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FYI: DD is going to take a breather on Thursday and Friday as our US readers/colleagues celebrate Thanksgiving. We’ll be back next week.
One thing to start: Japan’s Nippon Paint has gatecrashed friendly merger talks between Dutch group Akzo Nobel and Axalta Coating Systems of the US. This week it tabled an all-cash offer for the US company. Two quick thoughts: 1) Akzo can’t catch a break 2) Low premium stock deal was always going to susceptible to an interloper More coverage here.
Now back to our scheduled programming:
The US criminal complaint against former Hong Kong home affairs secretary Patrick Ho reads more like a script to an action-packed adventure flick than a legal document.
Ho (pictured), along with the former Senegalese foreign minister Cheikh Gadio, was arrested on Friday by US officials in New York on charges that the pair attempted to bribe the president of Chad and other officials in Uganda on behalf of a Chinese company trying to gain preferential access to Africa.
Quoting from emails between Ho and Gadio, the complaint shows how the latter suggests that officials from the Chinese company gather in Ethiopia and then fly clandestinely to the president of Chad’s “village in the middle of the desert” for a meeting free of political disruption by “enemies and lobbyists”.
The complaint also alleges that Chad sought military assistance from the Chinese company along with a $2m bribe. This is Hollywood material.
The company in question is not named but Ho is cited in the complaint as the head of an NGO that is funded by a Chinese “energy company”. The website of CEFC China Energy, a private oil and gas group that paid $8bn for a stake in Russian gas giant Rosneft earlier this year, shows that Ho is the head of its Hong Kong-based charity. The complaint also quotes directly from CEFC’s website. You may recall the FT’s deep dive on CEFC and our DD post from September.
CEFC has not responded to the FT’s requests for comment on the matter. It is unclear what the implications — if any — are for the company. The complaint says in several instances that the unnamed energy company’s chairman was aware of the alleged bribes targeted at the Chadian president. CEFC’s website shows that its chairman, Ye Jianming, met with Chadian president Idriss Déby in 2015 but gives few other details.
While the complaint has many film-like qualities, it is, more than anything, a window into the dark dealmaking world of Chinese companies in developing regions of the world.
“This is hardly surprising — the scale of Chinese lending, investment, and construction overseas is now such that incidents of graft are inevitable,” says Derek Scissors, a resident scholar at the American Enterprise Institute. “Where the rule of law is weak, host countries are vulnerable to whatever bad practices a Chinese company might bring — whether in funding, labor, or ecology.”
In Ho’s alleged attempt to bribe Ugandan officials for prime market access, he gives them a sense of the level of investment his company is capable of, stating that it has already invested $1.8bn in a football club, real estate, a TV station and a brewery, among other assets, in the Czech Republic. In 2016, CEFC inked a handful of deals in the Czech Republic including all the above mentioned transactions.
“Please also prepare a list of projects which the President wishes China to invest in,” Ho allegedly says in an email directed at Ugandan officials, dangling the prospects of lucrative investment over their heads. “[W]e wish to engage Uganda as our first stop in Africa,” the complaint quotes Mr Ho as saying.
Intelligent curation and exclusive information: This is Due Diligence, the FT’s daily briefing on corporate finance, private equity and M&A. DD is delivered to your inbox Tuesday-Friday at 5am UK time. Meet the team, catch up on previous editions and sign up here. Get in touch with us: Due.Diligence@FT.com
Tit for tat at Four Seasons Health Care
Things just got weirder between UK care home operator Four Seasons and its lenders H/2 Capital as they enter a public spat over how to save the struggling company.
For weeks now both parties have been embroiled in discussions over the best way to rescue the debt-laden business, which is owned by Guy Hands’ Terra Firma.
In October, Four Seasons came up with its own plans to help a business burdened not just with debt but facing headwinds in a sector that has seen a decline of government spending.
The creditors rejected the plan, arguing it relied too much on debt to turn things round. The new plan included an injection of £135m in cash to reduce debt and would see the hedge fund take ownership.
Terra Firma quickly said it would relinquish control, which some regarded as a tacit admission of Guy Hands’ failure to keep the business afloat. Still, the private equity group is still disputing ownership of around 70 care homes that form the Brighterkind group.
Terra Firma purchased the Brighterkind care homes separately to the main Four Seasons business, meaning bondholders did not originally have security on the assets. But a financing document filed last year was drafted in such a way that the supposedly separate care homes moved into debt holders’ collateral package.
Hands has taken the matter to the High Court to argue that it was never Terra Firma’s intention to grant security over the assets, while bondholders are arguing that they already have a claim to assets whatever the private equity firm’s intention may have been.
The prospect of a long-running dispute in court is threatening to tip over the care homes business, which is running out of money to sustain its debts.
On Tuesday H/2 publicly said it was waiting for an official response from Four Seasons — in writing or verbally. Instead of picking up the phone, Four Seasons resorted to issuing yet another public statement, “noting” the earlier announcement.
Four Seasons said it was working with H/2 “via its advisers” to find a solution.
Will somebody pick up the phone and deal with it like grown ups? It would help Guy Hands to nip this in the bud quickly as he’s already looking to raise a new $3bn fund — something that was already seen as a long shot.
Citigroup made a number of changes to investment banking business across Central and Eastern Europe, the Middle East and Africa. Omar Iqtidar has been appointed as head of M&A for what Citi calls CEEMEA. Miguel Azevedo has been named head of investment banking for the Middle East and Africa. Hamza Girach was appointed co-head of Middle East investment banking. Theo Giatrakos has been named head of investment banking for central and east Europe.
One of the largest retirement fund managers in Canada has hired Giovanni Davide Orsi as senior director, head of funds, private equity. Orsi is joining the Public Sector Pension Investment Board from Coller Capital where he was senior director head of funds in private equity. He will lead the fund that focuses on investing in private equity.
Japan Tobacco has named Masamichi Terabatake as its next chief executive starting in January. He has worked at JT for the past 28 years. Reuters has more here.
US law firm Weil Gotshal has elected 10 new partners and 9 new counsel. Read more here.
Meg Whitman is stepping down as chief executive of Hewlett Packard Enterprise, which she has led for the past six years.
New venture funds thrive Start a venture fund. Everyone is doing it and the cash just keeps pouring in. (WSJ)
Toying with a deal Online fads like fidget spinners are taking their toll on carefully planned toy company rollouts. That’s just one reason the likes of Hasbro and Mattel are being linked to deal talks. (FT)
AT&T/Time Warner The timing of the justice department’s intervention has raised eyebrows and seasoned lawyers think the government has an uphill battle in seeking to block the mega media merger (FT, FT View)
NH/Barcelo: Chinese check-ins (FT Lex)