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US asset manager will join case over decision when UBS took over struggling rival

US asset manager AllianceBernstein is preparing to sue Switzerland for $225mn over the decision to wipe out $17bn of debt when the country’s government orchestrated the takeover of Credit Suisse by rival UBS last year.

The group, which manages about $800bn in assets, is set to be added next month as a plaintiff in a case brought by law firm Quinn Emanuel Urquhart & Sullivan on behalf of Credit Suisse bondholders, according to people familiar with the details.

AllianceBernstein will be the first large institutional investor to join the claim and is expected to seek about $225mn in damages from the Swiss state, taking the total value of the lawsuit to $375mn, the people said.

The case, which was first filed in the Southern District of New York in June, relates to the controversial writedown of Credit Suisse’s AT1 bonds when the scandal-hit lender was forced into a rescue merger with UBS in March last year.

Quinn Emanuel has argued that the deal was brokered by the Swiss government and was an unlawful encroachment on investors’ property rights.

AT1 bonds are a form of bank capital that converts into equity or is written down when a lender runs into trouble. However, the UBS Credit Suisse deal upended the traditional hierarchy among bank creditors by imposing losses on bondholders while allowing equity investors to recover $3.3bn.

The Swiss government, which is being represented by law firm Wachtell, Lipton, Rosen & Katz, filed a motion last week to dismiss the Quinn Emanuel complaint.

In court filings, Switzerland argued that as a foreign state, it was entitled to sovereign immunity from the lawsuit and that the dispute should be adjudicated in a Swiss court.

AllianceBernstein and Quinn Emanuel declined to comment. Lawyers representing the Swiss Confederation did not respond to a request for comment.

The Financial Times has previously reported that lawyers at Quinn Emanuel chose to sue in the US because they believe there is a greater chance of convincing a judge to waive the country’s sovereign immunity rights.

Legal cases against sovereign states for expropriation are rare because many countries have reciprocal investment treaties. However, Switzerland is not party to such treaties in many of the countries where the Credit Suisse AT1 investors reside, most notably the US.

Quinn Emanuel has a history of pursuing legal cases against nation states. The firm last year won a long-running UK legal battle with Argentina over sovereign bonds that the country issued as part of its post-financial crisis debt restructuring.

The Swiss government’s decision to introduce an emergency law that allowed Finma, the country’s financial regulator, to write down Credit Suisse’s AT1 bonds has generated more than $9bn of legal claims. Most have targeted Finma.

A Swiss parliamentary commission that has been investigating the causes of Credit Suisse’s collapse and the government’s role in the UBS takeover is expected to publish its findings by the end of the year.

The fight for Banco BPM heats up

Europe has long been ripe for bank consolidation. The first signs of the potential M&A wave in the sector have arrived this year, first over Germany’s Commerzbank, and now for the Italian lender Banco BPM.

On Friday, France’s Crédit Agricole — which is already Banco BPM’s biggest shareholder — further boosted its stake in the lender.

The French bank entered into financial contracts that will lift its holding from 9.9 per cent to 15.1 per cent. And that’s just the latest step. Crédit Agricole’s plan is to ultimately get approval from regulators to own up to 19.99 per cent.

This sounds familiar because a similar stake-building strategy using derivatives played out a couple of months ago between UniCredit and Germany’s Commerzbank.

UniCredit and its chief executive Andrea Orcel have been on the prowl to build a European banking champion. But like the Commerzbank situation, Banco BPM also rejected the Italian bank’s €10.1bn takeover bid in late November.

Banco BPM hasn’t just been sitting around, either. It took a 5 per cent stake in Monte dei Paschi di Siena (MPS) a few weeks ago.

The new stake in MPS spurred Italian Prime Minister Giorgia Meloni’s government to hope that the smaller players in the country’s banking sector might team up to compete with UniCredit and Intesa Sanpaolo, the country’s largest lender.

While Crédit Agricole’s bigger stake in BPM Banco means that the French bank now might be a bigger hurdle between UniCredit and a takeover, UniCredit says it doesn’t change anything.

“We were always prepared to negotiate with [Crédit Agricole], as this would have been necessary whatever the scale of their shareholding,” UniCredit said in response to the Crédit Agricole news.

Orcel and Crédit Agricole chief executive Philippe Brassac had been scheduled to meet to discuss the Banco BPM takeover bid, according to one person with knowledge of the talks.

But whatever the outcome of the approach, the country’s takeover rules put Banco BPM in limbo. Under the so-called passivity rule, the bank can’t buy further stakes in MPS, or bump up its offer for the asset manager Anima, which it has been pursuing.

Can Banco BPM successfully fend off the overtures?

Dealmakers: say goodbye to your weekends

Deals, typically announced on Monday after a weekend sprint, have for the past two years languished at decades-level lows. But it looks like lawyers, investment bankers and other advisers have busier weekends to look forward to.

On Monday a rush of big deals crossed the wire in the US, which amounted to more than $35bn in transactions. After a long drought, so-called merger Mondays might be back.

It started with Omnicom, which agreed to a $13bn all-stock acquisition of rival advertising group Interpublic, a tie-up that would create the world’s largest advertising agency.

The combined company, with $25bn in annual revenue, will be better positioned to compete with Google parent company Alphabet and Facebook parent Meta in competing for digital advertising dollars.

Then came GTCR and Apax Partners’ $13.4bn sale of insurance brokerage AssuredPartners to competitor Arthur Gallagher, one of the year’s largest asset sales. Finally, Novolex’s near-$7bn deal for Pactiv Evergreen, the latest consolidation in the packaging and manufacturing industry.

For some dealmakers, the numerous deals are a matter of convenience more than broader optimism. With a few weekends left in the year, the time for announcing transformative transactions without spoiling Christmas dinner or a New Year’s holiday party is limited.

“I wouldn’t read into it,” one of Wall Street’s top mergers and acquisitions bankers told DD. “If you’re trying to get deals announced, you’re trying to get them announced quickly.”

But after several years of a record-low number of deals, other lawyers and investment bankers can’t help but interpret Monday’s spate of events as a sign of more to come.

The imminent return of Donald Trump to the White House has lifted hopes that larger corporations will pursue transformative transactions.

That’s even if Gail Slater, his nominee to lead the Department of Justice’s antitrust division is considered an advocate of tough antitrust stances (at least on Big Tech).

“It can’t get worse than the antitrust environment we’ve been in,” said George Casey, the global chair of Linklaters’ corporate practice.

That’s led some big corporations to express curiosity about the possibility of tie-ups. Get ready for a host of “exploring takeover” headlines — such as Mondelez cozying up to US chocolate maker Hershey, as Bloomberg reported.

At a minimum, dealmakers are fielding more phone calls. At least, that’s the case for prolific Paul Weiss dealmaker Scott Barshay.

“Clients who’ve been sitting on the sidelines for the past four years are suddenly eager to explore deals,” he said. “Even the challenging ones.”

Barrick ‘never’ planned to use dealmaker Ian Hannam on Randgold merger

Denial by chair of Canadian miner comes as veteran commodities banker claims he engineered $6bn deal but was not paid

Barrick Gold’s chair said he “never” planned to appoint veteran commodities dealmaker Ian Hannam to advise on its tie-up with Randgold, after the banker sued claiming he engineered the $6bn deal but was not paid.

John Thornton told the High Court in London that while he had been happy to have Hannam’s views on the merger, as there was “very little downside” to doing so, it had always been his intention to use Wall Street rainmaker Michael Klein on the 2018 deal.

Thornton, one of the mining industry’s most influential figures, appeared in the witness box on Monday in a case that is shedding unusual insights into how top investment bankers pitch to executives — and scrap over fees — on multibillion-dollar deals.

Hannam & Partners, Hannam’s boutique, is demanding up to $18mn from Canada’s Barrick Gold, whose combination with London-listed Randgold created what was at the time the world’s biggest gold miner.

Hannam claims to have been cut out of the deal, which would “not have happened without me”, at the last minute. He told the court he had been “shocked” to see Klein’s firm named in the release that announced the merger but no mention of H&P.

Thornton said in his witness statement that he sensed Hannam was “relatively close” to Randgold founder Mark Bristow and was “therefore in favour of keeping a line of communication open with Mr Hannam to the extent that he could provide insight into what was going on at Randgold”.

However, he added: “I knew that I was never going to appoint Mr Hannam, because I favoured and had access to Michael Klein, with whom I had been close for many years.”

Klein “was always going to be Barrick’s adviser in connection with the Randgold merger so long as I was involved”, he added.

Thornton, a former Goldman Sachs banker, told the court that he had “quietly started looking for a merger partner” after his appointment as executive chair of Barrick in 2014. He raised the idea of a nil-premium merger with Bristow the same year.

Thornton said he viewed Hannam, a former special forces soldier who earned a reputation as the “king of mining M&A”, “favourably” as a “very distinct and colourful character”.

But he dismissed several of his claims. While it was the case that Hannam devised the code name British Rail for the deal, he said this was “of no substantive importance”.

“I did not need Ian Hannam’s help to do a merger,” Thornton added. Lawyers for Barrick have said there was “no written evidence” of an agreement with H&P for the payment of fees.

Hannam told the court that he had been in “regular dialogue” with Thornton about the merger. In 2018, Thornton told him that Klein would be Barrick’s financial adviser but that he and Bristow had agreed that Randgold would engage Hannam’s firm, an arrangement he had accepted.

Klein has been closely involved in several of the mining sector’s biggest deals, including the $90bn Glencore Xstrata merger in 2012. He also advised Glencore on its hostile bid for Canada’s Teck Resources last year. Teck rejected the takeover attempt, but sold a $6.9bn majority stake in its steelmaking coal business to Glencore.

Following the merger of Barrick and Randgold, Klein advised Barrick on an $18bn attempt to acquire gold miner Newmont, though that was ultimately unsuccessful.

The case continues.

The slowdown in sales of electric vehicles has led to smaller and postponed orders for next-generation batteries. But some next-gen battery makers are eyeing a lifeline from an unexpected source: artificial intelligence.

AI-enabled smartphones and data centers housing AI servers both need large, fast bursts of energy, precisely what silicon anodes deliver.

Group14 Technologies of Woodinville, Wash., has locked up one deal. Next month, Honor, China’s fourth-largest smartphone maker, will begin selling the $1,479 Magic 7 Pro, an AI-enabled phone equipped with Group14’s anode, in Europe. Among the phone’s features will be Yoyo Agent, a personal AI assistant that Honor says trains on its user’s habits and can fulfill a task such as ordering coffee or buying a plane ticket with a simple request rather than requiring several steps.

The phone also includes a souped-up camera that can detect deepfakes, and a slew of other AI-powered features that require lots of energy, especially given widespread user expectations of a daylong battery, something silicon anodes also provide. Hence the Magic 7 includes a Qualcomm Snapdragon, an especially energy-efficient chip designed for AI-enabled devices. But the chip apparently isn’t efficient enough to run all the AI features installed on the phone, so Honor also included Group14’s silicon anode, which holds more lithium than a conventional graphite anode and thus adds 20% more energy.

For a couple of years, Group14 had been expecting its anodes to be installed in some Porsche EVs this year. Now the anodes likely won’t go into the German carmaker’s EVs before 2026 or 2027, said Group14 CEO Rick Luebbe.

In the meantime, Group14 is earning revenue from Honor, though Luebbe declined to disclose how much. Porsche and Honor did not respond to emails.

Group14 is not alone: Gene Berdichevsky, CEO of Sila Nanotechnologies, which also makes next-gen silicon anodes, said he is in negotiations with the makers of AI-enabled phones. Any deal he is able to conclude would help tide his company over until later this decade, when EV prices are likely to be far lower, models much improved and sales higher. Speaking to analysts in October, Raj Talluri, CEO of Fremont, Calif.–based Enovix, a maker of silicon-based batteries, said AI-powered phones were “driving significant pull for our products and the transformatory leap in energy that we can provide.”

Most Western next-gen battery makers have been struggling for at least 18 months, mired in the “valley of death,” the period between the creation of a prototype and its commercialization at large scale, as we have reported. More recently, companies have started to fail: Last month, the best capitalized of the battery startups—Sweden’s Northvolt—declared bankruptcy, signaling just how dire conditions are.

The frenzy over AI is unlikely to be a long-term savior for U.S. and European battery startups—the revenue on sales of tiny phone anodes won’t be large enough—but it looks like perhaps a medium-term life preserver for some of them. “If you look at what the path is for the more advanced AI chips, they are just getting more and more power hungry,” Group14’s Luebbe said. “So the problem is not getting better, it’s getting worse with each step in technology.”

The Battery’s AI Play

The AI play in batteries isn’t only about smartphones. AI data centers housing thousands and often tens of thousands of graphics processing units consume a lot of power; so prodigious is their energy appetite that Amazon, Google and Microsoft are attempting to use nuclear plants to power future data centers.

Luebbe says next-gen lithium-ion batteries can help handle the load. Data center operators can draw power from the grid while they train their AI models. But when the models need updating, the data centers require massive one- or two-minute surges of power multiple times a day, said Venkat Viswanathan, an expert on energy storage and machine learning at the University of Michigan.

Molicel, a Taiwan-based battery maker highly respected in the West, is using Group14’s anode in the P50B, a battery designed for AI data centers. Its batteries—placed directly in racks containing the AI servers—can provide energy in fast bursts matching the one- to two-minute requirement, Luebbe said.

​​Last month, Robin Zeng, CEO of Contemporary Amperex Technology Ltd., the world’s largest lithium-ion battery maker, told Reuters that demand for batteries in data centers and other uses could be 10 times that for EVs. Zeng said CATL would develop battery systems for data centers for AI companies.

Qichao Hu, CEO of lithium-metal anode developer SES AI, said data center operators had asked him to develop electrolytes that could extend the life of data center batteries. In the round-the-clock use of batteries in data centers, especially if they are located in cold climates, lithium can gum up the anode—what is called lithium plating—and cause the battery to fail, Hu said.

SES scientists found that a variant of the solvent-in-salt electrolyte they were already using in their in-house lithium-metal battery hindered the plating to some degree; they have since been looking for other electrolytes using the company’s AI models. “The rise in demand for data center storage is really exciting,” Hu said.

But smartphones appear to be the largest AI play for the next-gen battery companies while they wait for EV sales to improve. In Enovix’s second-quarter call with analysts in July, CEO Talluri said smartphone company representatives had asked him whether Enovix could increase the energy capacity of its batteries beyond the usual 5 ampere-hours, allowing them to run longer, handle more programs and generally work with the AI features; they wondered if Enovix could make them 6 Ah but in the same size battery—about the dimensions of a playing card, taking up much of the space in a smartphone.

Three months later, Talluri said during Enovix’s third-quarter call in October that the same smartphone representatives had upped their request: Now they wanted 7 Ah in the same space.

Can you give them 7 Ah, and if so, when? one analyst asked Talluri. He did not respond to messages for this column.

“We are actually talking about next year,” Talluri replied to the analyst. “And I actually think the ask is going to keep going up if we can produce higher and higher energy capacity batteries in the same footprint. Because the applications we see now are just taking more and more power from the battery.”