The Oracle heir with an offer Redstone couldn’t refuse

One fast-track to start: Top MBA graduates are skipping early career trainee programmes and instead looking for small businesses to buy and run, private equity-style. Stanford reported that 93 of these deals, known as “search funds”, were launched by graduates in 2023. Read this Lex report here.

In today’s newsletter:

• Paramount’s deal drama ends

• Melrose dealmakers plot next move

• Grifols gives shorts a scare

Shari Redstone finally sells Paramount

After eight months of negotiations, David Ellison has finally convinced Shari Redstone to hand over control of her family’s media empire, ending the Massachusetts family’s nine-decade run as fixtures of the entertainment business.

It’s a remarkable coup for Ellison, who at just 41-years-old has elevated himself into the upper echelon of Hollywood power players.

In 2005, Ellison was a university dropout and aspiring actor — viewed as a trust fund kid who was trying to buy his way into Hollywood thanks to funding from his father, the software mogul Larry Ellison. Paramount, meanwhile, was one of the most powerful entertainment groups in the world. 

But two decades later, after many years of mismanagement, family dramas, executive exits, lawsuits and a corporate rebrand, the Redstone media empire is a shadow of its former self. It struggled to adapt to the digital age and saw its stock pummelled by fears over its $14bn debt pile.

For Redstone, who is set to attend an annual summit of media moguls in Idaho this week, it is a soft landing after a tumultuous and deeply personal reign over the businesses her father and grandfather built.

Redstone’s willingness to pull out of negotiations last month has earned her family millions, but not generated a windfall for long-suffering shareholders. National Amusements, the Redstone-owned vehicle that controls Paramount, will get the sweetest deal.

Its shares will be acquired for $38 a share, or $2.4bn all together. Shareholders of Paramount’s listed non-voting stock will get $15 in cash for 48 per cent of their holdings, then the remainder in stock in the new company, worth $4.3bn in total. As Lex notes, the mooted enterprise value is $28bn, but the market has a different view. Paramount shares fell 5.3 per cent on Monday, closing at just over $11 per share.

Ellison, meanwhile, has been handed the keys to some of the most treasured assets in Hollywood history. Ellison is a movie lover and aerobatic pilot who grew up in the San Francisco Bay area, where his father co-founded Oracle. He moved to Los Angeles and, with his father’s money and access to business titans like Steve Jobs, built his own production business, Skydance, co-financing a series of movies including Top Gun: Maverick. 

The elder Ellison owns a Hawaiian island and has been bankrolling his children’s Hollywood ambitions for decades. He is ranked as the world’s seventh-richest person by Bloomberg, which estimates his net worth at $159bn.

His son has spent the past year winning over Redstone, working meticulously to engineer a highly complex deal that will elevate him to a new level of power in Tinsel Town. On a call with investors on Monday, Ellison thanked Redstone for “entrusting us with this incredibly iconic company”.

Melrose Place

The founders of Melrose Industries — some of the City of London’s few remaining old-school corporate raiders — are bringing a newly-listed private equity vehicle to market, and hostile bids are still on the cards.

BlackRock, Norges and GIC are among the investors that have committed to backing Rosebank Industries, a new group run by six former Melrose executives, in a float this week, while blue-chip investors including asset managers Artemis and Aviva have also signed up to take a slice of an initial £50mn fundraising.

The team of turnaround specialists, who over two decades followed a strategy of “buy, improve, sell”, made their reputations from five big acquisitions, culminating in a £8.1bn hostile takeover of engineering group GKN in 2018.

That deal prompted the automotive and aerospace supplier to accuse it of deceiving investors with “inaccurate” and “fake” claims. After breaking up GKN, the three executives this year took the major share of a £180mn bonus pot.

“We’re back . . . and we want to go and do it again,” Simon Peckham, chief executive of Rosebank and former chief executive of Melrose, told the Financial Times, a year after hinting that he might fancy another crack at the traditional Melrose strategy, saying he’d be “quite happy to be five of us in the back of a cab going to the next Christmas party”.

The company would target UK, US or Europe-based industrial and manufacturing companies with an enterprise value of up to $3bn, he said, refusing to rule out another hostile bid for a public company.

Peckham will be joined by his Melrose co-founder Christopher Miller — a student of the UK’s most famous corporate raider, the late James Hanson — who will serve as a non-executive, while other Melrose co-founder David Roper will invest but not be part of the management team.

Having considered raising a private equity fund or partnering with buyout groups on specific deals instead, the team decided that it “is just not as much fun”, said Peckham.

Will Brookfield bloody Grifols’ short sellers?

Grifols has been one of Europe’s biggest battleground stocks this year, after short seller Gotham City Research accused the Spanish maker of blood plasma-derived medicines of artificially manipulating its debt and earnings.

On Monday, Canadian real estate and private equity giant Brookfield entered the fray, announcing that it was exploring a bid to take the Barcelona-based company private alongside the namesake family behind it.

In debt markets, Grifols has already become well-trodden territory for some of the largest private capital firms in the US.

Apollo Global Management was one of the lead investors in a €1bn private bond that Grifols raised earlier this year. Oaktree Capital Management — which is itself owned by Brookfield — also agreed last week to refinance debt at Scranton Enterprises, a crucial shareholder of the group that also came under scrutiny in Gotham City Research’s initial short report.

Brookfield has named Scranton as one of the family-linked shareholders to Grifols with which it is now discussing the potential take-private. Brookfield’s statement stressed that while it was in exclusive negotiations around a potential transaction, it had so far held only “exploratory discussions” and that there was “no guarantee” this would lead to an offer.

That may explain why even after the announcement of a potential Brookfield bid, Grifols shares are still trading more than 30 per cent lower than before Gotham first took aim in January (DD should note that the company has denied wrongdoing, describing the allegations as “false information and speculations”.)

Another added point of complexity for any potential takeover relates to Grifols’ €11bn debt pile. Change of control clauses in the company’s bonds dictate that billions of debt have to be repaid if the Grifols family takes an over 50 per cent stake or a new investor holds more than 35 per cent. 

While Brookfield could structure the deal around those constraints using co-investors, for example, it is yet another reason the war between Grifols and its short sellers could have some room to run.

Job moves

• Southwest Airlines has appointed Rakesh Gangwal as a member of its board. He is the co-founder of India’s IndiGo. The appointment drew the criticism of Elliott, the activist who is challenging the airline company. 

• UBS has hired eight technology, media and telecommunications bankers, including Alejandro Palacio from Barclays. The bank will open a new office on Silicon Valley’s Sand Hill Road.

• Ben Darsney, a former senior capital markets banker at Deutsche Bank, has left military veteran-owned investment bank Drexel Hamilton, according to a person with direct knowledge of the matter and Finra records.

• Jim Leaviss, one of the City of London’s best-known bond investors, is leaving M&G Investments after almost three decades. M&G has hired Andrew Chorlton from Schroders as his replacement.

• Permira has appointed Anish Patel as partner and co-head of its climate investing team. He joins from Kerogen Capital, where he was a partner.

• Entain has appointed Helen Ashton as an independent, non-executive director. Ashton is also a director at JD Sports. 

• Carlyle’s head of global capital markets, Brian Lindley, has left after more than 13 years at the alternative-asset manager, according to Bloomberg.

Smart reads

False positives Medicare paid insurers $50bn for diseases that no doctor treated after private companies made hundreds of thousands of questionable diagnoses, The Wall Street Journal reveals.

Taste for tech Machines are now handling more than 75 per cent of the trading in some FX markets, even among Wall Street’s old guard, as clients increasingly look to trade algorithmically following the introduction of market makers such as Citadel and XTX, Bloomberg reports.

News round-up

Bernard Looney plots Abu Dhabi comeback from BP scandal (FT) 

Carlsberg to buy Robinsons maker Britvic in £3.3bn deal (FT) 

Brookfield creating UK insurer to join corporate pensions deal bonanza (FT)  

Sex offender worked at Goldman Sachs months after conviction (FT) 

Davos organiser World Economic Forum accused of workplace discrimination (FT)

LetterOne claims sanctions on founders pushing capital away from the west (FT) 

Sequoia Capital’s former China unit raises new $2.5bn start-up fund (FT)