What’s at stake in CVC’s biggest bet yet

One BIG event happening today: See you at the Pan Pacific hotel in London today for Due Diligence Live. Tomorrow’s newsletter will feature highlights from the event. Receive 10 per cent off your in-person pass here, or if you can’t make it, DD readers can register for a complimentary digital pass here.

In today’s newsletter:

• CVC’s planned public debut

• Ben & Jerry’s icy relations with Unilever

• Chelsea FC’s new owner aims high

The risks of a private equity firm going public

When it comes to discussions about a stock market listing, the central tension running through conversations within CVC Capital Partners goes like this.

On the one hand, a public listing would bring in outside capital that would allow it to grow and potentially stay ahead of fast-growing European rival EQT.

It would let the company’s co-founders and its outside shareholders — the Hong Kong Monetary Authority, Kuwait Investment Authority, Singapore’s GIC and Blue Owl — eventually cash out. And it would bring CVC into line with US giants that have long since made the shift.

But on the flipside: it would bring public scrutiny to a business that has long avoided the limelight. And it threatens to erode the high-risk, high-reward culture that CVC has prized, DD’s Kaye Wiggins and Arash Massoudi write.

At CVC, winners reap the rewards and losers suffer. Roughly a third of its profits are handed out to a small group of its savviest dealmakers — but if their deals go wrong, they are financially on the hook.

Advocates criticise what they see as a “heads I win, tails you lose” model at rival firms, where the rewards are pooled more widely so that one dealmaker’s success can offset another’s problems. If dealmakers are putting pension funds’ money at risk, they say, they themselves should be on the hook when things go wrong.

We can now reveal a guide of how that works in practice. Here’s how a hypothetical star buyout would lead to deal teams getting paid:

And here’s a breakdown of the returns on CVC’s funds:

CVC began gearing up for an Amsterdam listing at the start of the year. That has been on hold since Russia’s invasion of Ukraine derailed markets. But it’s coming back, insiders insist. The only question is when.

It is not a good time to list almost any company, let alone a private equity firm. Shares in listed rivals Bridgepoint and EQT are down more than 50 per cent this year.

The IPO will place more scrutiny on the firm, which is still almost entirely male-dominated. Of 34 managing partners and co-founders at CVC, just one is female: Cathrin Petty, who joined from JPMorgan Chase in 2016.

But if CVC wants to modernise, it may ultimately have to take the plunge next year.

“I haven’t met anyone who’s ever said, ‘I’m so glad I’m public,’” said one insider. But “if you want CVC to grow up and have the tools other private equity firms have . . . it would be nice to know the next generation is going to have that”.

Unilever’s ice cream empire drips with controversy

The Simon Wiesenthal Center, named for the famed Nazi hunter, is not known for its involvement with consumer goods brands.

Yet the organisation is among many to have become involved in the ice cream war surrounding Vermont-based Ben & Jerry’s since the dessert maker attempted in 2021 to stop selling Phish Food, Chocolate Chip Cookie Dough and its other popular flavours in the occupied Palestinian territories.

As well as prompting the Jewish human rights group to take out ads condemning “anti-Semitic ice cream”, the move by Ben & Jerry’s sparked fury from the Israeli government, a series of US pension funds and its parent company, Unilever, against which it has now taken legal action.

The rift between the brand and its parent company is all the more noteworthy because both place ethics at the heart of their public image, the FT’s Judith Evans reports in this Big Read.

Unilever is a darling of ESG (environmental, social and governance) funds, and its chief executive Alan Jope threatened near the beginning of his tenure to sell off brands that did not “stand for something more important than just making your hair shiny, your skin soft, your clothes whiter or your food tastier”.

His response to Ben & Jerry’s, however, might be summed up as “no, not like that”. The legal action concerns a move by Unilever to sell the ice cream brand’s Israeli arm to its local licensee with just a few days’ notice, enabling him to continue selling into Israeli settlements in the occupied West Bank.

The company will not be the last to face such a dilemma as groups face growing pressure to take public stances on sensitive issues.

And the rift may outlive Jope’s tenure. Last month he announced he would retire as chief executive at the end of 2023.

His departure is just one of the changes on the way at Unilever after it appointed the activist investor Nelson Peltz to its board — a well-known figure with a history of overhauling consumer companies who also chairs the board of governors at the Simon Wiesenthal Center.

Todd Boehly bets on the jet set

Some of Wall Street’s top dealmakers earn their money buying boring industrial companies that no one has ever heard of. Billionaire Todd Boehly isn’t one of them.

His investment portfolio includes a growing stockpile of trophy assets and high-end luxuries only the wealthiest financiers can afford to appreciate.

On Tuesday, Boehly found a way to take an operator of private jets public through one of his own investment vehicles.

A blank cheque company called Horizon Acquisition Corporation II backed by Boehly’s holding company Eldridge Industries announced a merger with private jet operator Flexjet at a $3.1bn enterprise valuation, the FT’s Claire Bushey and DD’s James Fontanella-Khan report.

The deal effectively gives Boehly the opportunity to keep a close eye on his investment empire, from attending a Los Angeles Dodgers baseball game to watching Chelsea Football Club contend for the Premier League title in London.

He’s part of the ownership group of both famed sports teams, and also counts the Waldorf Astoria in Beverly Hills, The Hollywood Reporter magazine for insiders in the movie industry and the music catalogues of The Killers and Bruce Springsteen as investments.

Flexjet became a sensation during the reopening following Covid lockdowns as the ultra-rich, many of whom were made wealthier by a stock market boom, booked private travel at unheard of rates.

Demand was so hot at one point in 2021 that Flexjet closed its jet card programme — a pre-paid balance of flight hours — to new customers. The company reported net income in fiscal 2021 of just under $53mn on $1.7bn in revenue.

Boehly’s Spac is betting the high times for jet-setting dealmakers continue, even as stock markets crater due to rising interest rates.

Job moves

• Moelis & Co has hired Morgan Stanley veteran Rick Polhemus as a managing director, based in San Francisco.

• Kirkland & Ellis M&A partner David Holdsworth has quit the US firm’s London office to join private equity firm TDR Capital, per Financial News.

• Latham & Watkins has hired Aaron Gardner as a partner in New York. He joins from Arnold & Porter.

• Law firm Jones Day has hired Rubina Ali, most recently senior counsel at Goldman Sachs, as counsel in its financial markets practice. She will be based in New York.

Smart reads

Pls fix “Until you’ve gotten that 10pm ‘pls fix’, you just don’t get it” — burnout and late nights are the norm on Wall Street. Junior bankers and consultants tell The Wall Street Journal how the culture of immediacy has effected their personal lives.

Fast-tracking change UK politicians have a solution to London’s congested streets: charging fees for diesel and gasoline cars to speed up the transition to electric vehicles. Drivers have little choice but to pay up, Bloomberg reports.

Too many takeovers Britain’s aerospace and defence suppliers have become hot targets of overseas suitors. Some experts say the surge in M&A could be bad for UK business, the FT reports.

News round-up

Berlin prosecutors pursue Lars Windhorst probe over alleged illegal banking activities (FT)

Bank of England repeats intervention as calls mount for prolonged action (FT)

Sterling slump frustrates US expansion plans of ‘magic circle’ law firms (FT)

Berkshire and Tesla resist making political spending disclosures (FT)

HSBC looks to deals and disposals as part of battle against break-up (Bloomberg)

Ferrovial sells UK support services business Amey in £400mn deal (FT)

Westinghouse to be sold for $7.9bn in sign of nuclear power revival (FT)

Lab tie-up would have multiple ailments (Breakingviews)

US bank accounting: loan loss methodology riles Jamie Dimon (Lex)