Private equity’s tempest in a teapot

One scoop to start: SoftBank is planning to create and list an AI and robotics company called Roze in the US that will be involved in building data centres as Masayoshi Son pushes to realise his massive AI ambitions. 

Another thing: Starwood’s high-profile property fund has halted redemptions as it seeks to prevent a flight of assets amid mounting pressure on its bet that property markets would quickly recover from interest rate rises in 2022 and 2023. 

And a last one: Hedge fund billionaire Ken Griffin has questioned whether wealthy individuals truly understand the risks of investing in private credit and warned they might struggle to access their money in the event of a downturn.

In today’s newsletter:

• The fate of Unilever’s spin-offs

• OpenAI’s abandoned venture

• A good day for Bill Ackman

Private equity’s food deals grow stale

A long shelf life may be desirable for grocery items. But it’s a less attractive trait when the goods in question are private equity assets.

Private capital groups CVC and KKR are facing the prospect of extended ownership of a pair of business units they acquired from the consumer goods group Unilever in recent years.

In 2017, KKR agreed a nearly €7bn deal to win a fiercely contested auction for Unilever’s spreads business, which includes brands such as I Can’t Believe It’s Not Butter. 

A few years later, in 2021, CVC made a €4.5bn acquisition of Unilever’s tea business that houses names including Lipton and PG Tips.

Neither acquisition has been easy. But tea has been the more challenging of the two.

CVC is injecting €210mn into the business in an attempt to stave off a potential debt restructuring, as the price of the unit’s loans falls and performance deteriorates, the FT’s Madeleine Speed and Euan Healy revealed on Wednesday.

Tea drinking has been in slow decline in the UK as younger people switch to coffee. In major markets where consumption is growing, that trend is being driven by teas other than traditional black tea.

That comes on top of other issues that faced the business such as its troubled Kenyan tea estates, which CVC agreed to sell in 2024.

However, KKR’s ownership of the margarine business also has not been smooth.

KKR has revived plans to sell the business, now called Flora Food Group, working with bankers to drum up interest at an up to $10bn valuation, DD’s Ivan Levingston revealed on Thursday.

The new sale attempt comes after a resurgence in dairy demand led Flora to abandon a plan to make its entire portfolio plant-based. The culprit in this case is consumers’ avoidance of so-called ultra-processed foods and the desire for more protein.

Both deals show the risks of betting on consumer tastes, even in categories that may seem stable.

‘I don’t know what Stargate means’

Just after taking office in January 2025, US President Donald Trump stood flanked by prominent tech executives and touted a lofty new private sector project.

Stargate, Trump said at a White House event, was a “declaration of confidence in America”.

The $500bn joint venture was designed to finance and build dedicated data centres that could satisfy OpenAI’s vast hunger for computing capacity to operate its AI tools and train new models.

In addition to the ChatGPT maker, the venture included Oracle, Abu Dhabi fund MGX and Japan’s SoftBank.

But since the announcement, OpenAI has taken a more flexible approach, striking whatever deals necessary to secure computing power.

It’s abandoned or revised some of its Stargate projects and is instead increasingly relying on third-party providers, leasing capacity rather than building and owning facilities.

The AI start-up has struck large bilateral deals with Oracle, AMD, Broadcom, Nvidia, CoreWeave and Cerebras. The deals at one point totalled more than $1tn in commitments, some of which have since been scaled back.

“I don’t know what ‘Stargate’ means at this point,” a person who was involved in the data centre build-out at the outset told the FT.

Some question whether OpenAI, a lossmaking company, will be able to meet its lavish spending commitments: It claims to have secured more than 8 gigawatts of capacity and forecasts spending more than $600bn by the end of 2030. 

Further doubts were raised after a report this week that OpenAI had missed internal targets for revenue and user growth.

Still, the company’s dealmaking has given it an edge in the race to build AI infrastructure. Rival Anthropic signed off hundreds of billions of dollars of spending on long-term capacity this month as power constraints start to weigh on its ability to meet fast-rising demand.

Whatever Stargate means, OpenAI executives said the guiding principle remains: “build more compute”.

OpenAI said: “Stargate is the umbrella for our compute strategy and we’ve done exactly what we said we would do: secure the compute OpenAI needs at unprecedented scale.”

Bill Ackman goes public

It was a great day for Bill Ackman, but less so for his investors.

The social media-obsessed hedge fund billionaire took his firm, Pershing Square, public. Overnight, Ackman’s stake in a hedge fund some had viewed as a zombie a decade ago was worth nearly $4bn. 

Listing Pershing Square was actually an enticement by Ackman to get another effort off the ground. In 2024, he attempted to raise an up to $25bn closed-end fund in the US that would have turbocharged his ability to make new investments and earn lucrative fees. 

Ackman’s efforts languished as investors balked. After all, his flagship closed-end fund, Pershing Square Holdings, has traded at a chronic discount to its assets.

After pulling the fundraising in 2024, Ackman revived it this year by offering a goody bag of incentives. Investors in the new fund, called Pershing Square USA, which trades as PSUS, would be given an interest in Ackman’s hedge fund and a fee holiday. 

Ackman targeted $5bn to $10bn for the fundraising, but ultimately only reached the low end of the target, even accounting for about $300mn in cash Pershing Square investors redeemed from his other funds to plough into PSUS, according to filings.

On Wednesday, PSUS opened at a 16 per cent discount to its assets, meaning that any buyer of the fund IPO was immediately underwater, even when including their free Pershing Square shares.

Still, Ackman must be happy. 

He now has billions of dollars in new fee-paying cash to invest, a more liquid net worth and a richly valued management company with a public currency for acquisitions.

DD expects Ackman’s new potpourri of assets will fuel a flurry of new and sometimes quixotic financial engineering plays, such as his Universal Music takeover effort. 

Job moves

• Blackstone’s head of growth equity Jon Korngold is leaving, as part of an overhaul focused on AI investments. Jas Khaira has been named head of the new AI and tech-focused unit, Blackstone N1.

• Ardian has appointed Mark Benedetti as co-CEO alongside Dominique Senequier, and Mathias Burghardt, Vladimir Colas and Jan Philipp Schmitz as executive presidents.

• OnlyFans has hired David Eisman as general counsel, Bloomberg reports. He joins from Skadden.

• Moelis has hired Lillian Tsinikas as a managing director in its healthcare services group. She joins from Lazard.

• Jefferies has hired Alex Thomas as Emea head of digital infrastructure investment banking in London. He joins from RBC Capital Markets.

• Citi has hired Karim Tannir as Middle East and Africa cluster and banking head. He most recently worked at HSBC.

Smart reads

America first Apple’s incoming chief executive is inheriting a bevy of supply chain challenges, the FT writes. John Ternus will be under pressure from Washington to onshore manufacturing from China, while surging demand from AI groups drives up competition for memory.

Existential threat Experts fear that new AI tools could help users develop and deploy biological weapons, The New York Times writes. Scientists who were consulted to test the chatbots were alarmed by what they saw.

State power Behind China’s recent order to unwind Meta’s acquisition of an AI company is a Mao-era agency that’s exerting growing influence in strategic sectors of the economy, the FT writes.

News round-up

China’s CIC considers selling Heathrow stake over third runway cost worries (FT)

Elon Musk says he was ‘a fool’ to fund the launch of OpenAI (FT)

DCC considers takeover bid from KKR and Energy Capital (FT)

Lululemon founder casts doubt on new chief as proxy fight escalates (FT)

Google told staff it is ‘proud’ of Pentagon AI contract after internal backlash (FT)