TheChek News Flow

Matt Perelman and Alex Sloane got their start buying up Burger King restaurants

They share an office with one big desk and one telephone. They often eat three meals a day together, and take all their meetings as a pair.

Matt Perelman and Alex Sloane’s relationship is an unusual one on Wall Street, where executives are better known for undercutting rivals to consolidate power. Their lifelong friendship helped build a private-equity firm that is drawing high-profile investors and a portfolio of regional restaurants that recently surpassed $1 billion in annual sales.

“It’s probably not the most efficient way to do things, but it’s worked for this long,“ said Perelman, 38 years old, about how he does just about everything with Sloane, 37.

Garnett Station Partners, which the duo started in their 20s, invests in everything from funeral homes to gyms and car washes. Whatever the business may be, the two apply the same strategy they honed buying up restaurants: finding promising local concepts, and scaling them.

The New York-based firm recently closed its fifth fund, netting about $1.2 billion in just four months and pushing the firm’s total assets under management to over $3.5 billion. That is even as a growing list of firms have struggled to raise capital.

“They’ve established themselves as the next generation of moneymakers,” said Marc Lasry, founder of private-equity shop Avenue Capital Group. Lasry, a mentor to the pair, said he rarely invests outside of his own firm but has put money into Garnett Station.

Other investors who have served as mentors include Oaktree Capital Management co-founder Howard Marks, Continental Grain Chairman and Chief Executive Paul Fribourg and 3G Capital Co-Managing Partner Daniel Schwartz.

Perelman and Sloane have known each other since they were toddlers, having grown up three blocks from each other on New York’s Upper East Side. They still live there today with their respective families (their wives are also best friends). The two see each other as brothers, sibling squabbles and all.

In 2023, for instance, they said they argued for weeks over whether to sell a collision-repair shop business. Perelman, who tends to be more skeptical and pessimistic, was pushing for a sale and ultimately prevailed, netting hundreds of millions of dollars for investors. Sloane, the more reliably upbeat of the two, said their dynamic is what helps them spot both the potential and risks in deals.

It is why they still take all their work trips together.

“It may be an unusual style, but it works,” said Royce Yudkoff, co-founder of Abry Partners, a private-equity firm based in Boston. (Yudkoff met the pair in 2014 while he was teaching a course at the Harvard Business School, and later invested in their firm.)

Garnett Station’s portfolio companies include a pet-services franchiser, a vacation-rental property manager and a business that offers disaster recovery help. But restaurants are where it all started.

“We love investing in businesses that do really well in their core market,” said Perelman. “What works in Ohio doesn’t necessarily work in Arizona.” The firm’s Primanti Bros, for instance, has a cult following in Pittsburgh for its massive sandwiches stuffed with french fries.

In 2013, Perelman and Sloane were still in business school at Harvard when they tried to strike their first deal, for a handful of Kentucky Fried Chicken locations. They were in their 20s at the time and rejected for lacking franchise experience. Perelman later gifted the original business plan in a leatherbound book for Sloane.

The following year, the duo spent the summer in North Carolina, doing diligence on nearly two dozen distressed Burger King restaurants. It was enough for them to clinch their first deal.

That Burger King portfolio eventually grew to more than 220 locations across the Southeast before it was sold in a stock deal in 2019 to Carrols Restaurant Group, the Whopper maker’s biggest U.S. franchisee. (Burger King parent Restaurant Brands International bought Carrols for $1 billion last year.)

Garnett Station launched Authentic Restaurant Brands in 2021. The restaurant holding company’s acquisitions have included a New Jersey and Pennsylvania sports-bar chain (PJ Whelihan’s), a Latin-inspired chain in Houston (Mambo Seafood) and the Pollo Tropical restaurant business.

The company’s latest purchase was Tavern in the Square, a sports-bar chain in the Boston area known for its fried pickle chips.

Sloane said other private-equity firms avoid starting out with smaller businesses because building the infrastructure for expansion can be challenging. “But once you do that, there will be a lot more buyers for that business than there were when you first found it,” he said.

The duo expect to sell Authentic Restaurant Brands within the next 12 to 18 months. A deal could fetch anywhere between $1.5 billion and $2 billion, going off of recent industry deal multiples. (They say they plan to do more restaurant deals in the future.)

Regulatory uncertainty could widen the scope of power stocks riding the AI wave

When the excitement around artificial intelligence started spreading to power stocks, the rally was concentrated on those with a big portfolio of nuclear power plants, such as Constellation Energy CEG 0.32%increase; green up pointing triangle and Vistra VST 2.81%increase; green up pointing triangle. This could now be changing.

Thanks to regulatory scrutiny in key markets of deals between nuclear plants and data centers, most of which effectively draw power away from the rest of the grid, investor favor may shift to others: Companies that can quickly build new gas-fired power plants and vertically integrated utilities.

Shares of NRG Energy NRG 0.57%increase; green up pointing triangle, which doesn’t own any nuclear capacity, had lagged behind the surge seen by nuclear-owning peers Vistra, Constellation Energy and Talen Energy TLN 3.04%increase; green up pointing triangle over the past two years. But on Wednesday, its shares jumped 11% after it made two big announcements.

One was an agreement with gas turbine manufacturer GE Vernova GEV 2.73%increase; green up pointing triangle and contractor Kiewit to construct more than 5 gigawatts worth of new gas-fired power plants, which would be enough to power millions of homes. Separately, the company said it is in talks with two data center developers to supply power, primarily from new natural gas-fired plants. Even after a broad selloff among power stocks on Thursday, its shares are outperforming Vistra and Constellation so far this year.

Vistra shares fell 12% on Thursday after it failed to disclose any new contracts in its earnings call. Chief Executive Jim Burke said on the call that “there are a number of questions to be answered” from regulators before Vistra can finalize certain contracts with data center customers. The company expects more regulatory clarity by midyear. Constellation disclosed quarterly results last week without announcing new contracts. Constellation and Vistra operate the largest and second-largest nuclear power fleets, respectively, that operate in competitive power markets.

There are many reasons why funneling energy from existing nuclear power makes sense for data centers. It is quicker than building a power plant from scratch and provides round-the-clock clean power. Because these sites have plenty of land, it is possible to co-locate data centers and possibly dodge transmission fees. The sites also have ready access to cooling water. These are also the most lucrative contracts for power plant owners, who get to charge higher power prices for an existing asset.

But these deals are facing skepticism from regulators in the largest competitive power markets, which are already seeing surging power prices. Late last year, the Federal Energy Regulatory Commission blocked part of Talen Energy’s plan to sell power from its existing nuclear power plant directly to Amazon’s data center in Pennsylvania. Trump-nominated FERC Chair Mark Christie said an agreement of that type could have “huge ramifications for both grid reliability and consumer costs.” The regulators last week voted to launch a review of issues associated with such arrangements in PJM Interconnection, a market that includes Pennsylvania.

Meanwhile, Texas’ state Senate introduced a bill a few weeks ago that, if passed, would add transmission costs for large power customers and create guardrails to make sure they don’t threaten grid reliability.

None of this spells complete doom for nuclear power plants looking to sign deals. Depending on how regulation shakes out, it could just mean such customers have to pay more transmission fees. The bigger risk is that the regulatory process drags out. FERC’s Christie has said the commission would act quickly, but given the sensitivity around grid stability and power prices, there could be legal challenges to their decision.

Time is of the essence for data center customers; they may prefer to ink contracts that involve less regulatory uncertainty. “It’s not just the money, it’s really the time,” notes Stephen Byrd, equity analyst at Morgan Stanley. His team’s analysis shows that there is going to be some 42 GW worth of shortfall between data center demand for power and actual grid capacity through 2028 in the U.S.

Easier contracts to strike could include ones for new natural gas-fired power plants, such as those NRG announced. Next to existing nuclear power, new natural gas-fired power is the best bet for AI because it runs around the clock and can be built much faster than nuclear power. Tech companies might also find it easier to put net-zero ambitions on the back burner under the current administration.

NRG said long-term contracts on those new gas-fired power projects could range from $70 to $90 per megawatt-hour, similar to industry analysts’ estimate of what Talen Energy’s nuclear power plant would get from its lucrative contract with Amazon. There is enough potential profit here that even Exxon Mobil and Chevron, oil majors with higher return hurdles, plan to build new natural gas-fired power plants for data centers. Because there is a limited supply of gas turbines, investors will want to keep an eye on companies that have secured slot agreements.

Vistra, for its part, said it has gas turbines booked for delivery in 2026 and 2027.

More data center customers could also look to work with vertically integrated utilities rather than power producers in competitive markets. Going this route may not come with the same level of speed or long-term fixed price certainty, but it could be simpler because it only involves dealing with one entity, according to Rodney Rebello, co-portfolio manager of Virtus Reaves Utilities ETF. Shares of utilities announcing data center deals have rallied: Entergy, which operates across several Southern states, is up about 74% over the past 12 months, while Alliant Energy, which serves Iowa and Wisconsin, has gained 36%.

As tech companies broaden the pool of prospective contracts, the AI power rally should spread across more stocks, not just a few highfliers.

Problems of Aberdeen-based group reflect decline of city built on oil and gas

When a young Ian Wood splashed out on an imposing presence for his family’s company at the inaugural Offshore Europe conference at the University of Aberdeen in 1973, his father John was aghast.

Sir Ian — he was knighted in 1994 — has recalled since how Wood senior, head of the family’s fishing company, thought his son was spending far too much on marketing the enterprise’s offshore expertise to the nascent North Sea oil sector.

But the gamble paid off handsomely for the offshore engineering arm, which was spun out of the family company in 1982 and listed 20 years later. Wood Group became synonymous with the transformation of Aberdeen from a fishing port to an oil and gas boomtown renowned for exporting its energy expertise across the world.

Yet, as Aberdeen grapples with the maturing of the North Sea basin, the group’s struggles with a heavy debt load and disappointing earnings performances have come to symbolise the city’s decline.

Wood Group had been one of the few homegrown success stories of the UK’s development of the North Sea, becoming a true multinational with global partnerships with titans of the oil industry such as ExxonMobil and Chevron. Its market value reached a peak of £5.3bn in 2018.

Paul de Leeuw, director of the Energy Transition Institute at Aberdeen’s Robert Gordon University, said Wood was an “iconic company” with a “whole legacy” in Aberdeen.

“For most of the duration of the industry, it’s been consistent through all the twists and turns,” de Leeuw said.

However, a decade of global expansion, launched after Sir Ian retired in 2012, has proved disastrous. The push ended in a debt-laden struggle for cash, haemorrhaging talent amid cost-cutting drives.

The company’s market value slid from that 2018 peak at first because higher interest rates and a slowdown in industry activity hit its business model. It tumbled by more than 60 per cent this February, to less than £200mn, after Wood revealed it was continuing to burn cash. A Deloitte review also uncovered “material” governance weaknesses in its projects division.

In addition, chief financial officer Arvind Balan was forced to step down on February 19 after admitting misstating his accountancy qualifications, following questions from the Financial Times. Iain Torrens, former CFO of brokerage ICAP, was brought in as an interim replacement this week.

Wood has $1.4bn in various debt facilities to refinance by October 2026, leaving it in a perilous position.

One industry veteran who has tracked the company’s travails closely said Wood had spun “its own death spiral”.

“This is a crisis that went slowly, slowly, slowly then suddenly, and that’s because the board has been much too hesitant to admit that things were unravelling,” the veteran said.

In less than two years, the company has failed to reach agreement on a takeover offer from private equity group Apollo that would have valued it at about £2.2bn and another from Dubai-based rival Sidara that would have valued it at £1.6bn. Sidara this week returned for its second buyout attempt at what is now expected to be a significantly lower price.

The veteran said Wood had ignored “multiple escape chutes on the way down”, particularly the takeover approaches.

“Now shareholders are going to presumably get a much worse deal,” he said. “Shareholders have a right to be angry.”

According to people close to the original discussions with Sidara last year, there was a perception that the Wood board scarcely believed a UK institution might be sold to a Middle Eastern rival.

That was a “failure to read the room”, one adviser said.

“There was a sense that these guys weren’t truly serious about a sale — that despite having completed due diligence that this was only the start of a discussion, rather than a precursor to hammering out the final details,” another adviser said.

The deal was “not existential” for Sidara, the person added.

“When they felt they weren’t being treated with enough respect, it made it easier to walk away,” the person said.

Wood Group’s problems also reflect wider challenges for its home region.

Melfort Campbell, an entrepreneur and veteran of the North Sea oil industry, described Wood as “hugely emblematic” of Aberdeen, saying its “core home business” in the North Sea had “dried up”.

Higher energy taxes have undermined investor appetite, fuelling fears of a brain drain among Aberdeen’s executive and corporate base, as the debate rages over new drilling for fossil fuels.

Reflecting widespread local anger at successive governments’ handling of the sector, Campbell said: “It’s been cut off at the knees for political expediency.”

Scotland’s highest civil court, the Court of Session, in January ruled that two of the few offshore UK oil and gas developments still being considered had been granted their consents incorrectly because their downstream emissions were not considered. The UK government will now have to reconsider whether they can go ahead.

With roughly 4,500 of its 35,000 global work force based in Aberdeen, Wood accounts for about one in 10 of north-east Scotland’s oil and gas jobs.

From the moribund housing market to empty stores on Aberdeen’s once-grand Union Street, residents feel that the city has, unlike in previous economic cycles, not benefited from the revival of the oil price since the 2014 crash.

Sir Ian, now 82, can still sometimes be seen driving around the “Granite City” in an Aston Martin sports car. He is working on philanthropic ventures around post-oil innovation and education.

His last corporate hurrahs were the 2011 sale of Wood’s well support division to General Electric for £1.75bn and the £600mn acquisition of rival PSN in 2010.

Around that time, it was spending about £200mn a year on mostly bolt-on acquisitions. That “slow, steady, but safe” approach changed with the £2.2bn acquisition of Amec Foster Wheeler in 2017, according to Mark Wilson, head of European energy research for investment bank Jefferies.

“The company has never really been the same since,” he said.

The big takeover offered diversification into new sectors, such as renewables and civil engineering. But it came with legal liabilities, including a corruption settlement. Net debt also jumped from $350mn in 2016 to $1.7bn in 2017. The latest update put average net debt at $1.1bn.

“The truth is they have struggled to get it down, even with asset sales,” Wilson said of the debt. “There is something in the business . . . that keeps on generating cash outflow each year.”

Wood Group declined to respond to questions about its recent performance.

Chief executive Ken Gilmartin in February claimed he had laid out “a very clear route to positive free cash flow in 2026.”

Investors are likely to be wary about performance after multiple previous promises of an imminent turnaround. It had been a “horror story” said one fund manager said. “They keep finding new losses, taking more writedowns.”

For the immediate future, however, the renewed Sidara talks are critical to Wood Group’s future.

One person close to Sidara said the company, founded in the 1950s by four university professors in Beirut, had a “strong strategic conviction” about Wood.

The two companies shared similar business outlooks, with a focus on “people and clients”, the person said.

Another person, who insisted Sidara had no intention of moving Wood out of Aberdeen, said Wood had expertise in both legacy and new energy industries.

Both agreed there would be challenges clarifying any outstanding governance issues and incentivising staff to stay.

The two sides were deep in late-night talks in an Aberdeen hotel last summer, only for the deal to collapse as Middle Eastern tensions rose ahead of Israel’s offensive against Lebanon in late August.

Yet industry observers in Aberdeen hope, on the basis of the understanding forged between the two groups last year, that Sidara could revive a company they regard as crucial to the area.

One said there were “enormous opportunities” for decades to come for the company, including offshore wind, gas production, well decommissioning, carbon capture and storage and hydrogen production.

Robert Gordon University’s de Leeuw said Wood was “a microcosm” of the oil and gas industry in the city.

“If Wood is busy, the industry is busy,” he said. “They are the early warning radar.”