Apollo’s grocery aisle mess

One scoop to start: Lockheed Martin has emerged as the frontrunner to buy Advent-owned naval defence group Ultra Maritime for roughly $3.5bn, as companies look to snap up military technology, with conflicts raging from Ukraine to Iran.

And another: Gymshark chief executive and founder Ben Francis is in negotiations to buy back a portion of the stake he sold to private equity firm General Atlantic, as the 34-year-old seeks to tighten his control over the company after a challenging few years.

And a last thing: Jersey Mike’s, the sandwich chain owned by Blackstone Group, has filed for an initial public offering as it taps buoyant financial markets to list portfolio companies and return cash to investors.

In today’s newsletter:

Trump’s agenda crashes into Apollo’s grocer

Donald Trump’s mass deportation campaign is hitting close to home for a large private equity deal owned by one of the US president’s most high-profile backers on Wall Street.

Apollo Global Management, which is led by Marc Rowan, once considered by Trump to be Treasury secretary and a member of his Board of Peace, has been struggling to sell its portfolio company Heritage Grocers Group after the Hispanic-focused grocery chain reported consecutive quarters of dwindling foot traffic and falling sales, according to people familiar with the matter. 

One of the company’s major issues: the immigration raids that have swept through the US under Trump have scared away some of Heritage Grocers’ core immigrant customers, denting its bottom line. The supermarket group has also been hit by the Trump administration’s cuts to government food aid.

The struggle to sell the group underscores how private capital’s top echelons have been hit in unexpected ways, even though Trump’s policies generally have helped Wall Street. 

Trump opened retirement plans to alternative assets, weakened the regulatory state and cut taxes for corporations and the wealthy — all broadly beneficial for the industry. But PE firms owning companies such as Heritage Grocers, or those with production facilities in Mexico and Asia, have seen their finances knocked by aggressive immigration and tariff policies. 

BlackRock and JPMorgan Chase lost millions of dollars on auto lender Tricolor, which served minority communities and is now facing numerous financial probes after it swiftly imploded last year.

Heritage Grocers, which operates more than 100 stores in six US states under brands including Cardenas Markets and El Rancho Supermercado, had aimed for a price tag of as much as $1.5bn — a lofty target for a business that generated just $150mn in ebitda last year.

Unsurprisingly, the asset has struggled to attract buyers. Creditors are equally pessimistic about the grocery chain’s outlook as it battles intensifying supermarket competition and the dwindling purchasing power of low-income consumers.

Heritage’s publicly traded debt — an $895mn loan maturing in 2029 — is now trading at a deeply distressed 64 cents on the dollar. S&P Global downgraded the company deeper into junk territory in April, forecasting continued declines in revenue and profit margins through the rest of the year.

The Mayfair set vs the tax man 

A rare corner of finance where London hasn’t lost its top global status is hedge funds, which have long been synonymous with swanky offices and fine dining in the Mayfair neighbourhood.

But on Wednesday the sector took a hit when Britain’s highest court unanimously ruled against Michael Platt’s BlueCrest Capital in a £200mn tax fight.

BlueCrest warned after the ruling that the UK was “no longer a serious contender” as a place to do business.

That may be an exaggerated threat from an unhappy loser. But the ruling could test the resilience of London’s hedge funds, already on edge after the end of the non-dom tax regime sent many in finance packing in recent years.

At issue in the case were rules about how members of limited liability partnerships are taxed. BlueCrest was a leading test case because it considered how the rules should apply in complex partnership structures.

However, an executive at a large hedge fund told the FT that most firms in the industry were set up differently and it was “crazy” for BlueCrest to have opted for the structure it did.

Experts are now weighing up the impact for around 50,000 LLPs. Some said the ruling paved the way for more LLP members to be treated as employees rather than true partners, increasing income tax and national insurance liabilities.

Hedge funds in particular are likely to be affected, said Michael Wistow, global head of tax at law firm McCarthy Denning.

The ruling also came just weeks after billionaire Alex Gerko lost a separate tax battle in the UK involving profits made by him and a group of traders while they worked at hedge fund GSA Capital between 2010 and 2015.

Exxon’s Trump era revival   

It’s almost a decade since Darren Woods was appointed to lead ExxonMobil. And after a shaky start, the electrical engineer from Wichita, Kansas, appears to be at the peak of his powers, the FT’s Jamie Smyth and Kenza Bryan report.

Woods, who tends to shun the media spotlight, is basking in the glow of strong financial results linked to his strategy of boosting oil production while European rivals pivoted to green energy and US competitors prioritised boosting “value over volume”.

Exxon’s oil and gas production recently hit a 40-year high, and it has outshone its main rivals on total shareholder returns. It has almost double the proven oil reserves of Chevron and given the green light to a number of exploration projects aimed at making the next big discovery.

It has also teamed up with the Trump administration to successfully weaken EU climate regulations.  

Exxon’s successes represent a big turnaround for Woods, who in 2021 was defeated by a tiny activist hedge fund Engine No. 1 in a campaign focused on poor capital allocation and Exxon’s weak climate policies. Since then, in what some critical observers say resembles the plot line of Star Wars sequel The Empire Strikes Back, Exxon has done everything in its power to ensure it will not face such an ignominious defeat at the hands of its own shareholders again.

First, it sued climate activist shareholders Follow This and Arjuna Capital in 2024. Then it introduced a management-friendly proxy-voting system and relocated its corporate domicile to Texas, moves that critics say will give management a greater presumption of independence.

Exxon denies its actions dilute shareholder rights, and it won votes on the measures at annual meetings.

But DD respectfully suggests Woods should avoid the tendency in many successful C-Suites to fall victim to unchecked power.    

As Christina Sautter, a law professor at Southern Methodist University, warns: “When shareholders can’t effectively challenge board decisions, whether it’s via derivative suits or shareholder proposals, you’re not eliminating problems, you’re hiding them until they explode.”

Job moves

• Sullivan & Cromwell is launching a German litigation practice and has hired Philipp Hanfland and Maximilian Bülau as partners to co-lead the practice in Frankfurt. Hanfland will also lead the firm’s European disputes practice. They join from Hengeler Mueller.

• Latham & Watkins has hired Erica Schohn as an executive compensation partner in New York. She joins from Skadden.

• Sidley Austin has hired Carl Hotton as an M&A partner in London. He joins from DLA Piper.

• Amundi has named Petra Salesny as chief executive of Amundi Alpha Associates.

Smart reads

Empire building Ken Griffin spent years buying a Miami condo building unit by unit, Bloomberg reports, as he builds a complex for Citadel in the south Florida city.

Unlucky fans While Donald Trump earned hundreds of millions of dollars last year from his family’s crypto company, most people who bought World Liberty Financial tokens have seen their values fall, The Wall Street Journal reports.

Suspicious activity An indie pop song surged to the top of Spotify’s US chart before the platform removed more than half a million streams it believed were initiated by bots, the FT reports. But not before some Kalshi traders collected their payouts.

News round-up

Blue Owl hit by $4.7bn of redemption requests as investor exodus persists (FT)

UBS to trial US banking services in push for wealthy American clients (FT)

Healthcare group owned by Ardian has its bank accounts seized (FT)

JPMorgan loses battle over Charlie Javice’s legal expenses (Bloomberg)