Elliott brews up trouble at Starbucks 

One tax overhaul to start: Rachel Reeves, the UK’s chancellor of the exchequer, has kicked off plans to end tax breaks for wealthy expatriates and close a tax “loophole” on private equity performance fees.

And a job move scoop: WPP is set to pick former BT chief Philip Jansen as its new chair, ending a lengthy search for a boardroom heavyweight to help the UK-based advertising group through a period of sweeping technological change.

The boardroom troubles stirring up at Starbucks

Starbucks’ outspoken quasi-founder Howard Schultz seems to have a caffeine addiction.

Schultz has stepped down as chief executive of the world’s largest coffee chain three times. Twice, he’s come back. And recently, he has insisted that his latest year-long stint was his last, telling a podcast last month he has “no desire or intent to return as CEO of Starbucks”.

But when its shares fell after reporting a slide in store sales, Schultz — a nearly $2bn shareholder in the company — made his discontent known, first via a public letter on LinkedIn, then on a three-hour-long podcast.

“The worst thing that a company can do, like a sports team, is start playing defence because you’re afraid to fail. That is a disease, not unlike another disease which has happened to Starbucks, which is hubris,” he said last month.

Now, the Starbucks board of directors is grappling with another big shareholder making their grievances known.

Activist investor Elliott has acquired a taste for the coffee chain, taking a sizeable stake in the $85bn company. The investor is privately pushing for representation on its 10-person board, DD’s Maria Heeter and James Fontanella-Khan reported on Friday.

The two investors are at opposite sides of the bargaining table. Schultz has made his distaste for a behind-the-scenes agreement with Elliott known to some board members, the FT reported. Schultz and Elliott hadn’t made contact as of last week.

Laxman Narasimhan, who took over as CEO last year after a months-long apprenticeship under Schultz, already has a lot on his hands with the company’s upcoming earnings set for Tuesday. (If McDonald’s latest earnings and analyst expectations are any indication, they might not be pretty.)

Now he’ll have to grapple with pleasing both big shareholders: a venti-sized task.

Carlyle goes after unloved oil and gas assets

With climate-consciousness on the rise, private equity giants like Blackstone and Apollo have pulled back from investing in fossil fuel in recent years.

But Carlyle has taken a different approach.

The private equity firm’s energy fund, London-based Carlyle International Energy Partners (CIEP), has been snapping up unloved oil and gas assets the world over even as its rivals retreat, the FT’s Tom Wilson and DD’s Antoine Gara report.

Last month CIEP announced its 15th investment — a $945mn deal for a portfolio of oil and gas projects in Italy, Egypt and Croatia that will make up a new Mediterranean-focused producer chaired by former BP chief executive Tony Hayward.

The rationale: it’s better to invest in reducing emissions from oil and gas businesses than to divest completely.

“Not owning them doesn’t make them disappear because there’s obviously demand on the other side for that supply,” said Megan Starr, Carlyle’s global head of corporate affairs.

Marcel van Poecke, the chair of energy at Carlyle, has helped spearhead the acquisitions. Shortly after joining CIEP in 2013, Poecke signed his first deal: buying a stake in a Swiss oil refiner Petroplus, a company he helped start decades earlier.

So far, the strategy’s churned out healthy returns. Its $2.3bn second energy fund raised in 2019 has reached a multiple on invested capital — representing the current fair value of the assets plus realised proceeds — of 1.7 times. (That outpaces many other funds raised around the same time.)

CIEP’s investments over the years have culminated in a small empire of energy assets. It has bought onshore oilfields from Shell and Occidental. In 2019 it bought a 37 per cent stake in Cespa from owner Mubadala.

As investors ramped up scrutiny of private equity firms’ carbon emissions, Carlyle came up with a workaround: it would keep its energy investments, but reduce each portfolio company’s emissions in line with the Paris climate agreement.

“They couldn’t shut down these energy investment businesses because they were too high of a percentage of the profit of the firm,” said one former Carlyle executive.

Larry Fink takes his time on BlackRock succession planning

BlackRock founder Larry Fink is showing no signs of slowing down.

Since the start of the year, the 71-year-old has been in 14 countries and inked two big deals for a combined $16bn.

But the recent departures of several second and third-tier executives — including Salim Ramji, Daniel Gamba and Zach Buchwald — to run rival asset managers have raised concerns that the $10.6tn money manager might start losing future leaders if Fink leaves succession planning too late.

BlackRock says it has the future well in hand, having recently set out ambitious plans to expand in technology as well as private markets, a high-fee, rapid growth area where it has long been second tier.

Fink is also said to be looking for the “Founders 2.0”, a cadre of people who can replicate the team spirit that he and seven colleagues brought to the creation of BlackRock in 1988 and later institutionalised as “One BlackRock”.

He and the board are still considering who will get what job, and it’s far from clear when any transition would take place.

The FT’s Brooke Masters reports that there are currently five top candidates to take over should Fink and president Rob Kapito, aged 67 and a co-founder of BlackRock, decide to move on.

Mark Wiedman and Rob Goldstein have been in the running for years; Martin Small and Rachel Lord have joined the top ranks more recently, while Raj Rao, a private markets specialist, will only join the firm when BlackRock’s $12.5bn acquisition of Global Infrastructure Partners closes later this year.

Succession planning is a delicate game. Other big financial firms such as KKR and Blackstone have successfully passed the reins to a new guard — or are at least well on their way to doing so.

With Fink still firmly at the helm, DD’s still taking part in the guessing game of who will lead BlackRock next.

Job moves

• Loews Corporation president and chief executive James Tisch is retiring after more than two decades in the role, and will become chair of the conglomerate’s board. His son, Benjamin Tisch, will succeed him in January. He has been at Loews since 2011.

• Davis Polk has hired Christopher Healey as a partner in the firm’s investment management practice. He previously worked for Simpson Thacher.  

• Rivian’s chief commercial officer and president of business growth Kjell Gruner is leaving the electric truck maker. He was previously president and chief executive of Porsche’s North American business.

Smart reads

Short seller squeeze Some short sellers have already given up amid a relentless bull market, Lex writes. The charges against Andrew Left will test the ones who are left.

World Cup’s wake Hosting the World Cup is notoriously expensive. And in Qatar, banks are still wrestling with loan losses two years on, Bloomberg reports.

Tech spats Silicon Valley billionaires have long kept their political disagreements private — or at least off the internet, The New York Times writes. They’re starting to spill into the open.

News round-up

Dealmaking revival hands bumper profits to UK ‘magic circle’ law firms (FT)

Nathaniel Rothschild agrees to back Lars Windhorst’s Tennor (FT)

Euronext ‘ready to strike’ with further acquisitions (FT)

Sixth Street teams up with Mnuchin’s Liberty Strategic on $5bn Bermuda insurance deal (FT)

European credit group Hayfin Capital nears buyout deal (FT)

Olympus’s $2bn Soliant sale is rare profitable exit from buyout stockpile (FT)

UK regulator considers rolling back insurance rules for big business (FT)

The West Bank has so much cash its lenders are worried (FT)