Saudi Arabia proves it can conquer sports with cash

One thing to start: Shares in Tingo Group more than halved on Tuesday after short seller Hindenburg Research said it had placed a bet against the Nasdaq-listed fintech group whose chief executive made a failed bid for Sheffield United football club.

In today’s newsletter:

The $3bn reasons for a shock peace in golf

Saudi Arabia’s Public Investment Fund has made frequent appearances in DD for its role in some of the wildest moments in business and finance over the past few years. Who can forget Elon Musk’s “funding secured” tweet in 2018 or the spectacular misfired bets on SoftBank’s Vision Fund?

While Masayoshi Son’s portfolio didn’t pan out, Saudi Arabia has made serious progress in commandeering the world’s most popular sports. 

The latest example came on Tuesday when PIF-backed LIV Golf and the PGA Tour said they would merge and become partners, ending a yearlong battle between the two golf leagues that was mired in litigation and mudslinging.

Saudi-backed LIV emerged on the golf scene last year spending hundreds of millions of dollars to lure top golfers such as Brooks Koepka, Phil Mickelson and Dustin Johnson to join its breakaway league. It has threatened the PGA’s dominance of golf and put top industry figures on the defensive.

But PGA commissioner Jay Monahan and Yasir al-Rumayyan, head of Saudi Arabia’s sovereign wealth fund, recently began to privately hash out a resolution between their organisations over rounds of golf and meals in Venice, they told DD.

Crucial to the truce is an increasingly common asset wielded by Saudi Arabia in the sports world: cash.

PIF is set to pump billions of dollars into the combined PGA and LIV, which has yet to be given a new name.

The infusion, which some people involved said could amount to about $3bn, underscores how Saudi Arabia has muscled into global sports using oil-funded state finances.

Another breakthrough for Saudi Arabia came last month when Newcastle United, the English Premier League football team it acquired in 2021, qualified for the lucrative Champions League competition.

Its ambition in sports does not stop there. The Saudi government earlier this week transferred majority holdings in four Saudi football teams to the PIF, a manoeuvre many speculate is aimed at creating a powerhouse domestic league with the resources to lure top footballers like Karim Benzema and Lionel Messi.

Some top Wall Street figures helped to broker the once unthinkable truce in golf.

Investment banker Michael Klein and British business figure Amanda Staveley represented Saudi Arabia, while Jimmy Dunne, a founder and managing partner of Sandler O’Neill + Partners, and Ed Herlihy, co-chair of Wachtell, Lipton, Rosen & Katz, advised the PGA.

“As we were competing over the last couple of years . . . I think it’s fair to say that we couldn’t have imagined we’d have gotten to this point,” Monahan told the Financial Times. 

But the fact that Saudi Arabia has prevailed underscores the merit of its bet that money will ultimately win in the world of sports.

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Sequoia’s conscious uncoupling

Venture capital’s most successful marriage is coming to an end. 

Sequoia, the Silicon Valley group that made its name through early bets on Apple, Google and Airbnb, has spent the last two decades burnishing it with the massive gains from its China business.

That union is now over, with Sequoia announcing on Tuesday that it’s splitting out its China business and ending a complex profit sharing arrangement between partners at the different entities. 

The break-up — which also sees the company’s Indian and south-east Asian business calved off — makes business sense, according to Sequoia. But it also comes against an increasingly grim geopolitical backdrop, with tensions rising between Beijing and Washington particularly around technology.

“It has become increasingly complex to run a decentralised global investment business,” the group’s US, China and India chiefs wrote in a letter to their limited partners. 

The separation will bring to an end a longstanding profit sharing arrangement, through which partners at each entity globally have shared in the spoils of successful companies in other countries. Sequoia China, led by billionaire Neil Shen, has won big with bets on Chinese tech behemoths like TikTok parent ByteDance, JD.com and Alibaba.

That set-up has been a hedge against domestic downturns and a way of sharing gains, though partners are ultimately rewarded according to the success of investments made in their own backyards. 

But with the US and China in a technological arms race, sharing profits from overseas investments is a more complicated business. In the US, Sequoia Capital is an investor in ChatGPT creator OpenAI; in China, Sequoia Capital China is a top investor in domestic artificial intelligence companies. 

And as cross-border investment in technology has come under more intense scrutiny, a strategy that has allowed Sequoia to gain handsomely from a tech arms race between the world’s two largest economies, has come to resemble a tightrope walk.

The firm insists this divorce is more like a conscious uncoupling, whose participants will celebrate each other’s independence. But after 20 close and lucrative years, both parties could be forgiven for looking over their shoulders wistfully. 

The tyre takeover testing Italy’s relations with Beijing

Pirelli, the 150-year-old Milanese “Prada of tyres” is every bit as Italian as the Ferraris, Lamborghinis, and Maseratis that spin its rubber.

So when tyre tycoon Marco Tronchetti Provera sold Pirelli to ChemChina in a $7.7bn takeover in 2015, politicians and investors worried whether its technology would be intercepted by its Chinese parent.

At the time, Tronchetti Provera said that was hullabaloo. The sale would help him retain control of the business, he reasoned.

But the Italian tyre king is now suffering from seller’s remorse, the FT’s Silvia Sciorilli Borrelli, Amy Kazmin and Yuan Yang report, as tensions mount between Pirelli’s Italian and Chinese shareholders.

The shifting geopolitical climate could help Tronchetti Provera’s case: prime minister Giorgia Meloni has taken a harder line on China than her predecessors. Her new government is reconsidering Pirelli’s future under rules that allow it to scrutinise foreign investments in strategic assets.

But before the Italian government can try to limit ChemChina parent Sinochem’s influence by curbing its voting rights or forcing it to reduce its 37 per cent stake, it must prove the tyremaker’s technology (including microchips to broadcast information about tyre usage and potentially geolocation data) poses national security implications.

Experts and some Italian officials say this is a stretch. But people close to talks between Pirelli, Sinochem and Rome say the Communist Party’s interference in the company’s management is the bigger issue. 

Documents provided to the hearing and seen by the FT show the Chinese government has sought to take more control of business and governance decisions.

With relations between Rome and Beijing already strained, Meloni could be opening a can of worms if she uses the tyre group to clamp down on investment from China, Lex notes.

Job moves

• Morgan Stanley’s global chair of M&A Rob Kindler is returning to law after 17 years at the US bank. Kindler will join Paul Weiss as a corporate partner and global chair of M&A in New York from September. He previously spent 20 years at law firm Cravath before joining JPMorgan Chase in 2000.

• BNP Paribas has hired senior JPMorgan banker Jacqueline Taylor as a managing director on its UK coverage team, Financial News reported.

• Slaughter and May corporate partner Hemita Sumanasuriya has been seconded to the UK Takeover Panel for a two-year term as secretary.

Smart reads

Bad bets Merger-arbitrage traders have met their match in antitrust watchdog Lina Khan as she boosts her aggressive campaign against some of America’s most powerful businesses, Bloomberg reports.

The Proxy awards FT Alphaville handed trophies to recipients of the best corporate perks out there.

Giorgia Meloni’s corporate gamble Italy’s prime minister has inserted herself into some of the country’s most complex financial deals in a strategy that could make or break her legacy, Bloomberg reports.

News round-up

Lloyds threatens to push Telegraph owner into receivership (FT)

CBI wins vote of confidence after claims of misconduct (FT)

Court upholds Musk’s win in $13bn lawsuit over Tesla-SolarCity deal (Reuters)

Warner Bros Discovery chief turns to longtime confidant to save wounded CNN (FT)

Italy’s Eni enters exclusive talks to acquire Neptune Energy (Reuters)

Unaoil founder negotiated bribes, US prosecutors say (FT)

Blackstone agrees to sell San Antonio resort hotel for $800mn (WSJ)