Peloton shares surge as news of PE buyout interest breaks

Shares in Peloton soared by as much as 18% on Tuesday after CNBC reported that several private equity firms are considering a buyout of the connected fitness company, which is looking to refinance its debt and return to growth after 13 consecutive quarters of losses.

CNBC’s report cited an unnamed source in confirming that the New York-based company has held talks with at least one firm as it considers going private, with a number of other private equity firms also reportedly viewing Peloton as a potential acquisition target, although it is unclear whether any other formal discussion have taken place.

Peloton has become a takeover target after seeing its market capitalisation plunge to about $1.3bn as of Monday, from a high of $49.3bn in January 2021.

Last week, Peloton’s CEO Barry McCarthy quit and the company announced around 400 job cuts as part of a plan to reduce costs after posting weak results in its latest earnings report.

According to CNBC’s source, there is no certainty a deal will happen and the business could remain a public company.

BHP’s Carbon-Heavy Bid for Anglo-American

The Australian miner’s attempt to buy Anglo-American has been pitched as a copper deal, but would create a huge coal producer with emissions equivalent to a mid-sized country’s.

Mining giant BHP’s bid to acquire Anglo-American would create the world’s biggest shipper of metallurgical coal and a global mega-polluter, exposing shareholders to stranded asset risk as the world moves away from fossil fuels, a think tank has warned.

This is a particular danger if steelmakers solve the problem of decarbonising steel faster than BHP assumes, and if carbon capture, use and storage (CCUS) – which could extend the life of dirty blast furnaces – fails to take off, the Institute for Energy Economics and Financial Analysis (IEEFA) said.

Australia-based BHP, the world’s biggest miner, offered to buy London-listed Anglo-American last month in an all-share deal that valued the company at £31 billion (US$39 billion). Anglo-American rejected the offer saying it was undervalued, but BHP is expected to increase its offer.

Most commentary has focused on the copper component of the proposed deal, a positive public-relations angle for BHP given the red metal’s central role in the clean energy transition.

But the deal would have a dirty side. Both companies have large metallurgical coal and iron ore divisions, supplying the carbon-spewing steel mills of China, India, Japan and South Korea. Steel is one of the world’s most polluting industries, producing around 8% of global carbon emissions.

Combining the two companies would result in annual emissions of around 490 million tonnes of carbon dioxide equivalent a year, analysis of each firm’s 2023 annual reports shows.

That’s equivalent to the emissions of a mid-sized industrialised country (well above the UK’s total annual greenhouse gas emissions, and about level with notoriously high-emitting Australia). This enormous, hard-to-abate carbon footprint is set to be an ongoing ESG headache for the firm – even as it spins off or shuts down its dirtier mines.

Most of the companies’ emissions come in the form of Scope 3 – emitted by the miners’ steelmaking customers. In BHP’s case, Scope 3 emissions from iron ore represented an eyewatering 283 million tonnes last year (on par with Spain’s total emissions), and from its metallurgical coal about 29 million tonnes. Meanwhile, Anglo-American’s Scope 3 emissions from processing iron ore were 51 million tonnes.

Steelmaking coal still ‘essential’

Iron ore is not intrinsically carbon-emitting. The ore itself contains no carbon, and if alternative methods

Banker Bonus Cap Removal Bursts Fair Pay Bubble

Academics question logic behind higher pay for talent retention, as further pay votes are set for AGMs later this month.

HSBC’s decision to scrap a cap on bankers’ bonuses at last week’s AGM could open the floodgates for rising executive pay, further aggravating investor concerns around fair pay.

The vote to remove the cap received 99.3% shareholder support, allowing the bank to set a new limit for bonus and significantly increase payouts. HSBC paid its top investment bankers an estimated average bonus of US$771,700 last year, while median employee pay at the bank sits at £63,000 (US$79,000).

“It’s reflective of the general direction of travel with senior management pay in the UK,” Lindsey Stewart, Director of Investment Stewardship Research at Morningstar, told ESG Investor. “There’s a conviction, certainly among companies, boards and management, that higher pay has to be part of the equation for talent attraction and retention.”

Before the meeting, Stewart suggested the vote would “likely become a focal point for the UK’s conversation on executive pay”.

Overall trend

Under the previous legal cap, an employee’s bonus could not exceed 100% of their annual pay, or 200% with shareholder approval. These limits were scrapped from 31 October 2023 by then-Chancellor Kwasi Kwarteng’s mini budget.

Similar votes are due to take place at Barclays’ AGM on 9 May and Lloyds’ on 16 May. Beyond the UK, proxy advisor Glass Lewis has urged Morgan Stanley shareholders to vote against an executive pay proposal at its AGM on 23 May.

“The overall trend is going to be preserved,” said Stewart. “With HSBC is having approved this, it’s unlikely that we’ll see a rejection of those decisions at Lloyds or Barclays.”

Last week, Goldman Sachs removed its bonus cap for UK bankers, meaning they can now earn more than the previous limit of double their base pay. The decision was criticised by British trade unions.

The median pay for S&P 500 chief executives rose 9% to US$15.7 million in the year to April 15, increasing the gap between top management salaries in the US and UK. UK executives have complained they are underpaid compared to US peers, with several warning of a talent exodus without more competitive pay.

Last year,

Vision Ridge Partners apoints Head of Europe

Global sustainable real assets investor Vision Ridge Partners has appointed Ramzi Moubarak, a former Managing Director on Macquarie Capital’s infrastructure and energy capital team in Europe, as a Managing Director and Head of Europe, effective immediately.

Moubarak, who is based in London, will be responsible for sourcing and executing investments principally in Europe, across the energy, transportation and agriculture sectors. His appointment follows the opening of Vision Ridge’s London office in October 2023.

At Macquarie Capital, Moubarak led the value-add infrastructure investing business and co-led the energy transition sector in Europe. Previously, he served as a Partner at European private equity firm Montagu, having earlier served as a Vice President at Morgan Stanley Infrastructure Partners.

Ironbridge exits Advance Engineered Products

Ironbridge Equity Partners has sold Advance Engineered Products, a manufacturer of tank trucks, trailers and vacuum truck equipment, to an entity controlled by TerraVest Industries.

Financial terms of the transaction have not been disclosed.

Throughout its investment in Advance, Ironbridge said in a statement that it supported management to expand manufacturing capabilities, diversify end-market exposure and implement efficiency improvements across its facilities.

Advance marks the sixth exit from Ironbridge’s second private equity fund, Ironbridge Equity Partners II, a fully committed $154m fund.

Littlejohn & Co exits IT recruitment agency Motion

Connecticut-based private equity firm Littlejohn & Co will sell IT staffing and recruitment agency Motion Recruitment Partners to global specialty talent solutions provider Kelly for $425m in cash, in a transaction that is expected to close in Q2 2024. 

Under the terms of the agreement, there is potentially an additional earnout of up to $60 million based on performance criteria. Additional details about the transaction will be provided in Kelly’s Q1 earnings conference call on 9 May.

According to a press release, Kelly will fund the transaction through debt and available capital, including the redeployment of around $100m from the sale of its European staffing operations in January.

The transaction is expected to build on Kelly Science, Engineering & Technology (SET), its life sciences and engineering staffing provider; KellyOCG, its managed services staffing and solutions provider; Kelly Professional & Industrial, its industrial staffing provider; and Kelly Education, its education staffing provider.

In a statement, Peter Quigley, President and CEO of Kelly, described Motion’s businesses as “an exceptional fit for Kelly’s SET and OCG segments”.

Kelly is being advised by Houlihan Lokey and Jasso Lopez. MRP is being advised by Robert W Baird and Baker Hostetler.

Kian Capital Partners exits managed IT services provider The Purple Guys 

North Carolina-based private equity firm Kian Capital Partners has sold its stake in The Purple Guys, a managed IT services provider to small- and mid-sized businesses, to Ntiva, a portfolio company of asset manager PSP Capital.  

Kian and co-investor ParkSouth Ventures initially acquired The Purple Guys as well as Network Technologies in 2020, with a majority recapitalisation and merger of Enterprise Computing Services and My IT. Following a rebranding, the company completed and integrated seven additional acquisitions, according to a press release.

The Purple Guys was advised by Harris Williams, Robinson Bradshaw and FORVIS.

Specialist energy PE firm Bluewater exits ROVOP

Specialist energy private equity firm Bluewater has sold its stake in ROVOP, a remotely operated vehicle (ROV) services provider for the energy sector, to US-based marine transportation solutions provider Edison Chouest Offshore. 

Terms of the transaction have not been disclosed.

Through its Blue Water Energy Fund II, Bluewater first invested in ROVOP in 2017, investing again alongside UK venture capital provider BGF in 2020. Bluewater assumed full ownership in 2022, facilitating a $25m investment from Cordiant Capital intended for further growth.

ROVOP reported a 31% increase in revenue, reaching £53m for the fiscal year ending 31 March 2023.

Brookfield to invest $1.5bn in private credit manager Castlelake

Brookfield Asset Management, a global alternative asset manager with over $900bn of assets under management, has agreed to invest $1.5bn to acquire a 51% stake in asset-based private credit specialist Castlelake’s fee-related earnings.

The investment includes capital to be invested in Castlelake’s investment strategies by Brookfield Reinsurance, and according to a statement, will allow the firm’s to expand Castlelake’s differentiated asset-based investment business, which includes aviation and specialty finance.

Castlelake will continue to operate its business independently, retaining its current governance and leadership structure, including Carruthers as Chief Executive Officer and Chief Investment Officer, and O’Neill as Executive Chair. It will retain majority ownership of its performance-related earnings. The transaction is expected to close in Q3 2024.

Castlelake was founded in 2005 by Rory O’Neill and Evan Carruthers and is one of the longest-tenured investment firms focused on asset-based investments. The firm manages approximately $22bn of assets for around 200 institutional investors.

Brookfield was advised by Evercore and Paul, Weiss, Rifkind, Wharton & Garrison. Castlelake was advised by Goldman Sachs & Co, Colchester Partners and Kirkland & Ellis.

Alto Partners and Arca Fondi acquire pharma manufacturer Eurosirel 

Milan-based private equity firm Alto Partners and Italian fund management company Arca Fondi have agreed to the buyout of Eurosirel, a manufacturer and distributor of medical devices and cosmetics. The transaction is expected to close by June. 

As part of the transaction, Alto’s latest fund, Alto Capital V, and Arca’s private equity fund, Arca Space Capital, will acquire Eurosirel from the company’s founders, Ernesto and Alberto Leonelli, through an equally owned and managed special-purpose entity.

The acquisition is intended to support Eurosirel’s international growth with a focus on research and development, technology and proprietary solutions.

Alto Partners and Arca Fondi were advised by OC&C, Giovannelli Studio Legale, Spada Partners and ERM. Ernesto Leonelli was advised by Marcianesi & Associati and Orrick.