SoftBank plots its next dealmaking spree

One invitation to start: Due Diligence Live is just around the corner — go here to receive insights from our editors Arash Massoudi and James Fontanella-Khan ahead of the conference. DD subscribers get a special deal on tickets.

In today’s newsletter: 

Masa shifts into ‘offence mode’

SoftBank’s dealmaker-in-chief is back to cutting checks.

Fresh from raising $5bn through the IPO of its chip designer Arm, the Japanese group’s mercurial founder Masayoshi Son has been emboldened to spend big once again, according to people familiar with his thinking, dipping into his multibillion-dollar war chest in the hunt for more deals in artificial intelligence.

SoftBank has been considering several options, including a deal with Microsoft-backed OpenAI, according to two people familiar with the thinking of Son, who has called the AI group’s boss Sam Altman “one of the key people on Earth”.

The Japanese conglomerate is also exploring a range of alternatives to OpenAI, including substantial investments in direct rivals of the ChatGPT maker, they added. The company also made a preliminary approach to buy UK-based AI chipmaker Graphcore, the people said.

Son isn’t wasting time. SoftBank is leading a $280mn funding round in US location-mapping company Mapbox and recently took part in a $165mn funding round for UK robotic surgery group CMR Surgical.

The pressure for Son to execute his great vision on AI is at an all-time high, and not just because he has started referring to himself as an “architect of the future of humankind”.

After a series of bets that backfired, including WeWork, Oyo, Greensill Capital and a string of crippling losses at SoftBank’s Vision Funds during the tech downturn of 2022, Son’s reputation as a dealmaker is on the line. 

The Japanese group’s founder has already spent more than $140bn on AI start-ups, Lex notes, and made mistakes along the way — including selling $3bn worth of shares it bought six years ago in Nvidia, which would’ve been worth $50bn today.

Arm so far plays a much smaller role in the creation of large language models — the technology that powers ChatGPT — than Nvidia. 

And the fact that it’s still ironing out its strategy to diversify from its core smartphone market hasn’t been lost on investors, as shares in the chipmaker ended down 4.1 per cent on Wednesday at $52.90 per share, slightly above the $51-per-share IPO price.

India emerges as a new hotspot for foreign banks

As business in China becomes more difficult and less lucrative for global investment banks, they’re looking to a less-explored market: India. 

The country’s burgeoning economy has drawn the attention of foreign banks, several of which are ramping up their presence in the country, the FT’s Chloe Cornish and DD’s Kaye Wiggins report. 

Part of the attraction is that an important group of clients – international private equity firms – are looking to strike more deals there. 

“There’s a desire from some limited partners [investors in private equity funds] to reduce exposure to China,” said Dieter Turowski, chair of Morgan Stanley’s Asia-Pacific investment banking operation. “If you’ve got an Asia-wide private equity fund and you’re trying to shrink China and invest in markets that are exciting and growth-oriented, India’s obviously a good place to do it.”

Still, even rapid growth in investment banks’ profits in India would not be enough to offset the decline in the once-lucrative business of advising Chinese companies on listing overseas. 

“I think our revenue base in India should be able to double or so, but that’s still not going to compensate for what I think in the next couple of years is the reduction we’re going to see in China,” said Peter Guenthardt, Bank of America’s head of Asia-Pacific corporate and investment banking, who’s based in Hong Kong.

One of the issues is that local banks often charge very low fees to arrange transactions for companies they have longstanding relationships with.

That’s why private equity is such an attractive draw: international buyout groups are used to paying higher fees to their bankers than local corporates might be used to.

Goldman’s loss is private capital’s ‘golden moment’

Less than two years after purchasing GreenSky, Goldman Sachs is in late-stage negotiations to sell the home improvement lender at a loss as it back-pedals on a costly foray into consumer banking.

The Wall Street bank is in exclusive talks with a consortium of investment firms to sell it for about $500mn, a group including Sixth Street, Pacific Investment Management, KKR and two smaller investors, people familiar with the matter told DD’s Antoine Gara and the FT’s Josh Franklin.

Goldman agreed the GreenSky acquisition in 2021 for $2.2bn but closed the deal at a price of $1.7bn in March 2022.

Goldman is hoping to wrap up the sale by the time it reports third-quarter earnings, scheduled for October 17, the people added, and put it behind them after investor unease with the strategy and years of heavy losses.

There are reasons GreenSky could be a better fit for a consortium of alternative money managers, however. 

They are growing fastest away from their core private equity business with large private credit and insurance operations. Building or buying platforms to originate debts to fill those portfolios is paramount.

Shortly after Goldman bought GreenSky, credit markets became dislocated as financing costs surged, making it hard to originate and then securitise the lender’s home improvement loans. 

Sixth Street appears to favour the sector, which traditionally lends to homeowners carrying high credit scores, and is quickly building out debt origination capabilities, like competitors Apollo Global and KKR.

The firm, co-founded by former Goldman executives including Alan Waxman, David Stiepleman and Joshua Easterly, has also become a landing spot for the investment bank’s top talent.

Marty Chavez, former head of the bank’s securities division, joined Sixth Street in 2021. Earlier this year, Goldman’s former head of asset management Julian Salisbury joined as part of a push to expand Sixth Street’s business and relationships internationally.

Job moves

• Pearson’s chief executive Andy Bird is leaving after three years at the helm of the education group and will be replaced by Microsoft executive Omar Abbosh.

• Wells Fargo has hired Citigroup’s Clayton Hale as co-head of equity capital markets alongside Jill Ford, who joined the bank earlier this month from Credit Suisse. Hale will join in New York.

• Linklaters plans to cut 30 lawyers across Beijing, Shanghai and Hong Kong in response to the prolonged downturn in the China market.

• TPG has appointed Asia managing partner Ganen Sarvananthan to lead the firm’s Middle East business.

• Former Experian chief Douglas Steenland has stepped down as a non-executive board director of the London Stock Exchange Group.

• Rothschild & Co has hired former Goldman Sachs executive Ibrahim Lamrini as a senior director on its mergers and acquisition teams for the Middle East, Bloomberg reports.

Smart reads

Levying the Loop An onslaught of new taxes and a surge in crime is threatening Chicago’s status as a financial hub with groups such as Ken Griffin’s Citadel headed for greener pastures, Bloomberg reports.

Bad break-up Michael Wolff chronicles Rupert Murdoch’s long and messy road to firing then-Fox News host Tucker Carlson in his new book, an excerpt of which can be read in New York Magazine.

‘Corporate malfeasatainment’ The FT’s Leo Lewis explains why a scandal at Japanese second-hand car dealer Bigmotor provides a bit of comic relief for the nation.

News round-up

Instacart and Arm shares lose steam after IPO pops (FT)

Goldman Sachs raises $15bn to buy stakes in private equity funds (FT)

Chelsea FC raises $500mn from Ares (FT)

Deutsche Bank struggles with fallout after huge Postbank IT migration (FT)  

Kanye West did not mean antisemitic remarks, Adidas CEO claims (FT)

Disney: Iger needs to dream up better ideas than spending more on parks (Lex)