Over three decades, John Studzinski has been a consummate deal maker — first at Morgan Stanley, then HSBC and most recently the Blackstone Group — acting as a consigliere to chief executives around the world.
Now, he will do so at a new firm: Pimco, the investment management giant.
The firm is planning to announce on Wednesday that it is hiring Mr. Studzinski, who recently said he would step down as vice chairman of Blackstone. Over the years, the financier — known among friends as Studs — has advised Indra Nooyi of PepsiCo, William A. Ackman of Pershing Square Capital Management and even the Vatican.
At Pimco, he will be a managing director and vice chairman and will advise clients like pension funds, governments and sovereign wealth funds. He will report directly to the firm’s chief executive, Emmanuel Roman. Mr. Studzinski will be based in New York and will shuttle between London, where he also has a home, and Newport Beach, Calif., where Pimco has its headquarters.
“I’ve known John for a very long, long time. We have been friends,” Mr. Roman said in a telephone interview, noting that he has watched Mr. Studzinski’s career over the years. “I tried to attract him to Pimco basically since I arrived. I thought he’d be a perfect fit. It took a little bit of time and finally, we got there.”
Mr. Studzinski, 62, began his career in finance at Morgan Stanley as a mergers banker. He rose through the firm’s ranks in New York and London to become its head of European investment banking and then deputy chairman of its international arm. In 2003, he joined HSBC to expand the British bank’s investment banking business.
In 2006, he moved to the private equity giant Blackstone, where he worked on mergers and corporate defenses against activist investors. He also guided the American International Group through its near-death experience during the financial crisis.
“That was the career deal of my life,” Mr. Studzinski said.
At the time, Mr. Studzinski also began advising some of the world’s biggest pools of capitals — sovereign wealth funds — in the Middle East and Singapore on their exposure to financial companies amid the crisis.
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After Blackstone spun out the advisory business into what is now PJT Partners in 2015, Mr. Studzinski took on a new role: vice chairman for investor relations and business development, working with sovereign wealth funds and family offices.
Mark Carney, the governor of the Bank of England and a longtime friend of Mr. Studzinski’s, described him as a “highly respected adviser to companies, financial institutions and sovereigns.”
Mr. Roman said he expected Mr. Studzinski to help build Pimco’s global footprint. The firm has 14 offices around the world and manages $1.7 trillion globally.
“I know what a fantastic job he has done for his clients,” he said. “He is going to do what he does best, which is to go a see clients and ask how he can help.”
Uniper selling French energy business; Rothschild advises
05 SEP 2018
German energy company Uniper [ETR:UN01] is auctioning its French business with Rothschild advising on the process, two sources briefed on the matter said.
In August, the company stated that it would have to review its entire business in France if a government-planned shutdown of coal-fired power plants were implemented. President Macron has called for coal-free power by 2021.
Uniper has already addressed the challenges with the early coal exit in France on August 7 in the course of its 1H18 results presentation, a Uniper spokesperson said.
The announced decision of the French government about an anticipated coal exit has radically changed Uniper France’s business plan, which needs to be reviewed as well as the development of Uniper’s strategy in France, the spokesperson said.
The strategic review of Uniper’s business in France is at an early stage and will be communicated in due course, the spokesperson added.
The vendor has conducted a quiet auction process, the two sources said. The auction has progressed into the second round, the first source said, though the identity of indicative bidders has yet to emerge.
The business could be valued at over EUR 500m, both sources said. The sale comprises Uniper’s entire French business, which includes two gas fired power plants, two coal fired plants, a biomass plant, and around 100MW of renewable capacity, and a small customer business, the first source said, and could fetch as much as EUR 700m.
Uniper owns about 2.1GW of installed capacity in France, of which 1.2200 MW are coal, according to reports. The company owns units in the 1.4GW Emile Huchet hard coal and gas plant in the Lorraine region, and coal and biomass units at the Provence plant in Meyreuil, as well as 84MW of onshore wind capacity, and 10.5MW of solar photovoltaic, according to its website. Its customer focused business is geared towards large companies, small and medium-sized enterprises, municipal customers, and public organisations.
This asset mix could make the sale difficult, both sources said. The presence of coal in particular will dampen buy side interest, the sources said. The wider political momentum is for the reduction of CO2 emissions, and in that context these assets will not be popular, the second source said.
Strategic bidders are unlikely to participate, this source said, despite recent deals in the space such as Total’s [EPA:FP] pending acquisition of Direct Energie [EPA:DIREN], and subsequently acquiring a suit of gas fired power plants from KKR.
However, the sale could be of interest to financial investors, the second source said. These could find value in using the plants as flexible power generation to support intermittent renewables and nuclear sources, this source added.
Volatile weather conditions, such as the extreme cold of last winter and extreme heat of this summer, demonstrate the need for grid balancing, the source added.
Rothschild did not respond to a request for comment.
Bayer Says More Americans Are Alleging Monsanto Weed Killers Cause Cancer
German company’s shares fall amid concerns of costly litigation following Monsanto deal
The company on Wednesday also lowered its full-year earnings outlook because of delays in closing its $63 billion purchase of Monsanto, which included a portfolio of herbicides, including its flagship Roundup, that contain glyphosate.
Bayer said Wednesday it faced some 8,700 plaintiffs across the U.S. as of late August—mainly cancer patients who claim to have fallen ill after being exposed to the glyphosate-containing Monsanto herbicides.
Last month, shortly after Bayer closed the acquisition, Monsanto was ordered to pay $289.2 million by a California state jury. It found that Monsanto’s Roundup and Ranger Pro products presented a “substantial danger” to consumers, and that Monsanto knew or should have known of potential risks and failed to warn users.
Bayer rejected the verdict as “wrong,” and is seeking a review of the court decision. It said it would appeal if necessary, a process that it expects could take up to a year. Such large jury awards are often ultimately reduced and in some cases overturned. Bayer hasn’t disclosed any provision for liabilities linked to the cases. The company argues some 800 studies have proven that the chemical is safe and doesn’t cause cancer.
Bayer’s shares opened 2.9% lower after the earnings report and were still trading down 1.5% in afternoon trade. The company’s shares have lost over 15% since the August 10 verdict.
As of late July, Bayer counted some 8,000 plaintiffs. A few months earlier—before the California jury victory—the number stood at some 5,200.
“Despite overall reassuring results, the glyphosate litigation uncertainty will likely remain an overhang in the midterm,” Jefferies analysts wrote in a note to investors.
Bayer said it hadn’t seen a decline in demand for its glyphosate products because of the litigation and that it didn’t expect to see any going forward as regulators hadn’t changed their stance that the chemical was safe. “Glyphosate has been used and trusted for over 40 years,” said Liam Condon, head of Bayer’s Crop Science business, which now includes Monsanto.
Roundup has come under increased scrutiny after a unit of the World Health Organization in 2015 said that glyphosate was probably carcinogenic. Yet further studies have produced mixed results about the potential carcinogenic hazard of glyphosate. The U.S. Environmental Protection Agency in September 2017 concluded a decadeslong assessment of glyphosate risks and found the chemical not likely carcinogenic to humans.
Bayer on Wednesday didn’t say how much money it was setting aside to cover legal costs or potential payments. “We continue to believe that we have meritorious defenses and intend to defend ourselves vigorously in all of these lawsuits,” the company said in a statement.
Bayer expects more lawsuits in the future. A next case was set to go to trial in Missouri in late October but Bayer Chief Executive Werner Baumann on Wednesday said this now wasn’t likely to start until 2019. So far, the majority of cases were filed in Missouri, Delaware and California, Bayer said.
The Leverkusen-based company closed the Monsanto deal on June 7 following two years of regulatory review during which the company had to shed more assets than originally planned to get the green light. Bayer blamed its lowered earnings outlook on the longer-than-expected review.
“The acquired business generates the majority of its sales and, above all, earnings in the first half of the year,” Mr. Baumann said.
Bayer said it now expects full-year core earnings per share of between €5.7 ($6.6) and €5.9, lower than consensus expectations and below 2017’s €6.64 a share, a restated figure to account for the integration of Monsanto. Bayer had previously targeted core EPS to stay flat.
However, Bayer does expect the acquisition to boost its full-year sales, which it now targets at more than €39 billion, compared with its previous forecast of €35 billion.
Bayer reported a fall in second-quarter net profit to €799 million from $1.22 billion a year earlier after Bayer further reduced its stake in plastics company Covestro AG . Sales rose 8.8% to €9.48 billion from a restated figure of €8.71 billion, boosted by the integration of Monsanto, which offset weakness in the pharmaceuticals and consumer-health segments.
Into each life a little rain must fall. Denis Kessler, boss of French reinsurance group Scor, appealed for investors’ sympathy on Wednesday. He complained that a €8bn unsolicited bid approach would prove an unwelcome distraction during an upcoming trip to the billionaires’ playground of Monte Carlo. Coping with a typhoon or forest fire is probably tougher, even with Scor ultimately covering your costs.
Nor does Scor look very vulnerable. The would-be bidder is Covéa, a French mutual insurer that already owns 8 per cent. A standstill agreement means Covéa needs the recommendation of Scor’s board. Mr Kessler, who is respected for turning Scor round, opposes the deal.
The price of €43 per share suggested by Covéa is less comforting for Mr Kessler. It represents a steep 30 per cent premium over Scor’s three-month average share price. Reinsurers typically sell for about 1.5 times book value, Jefferies notes. Covéa, which is awash with surplus capital, would need to lift its price by just €5 to hit that. Shareholders might then chivvy Mr Kessler to the negotiating table.
The question is whether Scor would still be undervalued. The group has a superior credit rating and scarcity value as a quoted European reinsurer. A presentation in which Scor reiterated financial targets did not however provoke a rally in the company’s shares, which sit a few euros below the approach price.
Buying Scor would be an odd move for Covéa — a motor, home and life insurer traditionally catering to French bureaucrats. It would be odder still if Covéa increased its stake to 50 per cent of Scor, which is one mooted compromise. A mutual with modest disclosure and governance duties would then call the shots at a quoted business half-owned by minorities.
Covéa should offer more for the whole of Scor or walk away. As for Mr Kessler, reflect that although he is going to Monte Carlo, it is for an insurance conference. Perhaps he deserves our sympathy after all.
Bayer/Monsanto: let us spray
Fears that the $63bn deal will destroy value are making investors jittery
Say it with kale. Billboards around the headquarters of Monsanto have sprouted a crop alongside the slogan “St Louis, let’s grow together”. Acquirer Bayer is behind the hearts and minds campaign. Investors may prove harder to win over than locals. On Tuesday morning, they sent the shares down 3 per cent, on news the deal would boost this year’s earnings less than hoped.
That reaction speaks volumes about investors’ attitude to the June acquisition. The downgrade was a result of regulatory delays to the deal’s completion, rather than serious problems. The jitters reflected fears that the Monsanto purchase — at $63bn, including debt, one of the biggest deals in German corporate history — will destroy value.
Shares in Bayer have already fallen by a fifth since May 2016 when news of the deal first leaked. They are trading on 12 times next year’s earnings, at least 3 percentage points below the sector average.
The share price has been battered by a US jury’s verdict last month linking Monsanto’s Roundup weedkiller to cancer. Even before that, there were grave doubts. Yes, the deal had some logic: it combines the companies’ strengths in crop sprays and seeds. But the premium paid — more than 40 per cent over the undisturbed share price — is unlikely to be justified by the expected $1bn of annual cost savings and $200m from cross-selling products. If those benefits fail to fructify, the balance sheet will stay under pressure.
Another worry is that empire-building will take Bayer’s eye off its traditional métier of pharmaceuticals. The group is too reliant on heart drug Xarelto, and has a weak pipeline. Its consumer health division is struggling. Investors who see Bayer primarily as a drugs and healthcare company are particularly sceptical about the new focus. Bayer’s claims that Monsanto is essentially a biotech business have fallen on stony ground.
Investors might hope for a split. If Bayer separates healthcare from crop science, the conglomerate discount might narrow. But that would still depend on the successful integration of the sprays and seeds business. This is far from guaranteed. Most acquisitions destroy value. In the case of Bayer and Monsanto, cultural differences exacerbate the risks. It will take a lot more to close the gap than green garlands for St Louis.
GameStop working with advisor in formal auction process
05 SEP 2018
Video game retailer GameStop [NYSE:GME] is working with Perella Weinberg to explore a sale, according to two sources familiar with the situation. Sycamore Partners and Apollo Global Management are the two main parties pursuing the company, those people and two additional sources said.
GameStop was having informal conversations with sponsors over the summer—Reuters reported in June that it had been approached by Sycamore—but is now running a formal auction, two of the sources said. The sale process is at an advanced stage, the second source added.
The publicly traded company has USD 630m in LTM EBITDA, making for a mid 3x EBITDA multiple based on its USD 1.43bn market cap and USD 818m in total debt. Its stock closed at USD 14.05 on Tuesday. The company is scheduled to release earnings figures on Thursday after market close.
Leverage expectations for a potential buyout are low, at around 2x-2.5x, two of the sources said. GameStop's debt comprises USD 350m of 5.5% senior notes due 2019 and USD 475m of 6.75% senior notes due 2021, according to its most recent filings.
In May, the company received a letter from shareholder Tiger Management calling for a strategic review on account of management changes and a decline in shareholder value.
“We view the recent management departures and crisis of confidence as an unprecedented opportunity for the board to launch a strategic review and revive shareholder confidence in the sustainability of the GameStop business model,” the Tiger letter said.
The hedge fund has been building up a stake in GameStop but had no plans of becoming a major activist shareholder, according to the same report. Bridgewater Associates also increased its stake in the company earlier this year.
GameStop’s stock has been declining for three years from a peak of USD 46 per share in October 2015. In its 1Q18 earnings, the company reported that new hardware sales had decreased by 7.8% while new software sales decreased by 10.3% year-over-year.
Amid the slide, there has been turnover in the company’s management team—chief executive Michael Mauler stepped down in May after only three months on the job. Later that month, the retailer appointed Shane Kim, a member of the board of directors and a former Microsoft executive, as interim CEO.
Mauler had replaced former CEO Paul Raines, who had led the company since 2010 until he took medical leave in November and died in March. Following Mauler’s appointment, GameStop also fired two tenured executives: chief operating officer Tony Bartel and executive vice president of strategic business and brand development, Michael Hogan.
GameStop’s USD 350m 5.5% senior unsecured notes due in 2019 traded yesterday (4 September) at 100.063 having traded at 100.5 in June, according to MarketAxess.
Its USD 475m 6.75% senior notes due 2021 last changed hands yesterday at 101 to yield 6.06%, having traded as high at 102.375 in early August.
GameStop, Perella Weinberg, Apollo and Sycamore did not respond to requests for comment.
GameStop was having informal conversations with sponsors over the summer—Reuters reported in June that it had been approached by Sycamore—but is now running a formal auction, two of the sources said. The sale process is at an advanced stage, the second source added.
The publicly traded company has USD 630m in LTM EBITDA, making for a mid 3x EBITDA multiple based on its USD 1.43bn market cap and USD 818m in total debt. Its stock closed at USD 14.05 on Tuesday. The company is scheduled to release earnings figures on Thursday after market close.
Leverage expectations for a potential buyout are low, at around 2x-2.5x, two of the sources said. GameStop's debt comprises USD 350m of 5.5% senior notes due 2019 and USD 475m of 6.75% senior notes due 2021, according to its most recent filings.
In May, the company received a letter from shareholder Tiger Management calling for a strategic review on account of management changes and a decline in shareholder value.
“We view the recent management departures and crisis of confidence as an unprecedented opportunity for the board to launch a strategic review and revive shareholder confidence in the sustainability of the GameStop business model,” the Tiger letter said.
The hedge fund has been building up a stake in GameStop but had no plans of becoming a major activist shareholder, according to the same report. Bridgewater Associates also increased its stake in the company earlier this year.
GameStop’s stock has been declining for three years from a peak of USD 46 per share in October 2015. In its 1Q18 earnings, the company reported that new hardware sales had decreased by 7.8% while new software sales decreased by 10.3% year-over-year.
Amid the slide, there has been turnover in the company’s management team—chief executive Michael Mauler stepped down in May after only three months on the job. Later that month, the retailer appointed Shane Kim, a member of the board of directors and a former Microsoft executive, as interim CEO.
Mauler had replaced former CEO Paul Raines, who had led the company since 2010 until he took medical leave in November and died in March. Following Mauler’s appointment, GameStop also fired two tenured executives: chief operating officer Tony Bartel and executive vice president of strategic business and brand development, Michael Hogan.
GameStop’s USD 350m 5.5% senior unsecured notes due in 2019 traded yesterday (4 September) at 100.063 having traded at 100.5 in June, according to MarketAxess.
Its USD 475m 6.75% senior notes due 2021 last changed hands yesterday at 101 to yield 6.06%, having traded as high at 102.375 in early August.
GameStop, Perella Weinberg, Apollo and Sycamore did not respond to requests for comment.