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The US investment giant ditching Deutsche Bank

One thing to start: Two of the most influential proxy advisers have counselled Credit Suisse shareholders to vote against a motion to absolve executives and board members from blame for the multiple scandals afflicting the Swiss lender.

Saying auf Wiedersehen to German banks

In February 2020, as disappointing revenue growth, negative interest rates and the ominous first stages of a pandemic began to weigh on the shares of Europe’s largest banks, two of Germany’s top lenders received an unexpected vote of confidence.

Just weeks after becoming one of Deutsche Bank’s largest shareholders, US asset manager Capital Group took out a 4.8 per cent stake in Frankfurt-based Commerzbank, doubling down on its bet that Germany’s banking sector would prevail.

The twin investments were especially validating considering the Los Angeles investor’s unique “multi-manager” system — which grants each portfolio manager the freedom to invest their “sleeve” of a fund however they choose. In other words, such sizeable holdings were likely the result of a collaborative strategy.

Capital Group is “the best kind of investor one can wish for”, a top-10 Deutsche shareholder told the FT. “They don’t have to own the stock, they want to own it.”

So DD imagines it must have stung particularly badly when the US investment company decided to reverse course this week.

On Monday the FT’s Olaf Storbeck and Stephen Morris unmasked Capital Group as the mystery seller of stakes of more than 5 per cent in both Deutsche Bank and most likely Commerzbank, together worth a combined €1.75bn. Shares in the two banks initially fell more than 10 per cent on Tuesday.

The latest exit by a leading investor is another blow for Deutsche Bank, Germany’s largest lender © AP

It’s not the first major investor to distance itself from the German banking duo in recent months. US private equity group Cerberus cut its stakes in both lenders by more than a third in January.

In 2019, Cerberus made unsuccessful attempts to orchestrate a merger between Deutsche Bank and Commerzbank as well as replacing Deutsche’s then-chair Paul Achleitner. It later shifted its energies towards waging a boardroom battle at Commerzbank.

Though it did successfully agitate for the resignations of the bank’s chief executive Martin Zielke and chair Stefan Schmittmann, the private equity group has suffered paper losses of €400mn on the dual investments since first disclosing them in 2017, according to the FT’s calculations.

It’s possible that Capital Group saw Cerberus’s struggles in the region as an indication of more trouble on the horizon for Europe’s banking sector.

Ambitious restructuring plans by Deutsche chief Christian Sewing and Commerzbank’s finance chief Bettina Orlopp had been thwarted by the same issues of fragmented markets, strict labour laws and poor governance that have long pervaded the industry.

The war in Ukraine has brought its own set of problems — from Germany’s dependence on Russian gas to the prospect of an economic slowdown in the EU.

Tim Armour, Capital Group chief executive, left, and former chief Jon B Lovelace, who helped build the company his father started into a mutual fund industry leader © FT Montage

But unlike Cerberus, the punt on German banking paid off for Capital Group as it bought in at a much later point, when Deutsche Bank’s share price was near its all-time low. Lex estimates that the 2.7tn US investment giant earned around 47 per cent on its investment in Deutsche Bank. Why not quit while you’re ahead?

It remains unclear how Capital Group intends to handle the rest of its European portfolio. It sold a £900mn stake in Barclays just last month, but remains the top shareholder in both France’s Société Générale and Italy’s UniCredit as of January, according to Capital IQ data.

Whatever happens, Capital Group’s unconventional investment structure — introduced by the son of Capital Group’s founder Jonathan Bell Lovelace who famously disliked strict hierarchy and wanted to avoid becoming too dependent on a handful of star managers — means that its next move in Europe is likely to be a group decision.

The vegetable seed salesman who built a $27bn sports empire

Like many entrepreneurs, Michael Rubin started out young, selling vegetable seeds when he was just eight and putting $2,500 of bar mitzvah money into starting a ski shop in Pennsylvania as a teenager.

Rubin has endured his fair share of ups and downs. One early lesson in debt management came after a snowless ski season, which forced him to borrow money from his father on the condition that he would go to college.

He went to the private Catholic university Villanova while continuing to run his retail business, which had expanded to five stores. After just one semester, he snapped up some discounted skiing equipment and sold it for a huge windfall. He dropped out of college and used the proceeds to get into athletic equipment and sold his ski shops.

Michael Rubin, chief executive, says Fanatics is in no rush to list on the public markets © Kevin Mazur/Getty Images for Fanatics

When the internet arrived, Rubin began to shift to ecommerce, setting into motion what would eventually become one of the world’s biggest sports merchandisers.

By 2011, Rubin’s efforts attracted the attention of online auction site eBay, which bought his GSI Commerce for $2.4bn as online shopping revolutionised retail.

Crucially, Rubin retained GSI’s sports operations, named Fanatics after a Florida-based retailer acquired just before the eBay deal. SoftBank was an early backer, injecting $1bn into Rubin’s new business.

Today, Rubin rubs shoulders with celebrity athletes and owns a minority stake in the Philadelphia 76ers, his home state basketball team.

Fanatics is valued at $27bn after a $1.5bn fundraising this month whose backers include Alibaba co-founder Joe Tsai and the Qatar Investment Authority, which owns French football team and Fanatics partner Paris Saint-Germain.

“All the capital raises are always for M&A, we don’t raise capital for our operations,” he told the FT’s Sam Agini.

Rubin’s next play will define his career. He won’t rush to list the group — “it’s a midterm thing”, he says — and is instead pushing ahead with an acquisition spree to diversify from merchandising.

This year, Fanatics bought the Topps trading cards business and vintage sportswear maker Mitchell & Ness in deals valued at a combined $750mn. The company is also the majority shareholder of Candy Digital, a platform for digital sports collectibles known as non-fungible tokens, which launched last year.

JPMorgan: Dimons are forever?

When Jamie Dimon announced plans to extend his tenure to reach at least two decades at the helm of JPMorgan Chase last year, DD began to wonder whether Dimons were, in fact, forever.

The US bank offered a rare glimpse of its succession preparations in a securities filing last week, which said a “substantial majority” of investors wanted him to stay on as non-executive chair when he steps down as chief.

Jamie Dimon © Bloomberg

Dimon has long led Wall Street’s legion of “forever CEOs”. With 14 years at the helm under his belt, he makes even some of his longest-running peers look like spring chickens.

In addition to enjoying far longer stints in the top job than the rest of quick-to-fire corporate America, executives at top US banks enjoy another industry perk that has fallen from favour in other industries: relatively unchecked power.

Along with its main rivals Morgan Stanley, Bank of America and Goldman Sachs, JPMorgan has so far fended off investor pressure to reel in the industry’s “imperial CEOs” and split the role of chief executive and chair.

An incredibly slow-motion succession battle has been playing out in the background at JPMorgan, with co-heads of consumer banking Marianne Lake and Jennifer Piepszak slated as potential successors to Dimon when he does eventually step down — but that could take years.

While the splitting of the chair and chief executive role would put the US bank on track with governance changes in other sectors, it would also give Dimon a way to cling to power even after the bank installs a new boss.

Job moves

  • KKR has named Ford veteran Pamela Alexander as a managing director and head of corporate citizenship, based in New York.

  • Private equity firm Hg has appointed Philip Marshall, the former finance chief of cyber security group Avast, as its new chief financial officer. The software investor also appointed four new partners and hired Kerry Heaton as head of talent from HSBC.

  • Skadden has hired Raymond Bogenrief, a corporate lawyer focused on leveraged buyouts, Spacs and other M&A transactions, as a partner in Chicago. He joins from White & Case.

  • AIG has named its chief risk officer Sabra Purtill as investment chief of its soon-to-be-listed life and retirement business, Corebridge Financial.

  • EFG Hermes, the emerging markets-focused investment bank, has named Bank of America’s former head of Saudi Arabia investment banking Saud Altassan as chief executive of its Saudi Arabia arm

  • Visa has appointed Teri List, the former chief financial officer of Gap and Dick’s Sporting Goods, to its board of directors.

Smart reads 

The jury is out Britain’s often-opaque courts system seems to start from the opposite principle to America’s: it asks why the public should be allowed to know what’s happening, rather than why they shouldn’t, the FT’s Kadhim Shubber writes.

Prime real estate Chinese companies have taken an interest in acquiring private islands. Is it a business move, or a plan to grow the communist party’s naval foothold in the southern Pacific? The FT’s Kathrin Hille investigates.

Too good to be true? As the Spac boom fades, trading Spac warrants — instruments that give investors the right to buy shares at a specified price in the future — has proved so lucrative that regulators are investigating certain transactions for potential insider trading, Bloomberg reports.

News round-up

Deloitte under investigation by UK accounting regulator over Go-Ahead audits (FT)

Benettons, Blackstone are nearing a takeover bid for Atlantia (Bloomberg)

Hedge fund trader who won big on GameStop backs energy stocks (FT)

Lloyd’s of London shuts headquarters after fossil fuel protest (FT)

Nokia becomes latest corporate departure from Russia (FT)

Shares in Dubai’s biggest utility surge on market debut (FT)

Offshore centres: trade in secrecy is big business for small islands (Lex)

The private market ‘supercycle’ (Alphaville)

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