The rumours are true: Orcel on European banking deals

One call for feedback to start: Yesterday we wrote about how junior lawyers in London are making upwards of £150,000, while some first-year associates in the US are raking in more than $200,000. Do you think they should be making that much? Send your grievances, support or Big Law horror stories to due.diligence@ft.com.

In today’s newsletter:

• UniCredit’s Orcel on dealmaking

• Documents shed new light on Adani’s coal dealings

• Prada and Gucci at FT’s luxury summit

Andrea Orcel on M&A: ‘Most of the rumours are true’

To the outside world, Andrea Orcel’s three years as UniCredit chief executive can be summed up by two issues: speculation over takeover targets and pressure to exit Russia.

The 61-year-old Roman recently sat down with the FT’s Owen Walker and Silvia Sciorilli Borrelli to discuss his time running Italy’s second-biggest bank.

Business has been booming, with the group’s share price quadrupling during his tenure.

It’s widely assumed within the investment banking industry that Orcel’s efforts to boost the bank’s share price — through operational efficiency and generous shareholder payouts — is part of a broader move to put UniCredit in the driving seat when it comes to consolidating Europe’s fragmented banking sector.

Orcel was Europe’s top bank dealmaker at Merrill Lynch in the run-up to the global financial crisis, where he advised on megadeals, including the sale of ABN Amro to RBS, Fortis and Santander. That’s only heightened speculation.

UniCredit has been linked with deals for a number of Italian and European banks over the past few years, including Germany’s Commerzbank, Russia’s Bank Otkritie and local rivals Monte dei Paschi di Siena and Banco BPM.

Orcel told the FT that industry scuttlebutt about UniCredit deals was only natural. “Theoretically, most of the rumours are true inasmuch as, in every single market we look at every possible target,” he said.

“The interest is there under the right conditions, but we haven’t found the right conditions yet, and we have had the discipline to say no.” 

Talk of deals among European banks has heated up in recent weeks, following BBVA’s hostile bid for Spanish competitor Sabadell and comments from French President Emmanuel Macron, where his support for a European capital markets union and cross-border dealmaking appeared to include moves for French lenders.

“It’s good to have this . . . commitment from a major European leader,” Orcel said.

But while M&A is likely to be a central theme in Orcel’s next three years at UniCredit, a more pressing concern is the bank’s Russian subsidiary. A St Petersburg court last week ordered the seizure of €463mn of the bank’s assets.

When it comes to dealing with UniCredit’s Russian business, Orcel’s famed negotiating skills will be put to the test.

Documents indicate Adani inflated low-quality coal prices

Adani Group is yet again facing suspicions of fraud.

The Indian conglomerate appears to have passed off low-quality coal as far more expensive and cleaner fuel in transactions with the country’s state power utility, according to evidence seen by the FT’s Dan McCrum, Chris Cook and John Reed. 

The revelation throws fresh light on allegations of a long-running coal scam, and adds an environmental dimension to accusations of corruption associated with the group.

Using low-grade coal for power means burning more fuel. As a result, the documents — which were secured by the Organized Crime and Corruption Reporting Project and reviewed by the FT — suggest the company may have fraudulently obtained bumper profits at the expense of air quality.

The evidence is all in the receipts. In January 2014, Adani purchased a shipment of coal in Indonesia said to contain 3,500 calories per kilogramme. But the same shipment was sold to the Tamil Nadu Generation and Distribution company as 6,000-calorie coal — one of the most valuable grades.

And there’s more. The FT also matched documentation for another 22 shipments that same year involving the same parties. They indicate a pattern of grade inflation in the supply of 1.5mn tonnes of coal.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

In 2016, Indian authorities announced a probe into endemic corruption in the supply of coal, naming Adani among a group of companies accused of inflating prices. But the probe became bogged down in a court fight over documents. 

Records show that the group used British Virgin Islands-based Supreme Union Investors as middlemen in the transactions. Adani, which denies wrongdoing and allegations of fraud, is still one of the country’s biggest coal importers.

The FT’s been circling Adani’s coal imports for months, while the company’s use of middlemen in some of the company’s schemes has been raising eyebrows for years. 

Last year, an FT investigation found that between 2021 and 2023 Adani paid more than $5bn to middlemen for coal imported to India far in excess of market prices.

Adani’s been trying to rebrand itself as a big renewable energy player while also enduring political debate over the power and influence enjoyed by billionaires (like Gautam Adani) in India.

It’s a delicate time for the company to face a new round of allegations.

Inside the FT’s Business of Luxury summit in Venice

Leaders from brands such as Louis Vuitton and Bottega Veneta descended on Venice this week for the FT’s Business of Luxury summit, where executives divulged their views on the sector’s future.

Up first: Prada. Speaking to the FT’s editor Roula Khalaf, chief executive Andrea Guerra said that while large-scale acquisitions aren’t on the horizon for the Milanese fashion label, “many things would happen” across the industry over the next couple of years.

Other industry insiders in attendance said they expected consolidation in the space despite hurdles, the FT’s Silvia Sciorilli Borrelli reports.

One potential target: Versace. Capri Holdings, its owner, faces regulatory hurdles in the US after its sale to Tapestry came under scrutiny by the Federal Trade Commission.

Whispers about the Italian label’s sale have circulated since last year, with insiders suggesting that Versace’s position was too far off from its parent’s other labels, like Michael Kors. But the rumoured €3.5bn price tag has been an obstacle to a potential sale.

Andrea Bonomi, the founder of private equity firm Investindustrial, said that when it comes to deals “it’s the target who decides”, referring to the price and timing of any potential deal.

Another big topic centred on the future of retail following a period of such frenzied consumer spending during the pandemic.

Ashley Wallace, an analyst overseeing consumer discretionary at Bank of America, said sites that sell multiple brands will struggle, with individual brands’ ecommerce platforms emerging as a critical source of revenue.

Meanwhile, icons like Gucci are recalibrating. Kering deputy chief executive Francesca Bellettini said the brand needed to build “sound foundations” after a period of fast growth that’s now coming to an end. 

Gucci, which accounts for half of Kering’s sales, is now banking on creative director Sabato de Sarno to revive its fortunes.

Job moves

• The World Economic Forum’s founder and executive chair Klaus Schwab is stepping back from his role and transitioning to non-executive chair.

• Grayscale Investments’ chief executive Michael Sonnenshein has stepped down and will be replaced by Peter Mintzberg, global head of strategy for asset and wealth management at Goldman Sachs.

• Covington has rehired Meghann Donahue as of counsel in its financial services group. She previously worked as associate general counsel for the Federal Reserve Bank of New York. 

• Houlihan Lokey has hired Vieri Betti Guaraldi as a managing director in its capital markets group in Europe. He previously worked for Rothschild & Co and Merrill Lynch.

Smart reads

‘Too hot to trot’ As the value of bids for London-listed companies hits the highest level since 2018, the UK government should provide more clarity on which companies should be sold — and protected, the FT’s Anjli Raval writes.

Forever chemicals The New Yorker and ProPublica teamed up to investigate how 3M, the conglomerate behind Scotch Tape and Post-it notes, ran tests and found its own toxic chemicals in human blood. It kept selling the products anyway.

$17 desk salad With the average price of fast-food soaring, fast casual meals like Sweetgreen salads have somehow become the “better-bang-for-your-buck” desk lunch, Bloomberg reports.

News round-up

Shell investors back oil major’s move to weaken climate targets (FT)

Amazon halts orders of Nvidia ‘superchip’ to await updated model (FT)

The highest paid CEOs of 2023 (Wall Street Journal)

Red Lobster owner disputes ‘endless shrimp’ deal allegations (Bloomberg)

Microsoft enhances ‘Copilot’ in race with Google to create AI-powered assistants (FT)