Joe Biden and Rishi Sunak meddle in two big deals

One thing to start: The US House of Representatives has voted to approve a bill that would ban TikTok from app stores unless it is sold by its Chinese parent company. Here’s what it means and what comes next. 

One CNBC rant to start: Alex Karp, the billionaire chief executive of US intelligence software provider Palantir has put forward an intriguing theory about the hedge fund portfolio managers betting against his stock.

In today’s newsletter: 

• Latest twist in the sale of the Telegraph

• US Steel deal becomes a geopolitical football

• Carried interest tax rises in the spotlight

Telegraph’s sale to RedBird IMI in doubt

It has been an eventful 48 hours for US private equity group RedBird.

On Tuesday, Italy’s finance police searched AC Milan’s headquarters as part of a probe into the ownership of the football club that US hedge fund Elliott sold to RedBird in 2022.

Then on Wednesday, UK Prime Minister Rishi Sunak moved to block the takeover of the Telegraph newspaper by RedBird IMI, a joint venture between RedBird and Abu Dhabi’s IMI media investment group.

The AC Milan raid came as a shock. RedBird said that “the notion that [it] doesn’t own and control AC Milan is just false and contradicts all the evidence and facts”. Elliott also disputes any lack of clarity.

But RedBird IMI’s planned acquisition of the Telegraph newspaper group and the Spectator magazine has appeared wobbly for some time now, given the opposition of several right-wing British politicians.

Our colleagues expertly break down the political forces lobbying for and against the deal for the publications that are favoured by Britain’s conservative establishment here.

Sunak’s move on Wednesday marked a final twist that will in effect kill the current planned deal. The prime minister proposed changes to legislation that would essentially prevent any foreign state from owning or having influence or control over a British newspaper.

That proposal means RedBird IMI’s £600mn takeover of the Telegraph Media Group would probably be blocked as it stands, according to people close to the UK government, given that Abu Dhabi has provided about three-quarters of Redbird IMI’s cash.

IMI is controlled by Sheikh Mansour bin Zayed Al Nahyan, a vice-president of the UAE who owns Manchester City Football Club.

RedBird IMI is led by former CNN chief Jeff Zucker and struck a deal only last year to buy the media group from Lloyds after the bank seized control from the Barclay family over unpaid debts.

Zucker has repeatedly said that the UAE investment fund would have no influence on editorial matters and has offered a number of remedies to secure that.

Yet it now appears RedBird IMI will have to decide whether to bring in new money to water down Abu Dhabi’s stake or simply seek to eventually divest the Telegraph.

Neither option offers an easy way out. A low foreign-ownership threshold is expected to be set to allow only small passive stakes, according to a person close to the situation, complicating any revamped deal that maintains Emirati investment.

And another sale process for the Telegraph — after undergoing one last year — could also be tumultuous.

In the previous round, interested parties included hedge fund millionaire Sir Paul Marshall and DMGT, the group that owns the Daily Mail. Rupert Murdoch’s News Corp is also interested in buying the Spectator.

A $14.9bn deal gets thwarted by the White House

Nippon Steel’s largest-ever acquisition — a proposed $14.9bn deal to buy US Steel — is melting away.

According to a big scoop by the FT’s Demetri Sevastopulo and Kana Inagaki, US President Joe Biden is expected to issue a stern message to the Japanese company: the deal deserves “serious scrutiny”.

The upcoming intervention, which will materialise before Japan’s Prime Minister Fumio Kishida arrives for a state visit in Washington on April 10, appears to stem from national security and supply chain concerns around the acquisition, the FT’s US legal and enforcement correspondent Stefania Palma reports for DD. 

According to FT reporting, Nippon Steel last week filed its proposal with the Committee on Foreign Investment in the US, the inter-agency body that screens deals by non-US companies for national security risks.

The deal also comes as the Biden administration has cracked down on anti-competitive behaviour across the US economy. The president has entrusted a new generation of progressive officials to head Washington’s most powerful antitrust enforcers and regulators: Jonathan Kanter as head of the Department of Justice’s antitrust unit and Lina Khan as chair of the Federal Trade Commission. 

The antitrust agencies have not weighed in on Nippon Steel’s move. But the deal comes as officials such as Kanter and Khan have ushered in a tougher antitrust agenda. They also argue antitrust policy must adapt to the modern day economy in a way that captures market dynamics such as supply chain resiliency and labour — two topics that are central to the Nippon Steel debate.

The United Steelworkers union — which like US Steel is based in Pittsburgh, Pennsylvania — has opposed the takeover. United Steelworkers president David McCall said last month that his union had “received personal assurances that Biden has our backs”.

Carried interest and legal interests in the UK

If the UK’s Labour party pushes ahead with its plans to raises the tax on carried interest, it might not just be some buyout executives leaving. 

The armies of lawyers, bankers, management consultants and accountants who provide services to them may also move. 

At least that’s according to Neel Sachdev, co-head of the London office of US law firm Paul Weiss.

“It could be worse than Brexit for financial and advisory services in London,” Sachdev said in an interview with DD’s Will Louch and the FT’s Michael O’Dwyer.  

“Private equity is a significant business generator for London and any move by [private equity firms] to relocate out of the UK will have a damaging effect on the UK economy.”

For Sachdev, the issue is particularly pertinent. After leaving US law firm Kirkland & Ellis in September, he spearheaded a significant expansion at Paul Weiss in London and hired more than 100 lawyers, many of whom service private equity groups. 

Paul Weiss has also taken on Twitter/X’s former headquarters in central London, a significant bet that London will remain a hub for its clients. 

His comments come as concerns mount in the private equity community over a plan by shadow chancellor Rachel Reeves to apply the top 45 per cent rate of income tax to carried interest — the share of the gains buyout executives receive when assets are sold. 

Some firms are now making contingency plans to shift people out of London if the tax changes come into play. However, some advisers and private equity executives are hoping Labour will compromise and only increase tax by a few points, ensuring the UK remains in line with other European countries. 

While there are reasons to be concerned, previous tax rises have done little to dull London’s allure, such as when former Tory chancellor George Osborne raised the tax on capital gains from 18 per cent to 28 per cent in 2010. 

Job moves

• Under Armour founder Kevin Plank will return as chief executive, replacing Stephanie Linnartz in April. In connection, Mohamed El-Erian, a lead director, will become board chair.

• Global head of trading Magid Shenouda is leaving the commodity house Mercuria, where he was once tipped as a potential successor to the group’s founders.

• EY’s new boss Janet Truncale has set out her leadership team for the Big Four accounting firm, naming four global managing partners to help run EY when she takes over in July. Meanwhile, an architect of EY’s failed split, Andy Baldwin, will leave his current role as global managing partner for client service and become a senior adviser. Details here.

• Talent agency UTA has parted with veteran Hollywood power broker Michael Kassan, sparking a bitter legal battle over differing allegations about the use of a $950,000 “special expenses” fund.

Smart reads

Growing influence Billionaire Bernard Arnault’s luxury conglomerate LVMH is seeking to grow his stable of media assets, rivalling other tycoons such as Elon Musk in building a media empire, The Wall Street Journal writes. 

The Ozempic effect The UK has set up a task force to tackle potentially deadly obesity drug counterfeits. Criminals are producing the drugs to capitalise on a weight-loss frenzy, Bloomberg reports.  

Art heirs A Dutch panel ruled in 2007 to return a painting stolen by the Nazis to a Jewish family. But 17 years later the heirs are still waiting for the picture to be returned, The New York Times reports. 

News round-up

Stripe in ‘no rush’ to go public as cash flow turns positive (FT) 

BP and Abu Dhabi suspend talks to buy stake in Israeli gasfield (FT) 

Activist investor demands Glencore keep its coal unit and move main listing to Sydney (FT) 

Activist investors’ cosy deals with boards deserve greater scrutiny (FT) 

Moody’s quits Canary Wharf (FT) 

Jamie Dimon backs Disney’s Bob Iger in proxy fight with Nelson Peltz (FT) 

Blank-cheque company aims to buy failed US banks (FT)