Brookfield’s internal economy of deals

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A massive pharmacy deal: Walgreens Boots Alliance has struck a $23.7bn deal with private equity group Sycamore Partners that will bring the struggling pharmacy chain’s century-long run as a public company to an end.

And a job move scoop: Amos Hochstein, who was formerly the US special presidential co-ordinator for global infrastructure and energy security under the Biden administration, is joining TWG Global as a managing partner. He will focus on AI, energy and infrastructure, according to people familiar with the matter.

In today’s newsletter:

• Brookfield sells billions to itself

• Star banker joins US government crusade

• Venture Global’s rocky start

The FT’s investigation of Brookfield

Canada’s Brookfield Corporation is synonymous with hulking office towers that dot skylines from New York to London and all over the world. It is the owner of Brookfield Place in Manhattan and Canary Wharf in London and hundreds of millions of square feet in other commercial space.

In recent years, billions of dollars’ worth of stakes in the properties owned by one of Wall Street’s most powerful investors have found a home in less glamorous locales such as the portfolios of the savings held by retirees at two insurers, one in Texas and one in Iowa.

But as the FT reports in an investigation into the sprawling $1tn in assets empire built by billionaire chief Bruce Flatt and his partners, the assets haven’t really left Brookfield at all.

In a Big Read, we examine how Brookfield has sold billions of dollars in property from its estate operations to the portfolios of insurers it recently acquired, American National of Texas and American Equity of Iowa.

The transactions have come as Brookfield’s property unit, weighed down by years of challenges such as the rise of ecommerce, a pandemic and the speedy interest rate rises that followed, has struggled to cover the dividend it pays to its parent.

Last year, Brookfield’s property business upstreamed hundreds of millions in dividends, but then the corporation returned $2.8bn to the property business, half coming from proceeds from the sales of properties between Brookfield and its insurers.

It has led to criticism of the circularity of cash flows inside Brookfield’s labyrinthian operations and questions of whether the earnings streams of its properties are overestimated by its shareholders.

Brookfield denies this and says “we disclose all relevant information on a transparent basis in our reporting . . . and that our real estate business is prudently managed for the long term”. The FT offers an account of both the criticisms levelled against Brookfield and its responses.

In some ways, the tensions raised only scratch the surface. They get to the heart of what could be a potentially massive insurance operation managed by Brookfield. Private capital giants like it, with Apollo, KKR and Blackstone having turbocharged their growth managing the assets of once sleepy insurers.

Some backers of Brookfield believe the insurers it owns will increasingly become a vehicle for its expansive investment operations, which span not only property bets, but credit investments, infrastructure deals and private equity takeovers.

These insurers, they believe, will not just buy its property, but also the debt financing Brookfield’s deals. Filings are already beginning to show the transformation.

Its Texas insurer has purchased pieces of Brookfield deals like from its acquisition of Primary Wave, the reported purchaser of a stake in deceased rapper The Notorious BIG’s catalogue. It also has bought Brookfield’s own debts, like over $500mn in liabilities from its property unit.

Former star banker leads latest US agency purge

Have you ever been asked what four to the fourth power is at work? Or about your “intellectual capacity”?

Well, if you work for the Chips Program Office, the US agency tasked with handing out billions of dollars in semiconductor subsidies, you might have just been asked both of those things. And by none other than former star Morgan Stanley banker Michael Grimes.

Last week, Grimes, who helped finance Elon Musk’s $44bn Twitter acquisition, and a small group carried out a series of interviews with select staff at the agency, the FT’s Michael Acton reports.

It’s the first time the former banker has surfaced since reports earlier this year that ​​he was going to leave ​M​organ Stanley to join the Department of Commerce.

The interviews were to determine which employees the agency would keep. One person described the interviews — which included senior staff — as “demeaning”.

Initially, the plan was to axe all but five probationary members. But staff pushed back over the weekend, sparing 22 jobs. Still, dozens of employees with probationary contracts were abruptly let go.

The sense of drift at the agency is compounded by the fact that several important figures have already left with the arrival of the Trump administration, including former KKR partner Todd Fisher, who was chief investment officer.

Grimes has been working within an agency run by another Wall Street veteran Howard Lutnick, who is now commerce secretary and was former chief executive of investment bank Cantor Fitzgerald.

Grimes made a name for himself leading public listings for star tech companies. He famously clinched the mandate for Uber after working on the side as one of the start-up’s drivers.

From what we’ve heard, though, the vibes at the agency are not good. “Everyone is very cagey about what Grimes is up to,” they said. “This is not a psychologically healthy place to work.”

Venture Global: a warning sign for potential IPOs

Shortly after Donald Trump was elected in November, hopes were high that companies would go public in droves this year.

Venture Global’s IPO in January was seen as a potential bellwether for other public listings. Yet not even two months later, the company has endured a brutal market.

The liquefied natural gas producer’s stock plunged 36 per cent on Thursday after reporting a decline in revenue for the quarter.

While private companies can weather the undulations in sales behind closed doors, Venture Global’s facing the harsh reality of the public market: nothing is private for too long. Its ultra aggressive IPO ambitions have not played out as planned.

Its fourth-quarter revenue fell 7 per cent, while its cargoes of LNG exports declined 18 per cent. Costs also jumped — and the impact of tariffs could drive costs higher, the company said.

The disappointing quarterly performance is the latest blow Venture Global has endured since announcing plans to list. Its planned listing value of $110bn dropped to just $65bn before its debut.

And when it came to the big moment, its IPO broke below its listing price on its first day of trading. Since then, the shares have kept sliding, wiping out more than half of its market value since the float.

The demolition of Venture Global’s stock price comes as other companies are reportedly weighing — or concretely planning — their own IPOs.

Cloud computing provider CoreWeave has plans to launch a blockbuster $35bn IPO next month, while fintech Klarna hopes to list at as much as $15bn. And on Wednesday, the FT reported that chat platform Discord was in early talks with banks about a public listing.

Surely they’re keeping one eye trained on Venture Global.

Job moves

• ​​John Ridding, group chief executive of the Financial Times, will step down after almost 20 years in which he has led the global media company through one of the most turbulent periods of change for the news industry.

• Kenvue has appointed two new independent directors, as well as Starboard chief executive and chief investment officer Jeffrey Smith, to its board.

• Akin Gump has hired Charlie Ofner as an energy and infrastructure partner in Houston. He joins from White & Case.

Smart reads

Hidden dangers Private wealth management companies for the super-rich now manage trillions of dollars globally, the FT writes. Critics say they’re susceptible to abuse.

‘Pay to play’ An all-American finance empire that sells exchange traded funds attracted billions of dollars from all over the country, even with relatively high fees attached, Bloomberg reports. Then it caught regulators’ attention.

Corporate stance As the Trump administration threatens to refuse compliance with judicial decisions and interfere with government’s prosecutorial power, it’s time for business leaders to decide where they stand on the rule of law, Anne-Marie Slaughter writes for the FT.

News round-up

US backtracks on Canada-Mexico tariffs in latest sharp shift on trade (FT)

Schroders ‘needs to do better’, says new chief (FT)

HSBC renames ‘eastern’ and ‘western’ businesses months after creating them (FT)

BP chief paid £2.4mn less last year after failure to meet targets (FT)

Jonathan Reynolds vows to ‘stand up’ for British steel as US tariffs loom (FT)

Visa and Mastercard face UK regulatory action over lack of competition (FT)

Poundland up for sale as owner seeks to change focus (FT)

Ministers plan to shelve VAT tax hit on UK investment funds (FT)

Air France-KLM targets ‘unbelievable’ spending of American travellers (FT)