The curious characters behind the Trump Spac deal

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The prince, the Donald and the Spac

Much has been written about Digital World Acquisition Corporation, the blank-cheque company looking to take a Donald Trump-backed social media platform public, since it announced the transaction last week.

In particular, its soaring share price, up almost 800 per cent since the deal was announced, and who is benefiting from it — namely hedge funds.

But little is known about the people behind the Spac, who have struck what could be one of the most lucrative deals since the blank-cheque boom took off.

DD’s Mark Vandevelde and Ortenca Aliaj and the FT’s Anna Gross, took a look at Trump’s new backers.

A person checking the app store on a smartphone for “Truth Social,” with a photo of former US president Donald Trump on a computer screen in the background
Donald Trump aims to compete against the likes of Facebook and Twitter, creating a platform for his rightwing supporters ahead of a potential run for office in 2024 © AFP via Getty Images

One of the key executives is Luiz Philippe of Orléans-Braganza, or “O Príncipe” (“The Prince”), as he is referred to in his native Brazil.

Orléans-Braganza, who was elected to Brazil’s National Congress three years ago and is a supporter of the country’s far-right president, Jair Bolsonaro, has put forward the idea of creating an unelected head of state with powers to veto the legislature’s decisions

The Brazilian “royal” also appears to be a fan of Trump and his inner circle.

Eleven days after last year’s US presidential election, he was cheering the former president’s personal lawyer Rudy Giuliani who claimed — without proof — that the election had been stolen.

To celebrate the deal with Trump Media & Technology Group, which could provide hundreds of millions of dollars for a social media start-up “to stand up to the tyranny of Big Tech”, Orléans-Braganza posted a now deleted picture on Instagram of himself and Trump saying he was “honoured” to be a part of the project. You can still view it here.

While Orléans-Braganza has a small stake in the Spac, the real beneficiary is an obscure Florida-based businessman called Patrick Orlando.

A slide from Trump Media & Technology Group’s presentation
A slide from Trump Media & Technology Group’s presentation

He owns the Spac’s sponsor, ARC Global Investments II, a little-known company that put up $25,000 to buy a stake in the blank cheque company.

Orlando is involved with several other Spacs, including one headquartered in Wuhan, China, but in the years prior to his deal with Trump, the businessman was at times fighting legal battles against business associates and seems to have had a tough few years.

“In trouble with bankers, wife, family, paying bills late . . . and gets worse every day,” Orlando wrote in a 2012 email.

Now Orlando’s stake in the Spac is worth about $600m. 

Losing Pinterest

It’s a bad habit of online shoppers to stuff their carts with items, often on discount, then forget to checkout. For Pinterest, the San Francisco-based social media and image sharing network, the feeling is familiar.

For the second time in a year, Pinterest has been the target of takeover interest from a big Silicon Valley tech group, only to see the prospective acquirer lose interest over its lofty valuation and concerns with its slowing growth.

PayPal and Pinterest
PayPal approached Pinterest about a deal that would valued it at $45bn but has since said it is no longer pursuing the company © Reuters

In February the FT reported Microsoft had taken a look at buying Pinterest but that the talks were no longer active. Last week the FT and others reported that PayPal was considering acquiring Pinterest in a deal that valued the company at $45bn, or a 30 per cent premium.

Before PayPal felt the need to say something publicly about the deal, shareholders rebuked whatever chief executive Dan Schulman may have been thinking.

In the subsequent trading days, PayPal’s value fell by almost $30bn, roughly equal to Pinterest’s current market capitalisation. With good reason.

While Pinterest benefited from the pandemic, as quarantined shoppers studied cooking recipes and artisanal home improvements, its lockdown-fuelled user growth is petering out. Its monthly active users in the US were down last quarter by 5 per cent, a number that is only accelerating.

Headwinds are everywhere. Like other social media apps, Snapchat and Facebook, Pinterest is grappling with privacy changes Apple has implemented on its iPhone operating system. Last week Snapchat shares fell by more than a quarter as it warned of the impact of Apple’s changes.

Dan Schulman, CEO, pictured outside PayPal’s headquarters in San Jose, California
Dan Schulman, pictured outside the company’s headquarters in San Jose, California, pitches PayPal as a payments ‘super app’ © Winni Wintermeyer

After studying Pinterest, it’s clear Schulman dreams of using PayPal’s valuable stock currency to build an ecommerce platform.

For now, Schulman, who is perhaps the valley’s most avid sweater wearer, has loaded PayPal’s shopping cart but failed to get past checkout. But rarely does one regret failing to pull the trigger on an ill-fitting cardigan from an online clearance rack.

Heady days in the buyouts business

Private equity firms Hellman & Friedman and EQT have spent the past few months slogging it out to buy Zooplus, a German company that sells pet food online.

Dogs jump into the water during a dog swim day at an open-air pool in Munich, Germany
Sales at Zooplus, one of Europe’s largest online petcare retailers, jumped 18% last yea © Andreas Gebert/Reuters

A quick timeline might help illustrate how Zooplus has made the most of the situation.

August 13: H&F bids €390 a share. Zooplus’s management and supervisory board back it

September 2: Zooplus says it’s in talks with EQT about a possible offer

September 7: Zooplus says it’s in talks with KKR as well as EQT about possible offers 

September 12: H&F raises its bid to €460 a share 

September 15: KKR walks away

September 25: EQT bids €470 a share 

October 8: H&F matches EQT’s €470-a-share offer

That left the pair in deadlock — until Monday.

H&F and EQT have put their rivalry aside and agreed to bid jointly for Zooplus. And just in case all that bidding wasn’t enough, they’ve given their offer one last rise, to €480 a share.

Chart showing the Zooplus takeover offers. Equity value (€bn) on fully diluted basis, Aug 13th to Oct 25th 2021.

The attraction? Zooplus offers ample scope for leverage and big spending, the FT’s Lex column notes, and sales have risen since more people bought pets during coronavirus lockdowns.

It’s rare for buyout groups to end bidding wars with an agreement to work together — though DD readers may recall that Blackstone and Global Infrastructure Partners did the same in February with a £3.5bn joint bid for the UK-listed private jet services company Signature Aviation.

But what’s really rare in this case is the price. The transaction gives Zooplus an equity value of €3.7bn and an enterprise value of €3.5bn (in case you’re wondering why the latter is lower, the equity value figure includes options, which are excluded from the enterprise value calculation). 

So the enterprise value is — don’t fall off your chair — 57 times Zooplus’s 2020 earnings before interest, tax, depreciation and amortisation.

Oh, and the €480 a share is a casual 85 per cent premium.

We’ve written before about how private equity groups are paying the highest premiums in more than two decades for listed companies, but even so, the European average is a more restrained 45 per cent.

So is an 85 per cent premium going to be the new norm for take-privates? Listed company CEOs should perhaps take note when buyout groups next come knocking.

Job moves 

  • Chemicals group Linde has elected two board members, including the very busy former Siemens chief executive Joe Kaeser, to its board. Kaeser is chair of Siemens Energy, vice-chair of NXP Semiconductor and a director at Daimler Truck, where he is proposed to become chair.

  • John McCormick, who co-runs Blackstone Alternative Asset Management, is leaving the business, the WSJ reported. That makes Joseph Dowling the unit’s sole head.

Smart reads 

Safe space Being a billionaire is so tough these days. Thankfully the Masters of the Universe found a safe space at the Milken Conference last week in Los Angeles. And lucky for you, our team was there to bring you the highlights. (FT)

Whistleblower If you haven’t heard of Facebook whistleblower Frances Haugen, you probably have encountered one of the many stories resulting from her leak of thousands of pages of Facebook documents. Her press strategy is the focus of this column. (New York Times)

French Murdoch Vincent Bolloré is usually featured in DD for his dealmaking mischief. But with a presidential election coming up in France, the dealmaker is using his acquisitions in the media to push a rightwing agenda. (FT)

News round-up

Private equity/IRRs: benchmark too often benefits buyout bosses (FT)

CVC and Sanjiv Goenka to pay $1.7bn for new IPL cricket teams (FT)

Telstra buys Digicel’s Pacific operations in government-backed deal (FT)

Why UK bank M&A is still stuck in the doldrums (FT)

Just Eat Takeaway rebuffs call to sell Grubhub (FT)

Two men claim Rogers chairmanship as rift convulses family (Bloomberg)

UniCredit walks away from rescue of Monte dei Paschi (FT + Lex)

HSBC announces $2bn share buyback as profits surge 74 per cent (FT)

Mozambique reeling from Credit Suisse ‘tuna bond’ scandal (FT)

Volvo scales back flotation after investors balk at control by Chinese owner Geely (FT)

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