Sunday, December 22

Randall Stephenson’s Exit From PGA Tour Casts Pall on Saudi Deal

Just days before Tuesday’s PGA Tour hearing before the Senate Permanent Subcommittee on Investigations, a prominent tour board member, Randall Stephenson, has resigned. His reason? He said he cannot support the golf organization’s proposed tie-up involving LIV Golf, its Saudi -backed rival, DealBook’s Lauren Hirsch and The Times’s Alan Blinder report.

In a scathing resignation letter obtained by DealBook, Mr. Stephenson, the former AT&T chair, said that he — like most of the board — was left out of the loop as the tour negotiated a deal with Saudi Arabia’s sovereign wealth fund that jolted the sports world.

“I have serious concerns with how this framework agreement came to fruition without board oversight,” Mr. Stephenson wrote, adding he cannot “objectively evaluate or, in good conscience support” it “particularly in light of the U.S. intelligence report concerning Jamal Khashoggi in 2018.”

Mr. Stephenson had already been planning to retire from the board, two people familiar with his thinking told DealBook. (In fact, he had already lately taken to attending most board meetings via videoconference, save for last month’s meeting in Michigan.)

The Saudi deal sped up the timeline. Days after the deal’s announcement, he told the board’s chairman, Ed Herlihy, a partner of the law firm Wachtell, Lipton, Rosen & Katz, of his plan to resign. Herlihy requested that Mr. Stephenson hold out while Jay Monahan, the PGA Tour commissioner, was out on medical leave. Mr. Monahan announced his return on Friday. Stephenson’s resignation letter was dated Saturday.

He wants the board to consider alternatives. “I hope, as this board moves forward, it will comprehensively rethink its governance model and keep its options open to evaluate alternative sources of capital beyond the current framework agreement,” Mr. Stephenson writes.

There are other interested investors, DealBook has heard. But it is unclear how they could compete with the Saudi wealth fund. And a Saudi alliance was the only one that could bring an end to litigation between both sides.

The optics look bad for the PGA Tour. At Tuesday’s Senate hearing, Jimmy Dunne, a PGA Tour board member who was heavily involved in negotiations, is set to testify alongside the tour’s chief operating officer, Ron Price. Mr. Stephenson’s exit also raises further questions about the deal itself, which still needs approval from the tour’s 10-member board, which includes five players.

Threads surpasses 100 million users, a record for app downloads. Meta’s new social network hit that level in just a few days, significantly faster than the two months that ChatGPT needed to hit that milestone, according to The Verge. Meanwhile, traffic to his social network appears to have dropped sharply during that same period.

Carl Icahn negotiates breathing room with his banks. Under pressure from a short-seller over loans tied to his publicly traded investment vehicle, Icahn Enterprises, the billionaire reached a compromise with some lenders that decoupled some of that borrowing from the company’s share price, The Wall Street Journal reports. That could help ease pressure on the firm’s slumping stock.

The moguls are set to arrive at Sun Valley. Allen & Company’s annual conference for tech and media C.E.O.s is set to begin in Idaho on Tuesday, with leaders like Tim Cook of Apple, Mark Zuckerberg of Meta and David Zaslav of Warner Bros. Discovery on the guest list. The gathering is famed as a place where big deals — think Comcast buying NBCUniversal or Jeff Bezos acquiring The Washington Post — are born.

Elon Musk made good on his threat of retribution against those who forced him to buy Twitter. The social network’s parent company on Friday sued Wachtell, Lipton, Rosen & Katz, the Wall Street law firm that represented Twitter’s previous board in efforts to make the billionaire complete his $44 billion takeover bid.

Twitter accused Wachtell, long among Wall Street’s most prestigious and profitable firms, of “unjust enrichment” by negotiating a hefty success fee just before the deal closed. Some legal experts said the lawsuit faces long odds because Twitter’s board approved Wachtell’s fee — but it also raises the question of whether the high-powered firm’s advice was worth its price tag.

It’s the first time Twitter has sought to claw back a vendor’s fee, after months of stiffing advisers and landlords alike on unpaid bills. By any measure, Wachtell’s bill was high: “O My Freaking God,” Martha Lane Fox, a board member at the time, wrote in an email upon seeing the cost.

Twitter executives wired $84 million to Wachtell just 10 minutes before Mr. Musk fired them upon his takeover’s closing, according to the lawsuit. That was fortunate for Wachtell: Other advisers on the deal, including the P.R. firm Joele Frank, Wilkinson Brimmer Katcher and the shareholder relations firm Innisfree M&A, have sued Twitter over fees they haven’t been paid.

Wachtell did provide value for Twitter’s then-shareholders. It helped the board compel Mr. Musk to complete his takeover bid, even as the company’s business deteriorated during months of uncertainty on whether the deal would close. Wachtell also helped Twitter avoid a trial, which would have cost even more in billable hours.

But the lawsuit is casting a light on Wachtell’s billing practices. On June 27, 2022, according to the complaint, one Wachtell lawyer billed $1,625 for five hours’ worth of drafting stock price reactions. On July 9, a lawyer charged $3,006.25 for 9.25 hours of small tasks and being on general standby.

Wachtell’s billing has been scrutinized before: Carl Icahn unsuccessfully sued the firm over its advice defending CVR Energy against a takeover bid of his.

(DealBook wonders: What did Mr. Musk’s legal adviser, Skadden, charge?)

What comes next: The parties are probably headed to arbitration.But the lawsuit raises the prospect of Mr. Musk eventually suing Twitter’s former board for breach of fiduciary duty, having accused the directors of doing so by approving Wachtell’s payment.

Remember that Mr. Musk fired the company’s former management for cause, denying them golden parachutes, but never specified why. Perhaps he may argue this was it?

Janet Yellen’s China trip received largely positive headlines, despite a lack of policy breakthroughs and some gripes about the secretary of the Treasury’s diplomatic protocol. Yellen said relations were on a “steadier footing” and China’s official news agency called the talks constructive.

But that anyone would regard the mere fact that the world’s two biggest economies are talking as a success shows just how low relations have plunged (or is an indicator of how desperate Beijing is to cool tensions amid a worsening domestic slowdown).

The focus was on building relationships. Ms. Yellen met with the officials recently put in charge of economic policy, many of whom have little international experience and are little known to western policymakers. She spoke of “diverse” supply chains — a purported Chinese goal as well — and avoided any mention of “decoupling” or “derisking.”

“Chinese decision makers understand that she is more moderate in comparison to many other senior officials in Washington when it comes to China policy,” Li Mingjiang, an expert on China foreign policy at Nanyang Technological University in Singapore, told DealBook. “Particularly, Beijing likes her public reiteration that decoupling would be disastrous for both countries,”

But the pressure points weren’t resolved. No new policies were announced and the tit-for-tat retaliation and criticism continues: China said it would impose restrictions on the export of minerals crucial to chipmaking and Ms. Yellen slammed Beijing’s treatment of American companies.

China has big problems at home. Official data published on Monday show that the country is teetering on the brink of deflation, as consumer spending slows and weak global economic growth hits exports. It’s the latest sign that China’s post-Covid recovery hasn’t materialized, prompting renewed calls for new stimulus measures.

What’s next: John Kerry, President Biden’s climate envoy, will travel to China this month to resume talks on global warming.

Speaking of Joele Frank, Wilkinson Brimmer Katcher … the firm, best known for its behind-the-scenes advice on deals and corporate crises, has just made headlines of its own: Several executives — along with Ed Hammond, a star M.&A. reporter at Bloomberg — have set up Collected Strategies, a new P.R. firm.

DealBook’s phone lit up Sunday night after the news broke because it was the first time in Joele Frank’s two decades that a partner had left to set up a rival firm.

Joele Frank is one of the top P.R. firms on Wall Street. Founded in 2000 by Ms. Frank, it has become a go-to for companies looking to make — or oppose — deals, defend themselves against activist investors or find their way through a crisis. (Its clients over the years have included G.E., Sony, Time Warner and US Airways.)

Ms. Frank also distributed equity broadly among her partners, who have been paid handsomely. That’s a reason Joele Frank hasn’t followed rivals like Sard Verbinnen in selling itself, and why no partner had jumped to create a rival firm — until now.

The departing partners include Scott Bisang, who advised Twitter on its deal with Elon Musk, and Jim Golden, who advised First Republic and PacWest.

Starting a new firm is hard, given the years needed to build up relationships with corporate leaders and M.&A. bankers and lawyers. Often, as in other industries, executives are also required to take lengthy leaves between jobs.

In this case, the Collected founders can’t go after their former clients for some time, since they have nonsolicit agreements.

But it’s a boom time for new advisory shops anyway, formed by veterans of longtime firms like Brunswick and Sard Verbinnen (which is now part of FGS Global, after a series of mergers).

Among the P.R. firms that have emerged during the past decade are Gladstone Place Partners, C Street Advisory Group, Gasthalter & Company and Reevemark.

Corporate profits, geopolitics and inflation will loom large this week. Here’s what to watch:

Tuesday: NATO’s annual summit begins with Ukraine’s entry to the alliance in focus.

Wednesday: The Consumer Price Index is set for release. Economists polled by Bloomberg have forecast that overall inflation cooled in June to 3.1 percent on an annualized basis, the smallest increase since March 2021.

Thursday: Earnings season kicks off with PepsiCo and Delta Air Lines reporting results. Investors are worried about corporate profitability, given inflation and elevated interest rates.

Friday: It’s Wall Street’s turn, with BlackRock, Citigroup, JPMorgan Chase and Wells Fargo set to report.

Deals

  • Glencore, the commodities giant, may consider spinning off the coal division that was long one of its most successful businesses. (FT)

  • Saudi National Bank reportedly offered to increase its stake in Credit Suisse to 40 percent before the Swiss bank collapsed, but was rebuffed by Switzerland’s financial regulator. (Bloomberg)

Policy

Best of the rest

  • The comedian Sarah Silverman and two authors are suing OpenAI and Meta for copyright infringement, accusing the companies of programming their A.I. networks using their work without compensation. (The Verge)

  • “America Is Wrapped in Miles of Toxic Lead Cables” (WSJ)

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