FT : Shell explored quitting Europe and moving to the US

Shell explored quitting Europe and moving to the US
New boss part of executive review that discussed potential shift in effort to close value gap with American rivals

Shell’s top executives explored moving the Anglo-Dutch energy group to the US in a proposal that threatened to deliver a hammer blow to the City of London.

Wael Sawan, the oil and gas group’s new chief executive, was among a group of top managers who in 2021 discussed the advantages of shifting the company’s listing and headquarters to the US, according to people familiar with the talks.

The executive team — where Sawan oversaw oil, gas and renewables before his move to the top job this year — ultimately decided to leave the Netherlands but consolidate its base and stock market listing in London.

“During formal discussions about the HQ relocation, Wael did not advocate for a move to the US,” Shell told the Financial Times.

Shell is the UK’s largest company, with a market capitalisation of £176bn and revenues of £316bn. Its loss to the US would crystallise fears about London’s status as a financial centre, with a dearth of new listings and a series of takeovers risking hollowing out the UK’s equity markets.

Although the US idea was ultimately rejected, the motivation that led to the potential move remains: Sawan is concerned about the yawning valuation gap between Shell and US-listed rivals ExxonMobil and Chevron.

On the US market, Exxon and Chevron are valued at about six times their cash flow, compared with about three times for Shell.

Since his promotion to chief executive in January, Sawan — who met investors in New York this month — has appointed a team of executives to review parts of Shell’s business as it seeks to win back American investors, according to people familiar with his plans.

Adjustments could include dropping the commitment made by previous Shell boss Ben van Beurden to allow the company’s oil production to decline by 1-2 per cent a year from 2019 as part of its plan to cut emissions, the people said.

Sawan and other Shell executives are said to have been impressed by the 10 per cent jump in UK rival BP’s shares this month after it stunned the sector by paring back its plans to reduce oil and gas production by 40 per cent by 2030.

Asked on a recent investor call about Shell’s commitment to reducing oil output, Sawan said the “longevity” of the group’s upstream oil and gas business was “a core part of our focus”.

Shell said it remained committed to the energy transition strategy, adding that it would update investors in June.

The strategy discussions at Shell come as energy companies wrestle with how to maximise returns during the energy transition, after the upheaval wrought by Russia’s assault on Ukraine revived fears about energy security and delivered record profits for the industry.

In the past three years, Shell and other European oil companies have pledged to overhaul their businesses to cut emissions but struggled to convince investors that they can deliver attractive returns from their low-carbon investments.


Sawan has said divisional heads will have to justify the cost of running their businesses and defend the potential returns, according to people familiar with the matter.

“We won’t be as benevolent as before,” said one person familiar with Sawan’s approach to investments in renewables.

In a recent internal memo, he announced organisational changes that will result in a reduction in the number of executive vice-presidents responsible for the renewables and energy solutions business, according to people with knowledge of the plans.

The possibility of renewed emphasis on fossil fuel production has sparked concern among European staff and questions about how the company would meet its obligations to slash emissions following a Dutch court’s landmark ruling against it in 2021, Shell employees said.

But any shift back to oil and gas would be greeted by US staff with “cautious optimism”, one employee said. Shell remains one of the largest producers in the country and recently brought on stream a new deepwater platform in the Gulf of Mexico.

Oswald Clint, a Bernstein analyst, said US investors “love the high returns potential with oil investing” and would welcome the company slowing its transition to renewables. “You’ve seen the playbook from BP . . . so if he walks back that commentary a little bit it’s preaching to the converted.”

FT : Oaktree Capital moves into leveraged buyout lending with $10bn fund

Oaktree Capital moves into leveraged buyout lending with $10bn fund
Credit investor is latest private lender aiming to fill void left by Wall Street banks

Oaktree Capital is seeking to raise $10bn for a new fund that will help finance large private equity takeovers, taking advantage of a void on Wall Street as other lenders are sidelined.

The credit investment manager co-founded by Howard Marks expects to offer loans of about $500mn or more to leveraged buyout groups, money they will use to fund corporate acquisitions, according to a letter to Oaktree clients seen by the Financial Times.

The fund launch comes when most major Wall Street banks are dramatically reducing the size and number of new loans they are willing to write to private equity firms, as stubborn inflation and sharply higher interest rates hit credit markets.

Oaktree plans to raise and invest the $10bn within the next two years, underscoring the opportunity the group believes exists in private credit, which has ballooned in size over the past half decade.

The push will also put Oaktree more squarely in competition with large private credit investors such as Apollo Global Management, Sixth Street Partners, HPS Investment Partners and Blackstone.

While Oaktree regularly interacts with these heavyweights elsewhere in credit investment, it has shied away from writing large direct loans to private equity-backed businesses — such as the $2.3bn financing provided by Sixth Street to Maxar Technologies — in recent years under the belief that competition had driven down returns.

“The leverage employed in these deals spiked to pre-2008 levels, and loan covenants providing lender protection mostly disappeared,” Marks wrote in the letter to clients with Oaktree managing director Tony Harrington.

The pair said they now believed the opportunity in large-scale direct lending was “exceptional”, particularly as some of the Oaktree’s biggest rivals have pulled back from writing mammoth loans after putting billions of dollars to work over the past two years. Investors have pointed to Bcred, a Blackstone-managed private credit investment fund, as among those to curtail the pace of lending after previously providing LBO loans worth $1bn or more.

The new fund — known as Oaktree Lending Partners — could ultimately invest $20bn in sponsor-backed debt if it taps loans from banks. Oaktree and the asset manager Brookfield, which owns a majority stake in Oaktree, will invest $2bn in the new fund.

“While the need for this type of lending is enormous, we believe the competition to lend is limited,” Marks and Harrington wrote. “Moreover, we believe many are facing legacy portfolio issues because they aggressively deployed capital in sponsor-backed loans between 2019 and 2021, a period when heightened competition caused financing for leveraged buyouts to become increasingly borrower friendly, to the detriment of lenders.”

Banks on Wall Street have also pulled back from financing new deals, with leveraged loan issuance down precipitously. The market has long been one of the main sources of financing for private equity firms as they attempt to fund takeovers.

New leveraged loan issuance in the US is down 88 per cent this year from a year ago to $9bn, the lowest level in more than a decade, according to PitchBook LCD. And while high-yield bond sales are up, investors warn the market is all but closed for lower-rated groups.

Big lenders such as Barclays and Bank of America have been stuck holding loans that they initially intended to sell. Those deals, including loans to software maker Citrix, telecoms company Brightspeed and auto-parts maker Tenneco, have limited their ability to provide new debt.

That has intensified the appeal of private credit providers such as Apollo and Ares, which generally intend to hold private loans for years, not months, as is the case for banks offering bridge financings.

Private credit groups are now banding together to assemble a $5.5bn direct loan to fund Carlyle’s purchase of a stake in Cotiviti, the largest private loan ever contemplated, according to four people with knowledge of the deal. Competition among direct lenders has already led the deal to become oversubscribed.

If Oaktree hits or exceeds the $10bn fundraising target, it will rank among the largest US direct lending funds ever raised, close to vehicles by HPS and the investment management arm of Goldman Sachs, according to Preqin data.

>>> US After Hours Summary: PGNY +11.8%, HIMS +9.6%, ZM +8%, VMEO +7.3%, AAON +3

After Hours Summary: PGNY +11.8%, HIMS +9.6%, ZM +8%, VMEO +7.3%, AAON +3.9%, TREX +3.2% all up on earnings; AHCO -15.8%, AMRC -9.3%, TTEC -8.1%, DAR -5.6%, NGVT -4.9%, UHS -4.7% all down on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: PGNY +11.8%, HIMS +9.6%, ZM +8%, VMEO +7.3%, AAON +3.9%, TREX +3.2%, IIPR +3.2%, FSK +2.4%, FGEN +2.2%, PRGO +1.8%, CDNA +1%, RRC +1%, VRAY +0.9%, HLIO +0.3%, OVV +0.1%

Companies trading higher in after hours in reaction to news: VRCA +4.3% (FDA accepted NDA), OII +2.1% (announces new Chairman), CLBR +0.4% (agrees to business combination), DDD +0.2% (to pay $4.54 mln, according to DOJ), META +0.2% (creating AI focus group, according to Reuters)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: AHCO -15.8%, AMRC -9.3%, TTEC -8.1%, DAR -5.6%, NGVT -4.9%, UHS -4.7%, NARI -3.7%, ROVR -3.7% (also authorizes repurchase program of up to $50 million), ICUI -3.6%, ESTA -2.9%, HEI -2.7%, BMRN -2%, OXY -1.3% (also increases quarterly dividend), WDAY -1%, NSA -0.6%, EBS -0.4%, OKE -0.2%, MKSI -0.2%, PRA -0.1%

Companies trading lower in after hours in reaction to news: TPIC -16.9% ($100 mln convertible senior notes offering), AMRC -9.3% (to acquire ENERQOS Energy Solutions), EVER -8.2% (files $150 mln mixed shelf), FTAI -5% (files mixed shelf), FPI -1.5% (names new CEO), TVTX -1.4% (to offer $175 mln common stock), GE -0.5% (files $20 bln mixed shelf), HOOD -0.4% (receives subpoenas regarding operations per 10K), MDLZ -0.2% (files mixed shelf)

>>> US Close Dow +0.22% S&P +0.31% Nasdaq +0.63%

Closing Stock Market Summary

Following last week's disappointing finish, the stock market kicked off this week on an upbeat note. The positive bias was partially fueled by some technical catalysts including the S&P 500 closing above its 200-day moving average on Friday, along with the 10-yr note yield staying below 4.00%.

A noticeable pullback in Treasury yields from overnight highs was another support factor for equities. The 2-yr note yield, which hit 4.86% overnight, settled at 4.80%. The 10-yr note yield, which hit 3.96% overnight, settled at 3.93%.

The main indices exhibited some fairly strong upside momentum in the early going, likely driven by some short-covering activity, that had the S&P 500, Dow, and Nasdaq up 1.2%, 1.1%, and 1.5%, respectively, at their morning highs.

That momentum quickly dissipated, though, and the market spent most of the session in a steady grind lower. The main indices ultimately settled off their lows for the day thanks to buyers stepping in when the S&P 500 slipped below its 50-day moving average (3,980). The Nasdaq settled with the biggest gain today, bolstered by outperforming mega cap stocks. 

Market breadth skewed positive, but margins were slimmer by the close compared to earlier in the session. Shortly after the open, advancers led decliners by a nearly 5-to-1 margin at the NYSE and a nearly 3-to-1 margin at the Nasdaq. By the close, advancers led decliners by a roughly 4-to-3 margin at both the NYSE and the Nasdaq. 

Most of the S&P 500 sectors closed with a gain led by consumer discretionary (+1.2%) and industrials (+0.8%). The former was boosted by Tesla (TSLA 207.63, +10.75, +5.5%), which traded up ahead of its Investor Day on March 1 and following positive remarks by Cathie Wood earlier on CNBC. The latter was supported by a big gain in Union Pacific (UNP 212.17, +19.45, +10.1%), which reacted to news of a CEO succession plan expected to unfold this year and a BofA Securities upgrade to Buy from Neutral.

On the flip side, utilities (-0.8%) and health care (-0.3%) suffered the steepest losses. 

  • Nasdaq Composite: +9.6% YTD
  • Russell 2000: +7.7% YTD
  • S&P Midcap 400: +7.2% YTD
  • S&P 500: +3.7% YTD
  • Dow Jones Industrial Average: -0.8% YTD

Reviewing today's economic data:

  • Durable goods orders declined 4.5% month-over-month in January ( consensus -3.9%) following a downwardly revised 5.1% increase (from 5.6%) in December. Excluding transportation, durable goods orders rose 0.7% month-over-month ( consensus +0.1%) following a downwardly revised 0.4% decline (from -0.1%) in December.
    • The key takeaway from the report was the strength seen in nondefense capital goods orders, excluding aircraft -- a proxy for business spending. Those orders were up 0.8% month-over-month following a 0.3% decline in December. Shipments of these same goods, which factor into GDP forecasts, were up a healthy 1.1% after declining 0.6% in December.
  • Pending home sales rose 8.1% in January ( consensus +1.0%) following a revised 1.1% increase in December (from +2.5%).

Advance Auto (AAP), AutoZone (AZO), Cracker Barrel (CBRL), J.M. Smucker (SJM), Norwegian Cruise Line (NCLH), Sea World Entertainment (SEAS), and Target (TGT) are among the notable companies reporting earnings ahead of tomorrow's open. 

Looking ahead to Tuesday, market participants will receive the following economic data:

  • 8:30 ET: January advance goods trade deficit (prior -$90.30 bln), advance Retail Inventories (prior 0.5%), and advance Wholesale Inventories (prior 0.1%)
  • 9:00 ET: December FHFA Housing Price Index (prior -0.1%) and December S&P Case Shiller Home Price Index ( consensus 5.8%; prior 6.8%)
  • 9:45 ET: February Chicago PMI ( consensus 45.0; prior 44.3)
  • 10:00 ET: February Consumer Confidence  consensus 108.4; prior 107.1)

WSJ : Altria in Talks to Buy Vaping Startup NJOY for at Least $2.75 Billion

Altria in Talks to Buy Vaping Startup NJOY for at Least $2.75 Billion
Marlboro maker looks to buy rival e-cigarette company after struggles with Juul

Marlboro maker Altria MO -0.51% Group Inc. is in advanced talks to buy e-cigarette startup NJOY Holdings Inc. for at least $2.75 billion, according to people familiar with the matter, moving to take over a new vaping brand after its bet on Juul fizzled.

The deal for NJOY, one of the few e-cigarette makers whose products have clearance from federal regulators, could be announced as soon as this week, the people said, though the talks could still fall apart. The proposed deal includes an additional $500 million earnout if certain regulatory milestones are met, the people said. The Wall Street Journal reported last June that NJOY had hired advisers and was exploring a sale.

Altria, the largest maker of cigarettes in the U.S., has tried for years to develop or acquire e-cigarettes as U.S. smoking of traditional cigarettes declined. The tobacco giant in 2018 paid $12.8 billion for a 35% stake in Juul Labs Inc., only to see the vaping market leader tumble.

Juul, embroiled in a dispute with federal regulators and swamped by lawsuits alleging that it had targeted minors, came close to filing for bankruptcy last year. Juul has since settled much of that litigation but its future remains in question amid a dispute with the Food and Drug Administration over whether its e-cigarettes can remain on the U.S. market. Juul has said it never targeted young people and has been working to regain the trust of regulators and the public.

Altria now values Juul at $714 million—down from the $38 billion valuation when Altria first invested.

The Federal Trade Commission is expected to issue a decision in March on whether to unwind Altria’s investment in Juul. The agency’s staff has alleged that it violated antitrust law. With the Juul case still pending, an NJOY deal would likely face regulatory scrutiny.

FT : Senior Carlyle dealmaker to retire after missing top job

Senior Carlyle dealmaker to retire after missing top job
Peter Clare was chief investment officer of group’s $105bn private equity division

Peter Clare, one of the most senior dealmakers at Carlyle Group who was passed over as a candidate to lead the US buyout group earlier this month, is retiring after over three decades at the group.

Clare, chief investment officer of Carlyle’s $105bn in assets private equity division and a board member of the New York- and Washington-based group, helped build its investment business in Asia and led many of its most successful deals such as aerospace companies United Defense and Avio, and consultancy Booz Allen Hamilton.

Earlier this month, Carlyle hired former Goldman Sachs executive Harvey Schwartz to be its new head. His appointment ended a six-month period of uncertainty after former chief Kewsong Lee resigned following a falling out with co-founders David Rubenstein, William Conway and Daniel D’Aniello.

Clare and Mark Jenkins, head of Carlyle’s credit business, had been the two top internal candidates for the role, the FT previously reported.

In late December, as the search for a new leader continued, Carlyle paid Clare a $4.5mn bonus to continue providing services to its private equity unit into mid 2024. However, Clare could now be required to repay the bonus, according to terms laid out in a securities filing. However, the board will ultimately decide, said one person briefed on the matter.

The departure will add more uncertainty to Carlyle’s private equity unit, which has struggled to raise money for its newest flagship corporate buyouts fund.

On a call the firm hosted a day after Schwartz’s hiring, Clare and Jenkins assured investors in Carlyle funds that they would support the new CEO, the FT reported. Clare will step off Carlyle’s board immediately and leave the firm on April 30.

Clare “played a pivotal role in the growth of our corporate private equity business and has served as a careful steward of our investors’ capital in all investment environments”, said Rubenstein and Conway in a press release.

Carlyle has promoted two veteran dealmakers, Sandra Horbach and Brian Bernasek, as co-heads of private equity operations across the Americas, effective immediately.

The duo have jointly led Carlyle’s US buyout and growth funds since 2021, overseeing the day-to-day investments of the group’s four largest corporate buyout funds.

Horbach is one of the most senior female investors in the private equity industry who founded Carlyle’s consumer and retail-based investment team.

She led some of the group’s most successful deals over the past 15 years, including its takeover of Dunkin Brands, the parent company of Dunkin’ Donuts, and its investment in headphone maker Beats, which was later sold to Apple in 2014.

Internally, Horbach would have been a popular choice to become CEO, but she never put her name forward during the search, preferring to focus on investments, people told the FT.

Bernasek has worked in recent years to improve co-ordination of Carlyle’s far flung investment operations. He has also been one of the company’s most active dealmakers during a career spanning more than two decades, focusing on industrial takeovers such as buyouts of automotive supplier Allison Transmission, car rental agency Hertz and HD Supply, a supplier to Home Depot.

Horbach and Bernasek will report to new head Schwartz, who is emphasising a broader collaboration within Carlyle’s investment operations, which have historically struggled to be integrated and weighed on overall profit margins.