former military pilot, was described as Kravis’s “consigliere” with the “soft voice of a kindly uncle, yet the steely gaze of an ex-Marine”.

In today’s newsletter: 

What next for Moelis & Co?

Ken Moelis has seen it all.

During a 40-year career on Wall Street, he’s worked under “junk bond king” Michael Milken, advised the likes of Donald Trump and Carl Icahn and founded his own boutique investment bank that’s shepherded through deals including Blackstone’s $26bn purchase of Hilton Hotels.

(Moelis is also the rare CEO who says interesting things on earnings calls.)

On Monday, he announced he’d step down later this year as chief executive of Moelis & Company, but he’s not calling it quits just yet.

The 66-year old will stay on as executive chair, and he’s in line to receive a $25mn retention bonus if he remains in a senior role until 2029.

Taking his place as chief executive is co-founder Navid Mahmoodzadegan, while Jeff Raich, another co-founder, will become executive vice-chair.

It’s a switch that’s been years in the making: Mahmoodzadegan and Raich, who have worked with Moelis for decades, became co-presidents in 2015 as part of early-stage preparations for succession.

Nonetheless, it’s a crucial moment for the bank.

Boutique M&A advisers flourished in the wake of the global financial crisis, which weakened more established players with lending and trading arms.

Moelis threw himself into action, developing a reputation as one of the best connected bankers on Wall Street. In 2014, Moelis & Company went public and it now has a market capitalisation of more than $4bn.

But there’s always been a question over the staying power of smaller outfits that are known for a single big-name dealmaker.

Moelis & Company has fought this over the years with a series of splashy hires and by empowering the likes of Mahmoodzadegan and Raich.

Last year, it went on a recruiting spree and its ranks are now bulging with rainmakers.

The downside is that those bankers command hefty wages that are weighing on the company’s finances at a time when dealmaking is slow.

They’d better get to work.

Warner Bros Discovery splits up

Time Warner, AOL Time Warner, Warner Bros Discovery . . . The House of Warner has blessed the deals machine with an abundance of activity over the past couple of decades.

And now dealmakers are getting their teeth stuck into another Warner-related project.

Warner Bros Discovery on Monday said it would split into two publicly traded companies — a break-up plan DD scooped nearly a year ago. One company will focus on streaming and studios and the other on the television network business, which includes CNN and Discovery.

It’s an attempt to “enhance shareholder value”, as chair Samuel A Di Piazza Jr euphemistically put it.

The company’s share price has fallen 60 per cent since it was formed by the merger of Warner Media and Discovery.

The combined outfit fared poorly as it ploughed money into its streaming operations and its cable networks suffered from a generational shift away from traditional TV.

Just last week, shareholders rejected pay packages for several of the company’s top brass, including chief executive David Zaslav, who was behind the Warner-Discovery merger.

The split follows a similar move by Comcast and will separate out the faster-growing streaming business from the linear TV business.

While the decision will please shareholders, creditors may not be so happy.

Warner Bros Discovery holds some $37bn in debt, which has weighed on its share price. Much of that is trading below par.

The company plans to buy back some of its bonds, likely below face value, and then refinance the debt ahead of the separation — setting up a showdown with debtholders.

For more analysis, go deeper with Lex.

The tiny deal with big implications

Alimentation Couche-Tard’s near-$50bn bid for rival convenience store operator Seven & i Holdings caused a stir in Japan.

But a deal 100 times smaller highlights a far more serious debate around the future of Japan’s economic security and its openness to unsolicited takeovers.

Meet Shibaura Electronics, a world-leading producer of temperature sensors used in rice cookers, fridges and missiles.

Shibaura is at the centre of a fierce takeover battle between Taiwan’s Yageo, which went hostile, and Japanese white knight MinebeaMitsumi.

The fight comes as Japan’s east Asian rivals eye the country’s unique companies, which have high market shares in critical technologies. 

Foreign companies such as Yageo — as well as private equity groups — have pledged to help inward-looking Japanese companies expand their sales overseas.

But domestic rivals have warned about the risks of leaking Japan’s treasured technologies.

“If it’s okay for anyone to buy our companies and we sell everything to foreigners at a high price, then what’s left at the end?” quips Yoshihisa Kainuma, chair of MinebeaMitsumi.

The debate plays out against the backdrop of an emboldened China: Beijing has made clear in its “Made in China” plan that it intends to control high-tech supply chains.

That threatens Japan’s own prowess in technological niches. The country has woven itself into global supply chains ranging from semiconductors to radar systems.

Government officials are now focused on securing “Japan’s current indispensability”, says Takashi Shimada, who served as a senior adviser to Fumio Kishida, a former Japanese prime minister.

Pay close attention to what happens at Shibaura. It could say a lot about how actively Japan’s government will defend its cutting-edge technology champions.

Job moves

• Jenner & Block has hired Damian Williams as co-chair of its litigation department and white-collar investigations and defence practice. He is defecting from Paul Weiss just months after the firm capitulated to the White House.

• Paul Weiss lost a seventh partner in less than three weeks to a new litigation boutique launched in May. Melissa Zappala said in a LinkedIn post on Monday that she was joining Dunn Isaacson Rhee.

• Clearlake Capital has hired Josh Lederman as head of capital markets. He joins from KKR, where he was a managing director. 

• WPP said Mark Read will stand down from his role as the group’s chief executive. He will continue until the end of the year while the board starts the search for a successor.

• AIA Group has appointed Mark Tucker as its new chair. Tucker will step down from his current role as HSBC chair in September. 

Smart reads

Succession Two brothers are duelling for the top job at the German media empire that owns Penguin Random House, the FT reports. It’s a fight that’s been a long time in the making.

Wall Street’s mayor Former New York governor Andrew Cuomo is shaping up to be Wall Street’s favourite in the race for New York City’s next mayor, the FT reports.

‘NAV squeezing’ Private asset managers are earning outsized returns by buying private equity stakes at discounts to their net asset value and then marking up their holdings, The Wall Street Journal writes.

News round-up

Hedge funds circle distressed French private equity-owned companies (FT)

Thames Water bosses were set for £18.5mn before outcry over bonuses (FT)

Advent swoops for London-listed Spectris in £4.4bn deal (FT)

Main distributor to Amazon’s Whole Foods hit by cyber attack (FT)

Norway’s oil fund calls for urgent reform of European capital markets (FT)

Japanese hotel group plans to buy $5bn of bitcoin (FT)

US quantum computing company IonQ to buy Oxford university start-up (FT)

US chipmaker Qualcomm agrees to buy UK’s Alphawave in $2.4bn deal (FT)

US companies push for lower Vietnamese tariffs as China hedge (FT)