FT : Elliott’s $164bn corporate break-up target

Elliott’s $164bn corporate break-up target

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.

FT : ‘The most badass airline on the planet’: Lebanon’s carrier flies through wa

‘The most badass airline on the planet’: Lebanon’s carrier flies through war
Middle East Airlines is only operator serving the country in midst of Israeli bombardment and fighting with Hizbollah

Ever since Carla Haddad can remember, stepping aboard a Middle East Airlines aircraft was like being “one step closer to home”.

Growing up abroad, the 39-year-old would regularly fly back to visit family in her native Lebanon, the MEA flights full to the brim with fellow citizens excitedly heading back in an annual summer ritual.

But in late September, as Israel stepped up its campaign against Hizbollah in Lebanon, where she now lives, MEA became more than just a memory. As the violence moved closer to her Beirut doorstep in September, Haddad and her family boarded an MEA flight to the safety of Marseille. “It was the lifeboat that helped us escape yet another horrible war,” she said.

MEA has long been a mainstay of Lebanon’s collective imagination, with memories coloured by the country’s propensity for rose-tinted nostalgia. Lebanese have mixed feelings about their national carrier: it is as beloved for reuniting families during the lengthy civil war and serving sweet, fragrant knafeh for breakfast, as it is hated for its sky-high peak season prices and ageing fleet.

But for the past seven weeks, as its pilots have deftly navigated Israeli air strikes, MEA has become a beacon of national pride. The sole remaining airline currently flying in and out of Lebanon, MEA has helped ferry tens of thousands of desperate passengers out of the country and brought in vital humanitarian aid.

And it has done so from the country’s only commercial airport in south Beirut, which is located uncomfortably close to areas that Israel has fiercely bombarded in recent weeks.

While airport traffic has dropped to 30 per cent of its prewar average, MEA said it is still running only slightly fewer flights each day from its seasonal average of 45. But those flights have typically been departing Beirut full and returning two-thirds empty. While tens of thousands of Lebanese fled, others continue to travel for work or to visit family.

“Our goal is not to make money right now, it’s to keep this airport open and keep things running as best as we can for the country,” said Captain Mohammad Aziz, adviser to MEA chair Mohamad El-Hout.


The 79-year-old airline is almost entirely owned by Lebanon’s central bank, which has been at the centre of the country’s devastating economic meltdown in recent years. MEA has not released financial statements since 2021.

But photographs of the national carrier’s aeroplanes flying near blazing fires and thick plumes of black smoke — some of which were generated by artificial intelligence — have fuelled its newfound mythology, leading some to dub it “the most badass airline on the planet”. One Beirut bakery even made MEA-themed cupcakes, topped with planes and pilot hats, in a tribute to the airline’s “heroes”.

“The past six weeks have truly highlighted the resilience of our little airport and the exceptional airmanship of MEA pilots,” said Richard John, 33, a Lebanese aviation enthusiast who grew up close to the airport.

John has watched in awe as pilots touch down behind a veil of smoke while Israeli warplanes bomb nearby targets. “In other countries, total panic would ensue,” he said. “But we only have this one little airport. No diversions, no alternates, no room for panic.”

Aziz played down the dangers, saying while the pilots were courageous, MEA was conducting daily risk assessments and said “no planes were flying unless the conditions are 100 per cent safe”.

While risk and cost considerations have scared away other airlines, Aziz said, “MEA has a duty to keep going.”

This is despite immense challenges. GPS jamming by Israel has forced MEA’s pilots to return to systems that predate autopilot. And about 20 per cent of the airline’s fleet of 22 Airbus planes is parked overseas, owing to spiralling insurance costs and to reduce exposure to the conflict.

The airline, which along with its subsidiary companies employs about 5,000 people, has also reduced the number of staff at the airport in case they need to evacuate.

When Israel and Hizbollah last fought a war in 2006, Israeli strikes almost immediately put the airport out of commission by bombing its runways and fuel depots. While the airport has been spared this time around, it is eerily quiet nevertheless, with shops and cafés empty.

Aziz and Lebanese government officials told the Financial Times they have been assured through UN and western officials that Israel would not target the airport if it was being used solely for civilian purposes. Aziz said there was a “gentleman’s agreement” in place such that Israel would give a two-hour warning if it was to attack.

Iran-backed Hizbollah, which is the dominant political and military force in the country, has historically exerted considerable influence over the airport’s security functions. Israel has accused the militant group of using it to transport weapons, something Hizbollah and the state deny.

Government officials and diplomats say that since Israel stepped up its campaign against Hizbollah, Lebanon’s government and army have taken extra precautions to ensure the airport was free of military activity.

This has meant flights coming from destinations Israel considers suspicious, such as Iran, Iraq and Algeria, have been subject to greater scrutiny, even when carrying humanitarian aid, government officials, aid workers and diplomats told the FT.

In September, Lebanon blocked an Iranian plane from landing in Beirut, following Israeli threats. In another instance last month, dozens of boxes of medical aid brought by an Iranian official could not be unloaded until they underwent inspection by Lebanese Armed forces, they said.

“There’s continuous communication between the prime minister, the US ambassador and the MEA chair,” Aziz said.

Underlining the very real danger, Israel issued an evacuation order last week for a building between two of the airport’s runways.

A flight from Riyadh landed just 15 minutes after the evacuation order was issued shortly before midnight, with one passenger describing scenes of quiet panic as airport workers, cab drivers and travellers scrambled to leave the airport before Israel struck within the hour.

In recent weeks, MEA has worked with the government, army and aid agencies to bring in humanitarian goods, as well as bringing in at least 27 tonnes of medicine in individual efforts driven by its vast diaspora.

“How would we have sent desperately needed medicines to Lebanon without MEA right now?” said Larissa Ratl, 35, who helped organise a 1-tonne shipment last month.

After weeks abroad, Haddad has started thinking about returning to Lebanon from France, inspired by the trickle of people who have gone back after weeks overseas. Her toddler has been watching MEA’s dance-filled safety video on repeat since first hearing it when they fled in September.

“She keeps repeating a catchy line from the video, ‘Let’s fly, let’s fly away’, and pretending she’s an aeroplane,” she said. “I’m scared to go back, but sooner or later, we have to go home.”

>>> US After Hours Summary: DAVE +32.4%, PAY +26%, CAVA +16.2%, ICUI +6.7%, SPOT

After Hours Summary: DAVE +32.4%, PAY +26%, CAVA +16.2%, ICUI +6.7%, SPOT +6.4% higher on earnings; RIVN +8.2% to launch JV with VW; HNRG +17.7% on deal with data center developer

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: DAVE +32.4%, PAY +26%, RKLB +23.5% (also signs multi-launch agreement with satellite operator; also awarded a federal defense contract), CAVA +16.2%, NTRA +14%, DNA +11.2%, HNST +10.6%, AMBC +10.4% (also authorizes new $50 mln share repurchase program), RPAY +7.5%, PRDO +7.4%, ICUI +6.7% (also creates joint venture), SPOT +6.4%, MODG +6.1%, SDRL +6%, CAE +5.1% (also CEO to step down), RXT +4.9%, FNA +3.5%, BHVN +3.3%, DHT +2.9%, PUBM +2.6%, OXY +0.8%, NATL +0.6%, TTGT +0.3%, SU +0.1%

Companies trading higher in after hours in reaction to news: HNRG +17.7% (signs term sheet with data center developer to supply power for 10+ years; also reports earnings), DSP +12.8% (acquires IRIS.TV), RIVN +8.2% (RIVN and Volkswagen (VWAGY) to launch joint venture), SNY +6.6% (treatment of acute myeloid leukemia granted orphan status by FDA), MRVI +6.3% (Exec Chairman disclosed the purchase of 175,000 shares), MIST +4.3% (files $250 mln mixed shelf securities offering), EXAI +2.2% (EXAI shareholders voted in favor of RXRX merger), RCEL +1% (signs distribution agreement with Revolution Surgical to expand into Australia and New Zealand), RXRX +0.9% (EXAI shareholders voted in favor of RXRX merger), IONQ +0.7% (issued 5 new patents), VKTX +0.7% (to Present Data from Phase 2b VOYAGE Study), AB +0.4% (reports Oct AUM), AMZN +0.4% (Jeff Bezos sold another 5,992,724 shares), JNJ +0.2% (receives IDE approval for OTTAVA robotic surgical system), AER +0.1% (insurance policy settlement update)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SIBN -22.5%, CHGG -14.4% (also undertakes additional restructuring, $300 mln increase to securities repurchase program), ZI -12.8%, RUM -12.2%, RKT -10.9%, SOUN -7%, PGNY -6.9%, PLUS -6.3%, MARA -6%, CART -5.3%, IAS -5%, PRTA -5%, LNW -4.4%, SWKS -2.6%, CNNE -1.6%, CRNX -1.3% (also to showcase pipeline advancements), MTTR -1.2%, HPP -0.5%, NVEI -0.5%, WULF -0.4%, AHR -0.1%

Companies trading lower in after hours in reaction to news: SAVE -39.1% (moving toward bankruptcy after merger talks with ULCC break down, according to WSJ), GRPN -20.7% (negotiates with convertible notes holders; also reported Q3 results), SGMO -9% (files $500 mixed shelf securities offering), GDYN -8.5% (stock offering), VVX -5.4% (stock offering), LAZR -4.4% (to delay 10-Q filing), OS -3.7% (15 mln share offering), EBS -1.9% (stock offering by selling shareholders, relates to warrants), SHOP -1.8% (files mixed shelf securities offering), ETNB -1.1% (commences $100 mln offering), EXP -0.4% (files mixed shelf securities offering), RGEN -0.4% (to delay 10-Q filing)

TechCrunch : The Rivian-Volkswagen joint venture deal is now up to $5.8B

The Rivian-Volkswagen joint venture deal is now up to $5.8B

Rivian and Volkswagen Group have finalized a multi-billion-dollar joint venture to develop software, paving the way to let the German auto giant leverage the EV startup’s more technical chops in the coming years. Volkswagen will invest up to $5.8 billion by 2027, about 16% more than when the deal was first announced in June.

Volkswagen Group has already made an initial investment of $1 billion in the form of a convertible note.

The new joint venture — Rivian and Volkswagen Group Technologies — will officially kick off November 13 as an independent company. And, if successful, it could be a boon for both companies. Rivian gets a needed injection of capital and the opportunity to diversify its business, while VW Group gains a next-generation electrical architecture and software for EVs that will help it better compete. Both companies argue the joint venture will reduce development costs and help scale new technologies more quickly.

The companies designed the joint venture as a 50-50 partnership with co-CEOs, who will report into both Rivian and Volkswagen Group. Rivian’s head of software Wassym Bensaid and Carsten Helbing, who is chief technical engineer at Volkswagen Group, will lead the joint venture. Developers and software engineers from both companies will join the joint venture, according to Rivian and VW. The team will be based initially in Palo Alto, California. Three other sites are in development in North America and Europe, the companies said Tuesday.

VW, and more specifically its software arm Cariad, has struggled in recent years to deliver what some in the industry have dubbed a “software-defined vehicle.” This jargon industry term, sometimes abbreviated SDV, means any car, truck or SUV with capabilities that can be upgraded over time (or even new functions added) via software. Automakers view these so-called software-defined vehicles as a new way to make money via in-car entertainment and services; it’s also seen essential for automakers aiming to compete with Tesla.

Earlier this year, Rivian started producing the next-generation of its R1T pickup truck and R1S SUV, an upgrade that reworked the guts of its vehicles, including a new electrical architecture and compute platform. That new electrical architecture is seen internally as a key innovation at Rivian and one that allows the company to wirelessly update software.

With the Rivian-VW joint venture steering software development for the German automaker’s next-generation of EVs, Cariad’s future is uncertain. VW Group CEO Oliver Blume said Tuesday that Cariad will continue to play a “central role” in its global software strategy at Volkswagen Group, adding the software arm will be responsible for the existing software platform in today’s vehicles over the next decade. Cariad is also in charge of software governance, which covers autonomous driving, data management and cloud services.

Prior to the initial June announcement, Cariad had hired at least 23 of Rivian’s top employees over the past several months to bolster its Silicon Valley outpost called the SDV Hub. The SDV hub is ground zero for Cariad’s next-generation software architecture known as “software 2.0.”

Now, Rivian will contribute even more talent towards the joint venture. “Rivian will be contributing a significant portion of the team,” Rivian founder and CEO RJ Scaringe said during a press conference Tuesday afternoon.

The JV team plans to use the existing Rivian electrical architecture and software technology stack to enable the launch of Rivian’s R2 midsize SUV in the first half of 2026 and support the expected launch of the first models from the Volkswagen Group as early as 2027, the companies said.

Last month at Disrupt 2024, Bensaid described the joint venture as an opportunity for Rivian to bring its software to multiple brands, including the VW spinoff Scout. He said each brand that uses the joint venture’s software will “continue to have their own identity,” as well as “their own features.”

“We’re enabling competition,” Bensaid said at the time.

Scout has since confirmed that its vehicles will be among the first to use the new zonal architecture built by the Volkswagen Group-Rivian joint venture.

Reuters : Blackstone backs Brigade with $300 million investment for private cred

Blackstone backs Brigade with $300 million investment for private credit, CLOs

Summary
  • Blackstone's Multi-Asset Investing unit to invest $300 mln with Brigade
  • Blackstone's Strategic Alliance Fund IV allocates $150 million to new private credit strategy
  • $150 mln to support Brigade's existing CLO business

NEW YORK, Nov 12 (Reuters) - Hedge fund Brigade Capital is receiving a $300 million investment from Blackstone (BX.N), opens new tab to help build its new private credit strategy and expand its collateralized loan obligations (CLO) platform, two people familiar with the matter said.

Brigade, an established credit investment specialist that made headlines earlier this year with a joint bid for department store Macy's (M.N), opens new tab, is building expertise in the hot private credit market where some $2 trillion in loans are being made to corporations by non-banks.

The Multi-Asset Investing unit of Blackstone will allocate $150 million to the new Brigade strategy. Brigade raised some $500 million this year for the strategy and plans to focus on opportunities in the lower middle market, where companies generate between $10 million and $50 million in earnings before interest, taxes, depreciation and amortization, one of the sources said.

Blackstone and Brigade representatives declined to comment.

The lower middle market is full of lending opportunities with higher spreads and yields because there is less competition. Some examples of lower middle market borrowers include vacation rental company Awayday and mattress and bedding retailer Saatva.

Brigade's efforts in private credit began in earnest when it poached Jenny Lee from JPMorgan Chase and Jim Wolf from Whitehorse Capital two years ago to spearhead the strategy. Their strong networks and years of experience are expected to help source smaller deals that are often tougher to find, one of the sources said.

Blackstone is also allocating $150 million to support Brigade's existing CLO business with dedicated equity commitments for new CLOs globally. The capital is coming from the Multi-Asset Investing unit's Absolute Return platform, which is also run by Ben-Ur. The Brigade CLO business currently has some $11 billion in assets across 25 deals in the U.S. and Europe.

CLOs offer a diversified exposure to the broadly syndicated loan market and CLO equity is structured to take advantage of volatility in the loan market given non-mark-to-market leverage and term financing.

WSJ : Former Walmart Executive’s Startup Near Deal to Buy Grubhub

Former Walmart Executive’s Startup Near Deal to Buy Grubhub
Marc Lore’s Wonder is close to a deal to buy the food-delivery startup from Europe’s Just Eat Takeaway.com

Wonder, a food-delivery startup led by former Walmart WMT 0.93%increase; green up pointing triangle executive Marc Lore, is in advanced talks to buy Grubhub from Europe’s Just Eat Takeaway.com TKWY -1.87%decrease; red down pointing triangle, according to people familiar with the matter.

The details
A deal for Grubhub could be finalized imminently, assuming the talks don’t fall apart, the people said. Amsterdam-based Just Eat bought Grubhub in 2021 in a deal valued at over $7 billion. Grubhub had been in discussions to sell itself to Uber before it made a surprise move to join forces with Just Eat instead.

But the deal drew criticism from Just Eat’s shareholders, some of whom argued it was a distraction. In 2022, Just Eat said it was considering selling Grubhub after its U.S. subsidiary reported a decline in orders following a sales boom during the pandemic.

Grubhub is likely to be valued below $1 billion in any deal.

The rationale
Wonder, launched in 2018, originally focused on operating mobile kitchens from a fleet of trucks that aimed to recreate meals from popular restaurants.

Last year it switched strategies, closing the trucks and opening physical locations instead. It has a few dozen locations in the New York City area and aims to have 100 locations by the end of next year, Lore said in an interview last month.

Buying Grubhub would boost Wonder’s revenue as it continues to raise money. It also offers a direct source of delivery drivers and related technology.

Wonder was last valued at around $3.85 billion in a 2022 financing round, according to PitchBook. The startup also owns meal-kit provider Blue Apron, another once-highflying startup that struggled in more recent years.

Lore joined as CEO in 2021 after leaving his role as chief of U.S. e-commerce operations for Walmart.

The context
Grubhub, which was founded in 2004, pioneered online ordering in the U.S. But it came under pressure as it warded off competition from newer entrants such as DoorDash and Uber Eats.

Just Eat was created in 2020 through the $11.1 billion merger of the U.K.’s Just Eat and Netherlands-based Takeaway.com. The deal combined one of the biggest food-delivery companies in the U.K. with a major player in the space in continental Europe.

After its discussions with Grubhub fell apart, Uber pivoted and made a $2.65 billion acquisition of smaller food-delivery rival Postmates Inc. in late 2020.

>>> Groupon entered into privately-negotiated agreements with holders of 1.125%

Groupon entered into privately-negotiated agreements with holders of 1.125% Convertible Senior Notes due 2026; reported Q3 results

  • Revenue was $114.5 million in the third quarter 2024, down 9% (10% FX-neutral) compared with the prior year period (low-end of guidance). Local revenue was $105.0 million in the third quarter 2024, down 9% (10% FX-neutral) compared with the prior year period. Adjusted EBITDA of $14.8 million (above the high-end of guidance),
  • Pursuant to the Exchange and Subscription Agreements, Groupon will: exchange $176,260,000 aggregate principal amount of 2026 Notes held by the participating existing holders for $176,260,000 aggregate principal amount of Groupon's newly issued 6.25% Convertible Senior Secured Notes due 2027 (the "2027 Notes"); issue and sell to certain participating existing holders $21.0 million aggregate principal amount of 2027 Notes for gross cash proceeds of $20.0 million (representing an issue price of 95%). A total of $197,260,000 2027 Notes will be issued upon close of the transaction, which is expected to be on or about November 19, 2024.

>>> US Notable earnings/guidance movers: PAY +22.3%, RKLB +19.5%, CAVA +14.9%, N

Notable earnings/guidance movers: PAY +22.3%, RKLB +19.5%, CAVA +14.9%, NTRA +8.9%, CAE +8.7%, SPOT +8.5% on upside; IAS -14.4%, ZI -9.3%, PGNY -8.3%, RKT -8.2%, CART -2.9% on downside
  • Earnings/guidance gainers: PAY +22.3%, RKLB +19.5%, CAVA +14.9%, NTRA +8.9%, CAE +8.7%, SPOT +8.5%, HPP +7.1%, ICUI +6.2%, RXT +4.9%, DHT +3.8%, MODG +3.8%, PUBM +2.6%, PRTA +2.2%, NATL +1.7%
  • Earnings/guidance losers: IAS -14.4%, CHGG -12.7%, ZI -9.3%, PGNY -8.3%, RKT -8.2%, WULF -5.6%, MARA -5.3%, CART -2.9%, SOUN -2.8%, LNW -2.4%, CNNE -1.6%, CRNX -1.6%

>>> US Close Dow -0.86% S&P -0.29% Nasdaq -0.09% Russell -1.77%

Closing Stock Market Summary
The stock market took a breather after a solid run since the election results last week. Losses were muted, though, compared to gains since last Tuesday's close. The Russell 2000 fell 1.8% today, which leaves the index up 5.8% since the election.

Downside moves were fueled by profit-taking, along with rising market rates. The 10-yr yield settled 12 basis points higher at 4.43% and the 2-yr yield settled nine basis points higher at 4.34%.

Many stocks moved lower due to broad selling interest. The Invesco S&P 500 Equal Weight ETF (RSP) declined 0.8% and nine S&P 500 sectors registered losses. The consumer discretionary sector (-1.1%) was among the worst performers, clipped by losses in Tesla (TSLA 328.49, -21.51, -6.2%) and Home Depot (HD 403.08, -5.21, -1.3%). TSLA shares fell under consolidation efforts and HD shares responded to earnings news.

Gains in some mega cap names provided some offsetting support to the broader equity market. Microsoft (MSFT 423.03, +5.02, +1.2%) and NVIDIA (NVDA 148.29, +3.03, +2.1%) were standouts in that respect.

The New York Fed released its Survey of Consumer Expectations for October was released this morning, but received a muted response from equities. It showed that year-ahead inflation expectations dipped to 2.9% from 3.0% while the three-year outlook decreased to 2.5% from 2.7%, and the five-year expectations dipped to 2.8% from 2.9%.

Today's economic data was limited to the NFIB Small Business Optimism survey, which rose to 93.7 in October from 91.5 in September. Wednesday's calendar features the October Consumer Price Index and core-Consumer Price Index at 8:30 ET.
  • Nasdaq Composite: +28.5%
  • S&P 500: +25.5%
  • S&P Midcap 400: +18.4%
  • Russell 2000: +18.0%
  • Dow Jones Industrial Average: +16.5%