Moelis Unveiled: Embracing a Bold New Chapter

Starting with a scoop: Activist hedge fund Parvus Asset Management is acquiring shares in Novo Nordisk, the maker of Ozempic, while searching for a new CEO after a drop in share prices.

Remembering a Wall Street icon: Dick Beattie passed away at 86 years old on Friday. He dedicated sixty years to the corporate law firm Simpson Thacher, playing a key role in major transactions including JPMorgan’s takeover of Bank One and the merger of AOL and Time Warner. Beattie is particularly remembered for his strong bond with Henry Kravis, co-founder of KKR. In Barbarians at the Gate, Beattie, a former military pilot, was referred to as Kravis’s “consigliere,” noted for his gentle demeanor and the intense gaze of a former Marine.

Highlights from today’s newsletter:

What’s next for Moelis & Co?

Ken Moelis has experienced it all.

Over a 40-year journey on Wall Street, he has worked alongside the “junk bond king” Michael Milken, advised figures like Donald Trump and Carl Icahn, and founded a boutique investment bank that facilitated significant deals like Blackstone’s $26 billion acquisition of Hilton Hotels.

(Moelis is also one of the few CEOs who delivers captivating insights during earnings calls.)

On Monday, he announced his upcoming departure as CEO of Moelis & Company later this year, but he won’t be stepping away fully.

The 66-year-old will transition to executive chair and is set to receive a $25 million retention bonus if he remains in a senior role until 2029.

He will be succeeded as CEO by co-founder Navid Mahmoodzadegan, while Jeff Raich, another co-founder, will assume the role of executive vice-chair.

This change has been in progress for years: Mahmoodzadegan and Raich, long-time collaborators of Moelis, became co-presidents in 2015 in anticipation of this succession.

Nonetheless, the bank is at a pivotal junction.

Boutique M&A advisors thrived after the global financial crisis, leaving larger firms with lending and trading divisions at a disadvantage.

Moelis made the most of this by establishing himself as one of Wall Street’s most connected bankers. In 2014, Moelis & Company went public and currently holds a market value exceeding $4 billion.

Yet, questions persist regarding the longevity of smaller firms that rely on a standout dealmaker.

Moelis & Company has addressed this with notable hires and by giving more responsibility to executives like Mahmoodzadegan and Raich.

Last year, they actively recruited, significantly increasing the number of top talent in their ranks.

The downside? These talented bankers demand high salaries, which are putting financial pressure on the firm during a period of slow dealmaking.

They need to hit the ground running.

Warner Bros Discovery is restructuring

Time Warner, AOL Time Warner, Warner Bros Discovery… Over the last couple of decades, the Warner brand has generated significant deal-making activity.

Now, dealmakers are embarking on another venture linked to Warner.

Warner Bros Discovery declared on Monday that it will separate into two publicly traded entities — a split plan that originated nearly a year ago. One entity will concentrate on streaming services and studios, while the other will handle the television network sector, which encompasses CNN and Discovery.

This initiative aims to “enhance shareholder value,” as chair Samuel A. Di Piazza Jr. diplomatically stated.

The company’s stock price plummeted 60% since its formation through the merger of Warner Media and Discovery.

The combined entity struggled while investing in streaming initiatives, and its cable networks have been affected by a generational shift away from conventional TV.

Just last week, shareholders rejected compensation packages for several executives, including CEO David Zaslav, who led the Warner-Discovery merger.

This split mirrors a similar move by Comcast to distinguish between the faster-growing streaming sector and traditional TV.

While shareholders may welcome this news, creditors might not share the same sentiment.

Warner Bros Discovery carries approximately $37 billion in debt, which has exerted downward pressure on its stock price. A significant portion of that debt is trading below par.

The company intends to repurchase some of its bonds, likely at a discount, and refinance the debt before the split — setting the stage for a confrontation with debtholders.

For deeper insights, check out Lex.

A small deal with significant consequences

Alimentation Couche-Tard’s nearly $50 billion offer for its rival, Seven & i Holdings, has generated buzz in Japan.

However, a transaction that is 100 times smaller is stirring a more serious discussion about Japan’s economic security and its openness to unsolicited takeovers.

Meet Shibaura Electronics, a leading maker of temperature sensors utilized in rice cookers, refrigerators, and missiles.

Shibaura currently finds itself at the center of a fierce takeover dispute between Taiwan’s Yageo, which has adopted a hostile approach, and Japanese knight in shining armor MinebeaMitsumi.

This contention arises as Japan’s East Asian competitors take an interest in the nation’s unique firms, which dominate critical technological markets.

Foreign companies like Yageo, along with private equity firms, have committed to aiding inward-looking Japanese companies in expanding their global reach.

However, local competitors caution against the dangers of exposing Japan’s cherished technologies.

“If it’s permissible for anyone to acquire our firms, and we sell everything to foreigners at a premium, what remains?” quips Yoshihisa Kainuma, chair of MinebeaMitsumi.

This debate unfolds amid a more assertive China: Beijing has made its intentions known through its “Made in China” initiative, aiming to dominate advanced supply chains.

This presents a threat to Japan’s own technological strengths, as the country has integrated itself into global supply chains ranging from semiconductors to radar technologies.

Officials are now prioritizing the safeguarding of “Japan’s current indispensability,” remarks Takashi Shimada, who previously served as a senior adviser to Fumio Kishida, a former Japanese prime minister.

Keep an eye on developments at Shibaura. The outcomes may reveal how vigorously Japan’s government will safeguard its high-tech champions.

Employment updates

• Jenner & Block has appointed Damian Williams as co-chair of its litigation and white-collar investigations department.