Bill Ackman’s ties to the new Starbucks chief

One mega-deal to start: Mars, the candy, food and petcare giant, has reached an agreement to acquire Pringles and Pop-Tarts maker Kellanova at a more than $29bn valuation, marking one of the largest deals of the year, said people briefed about the matter.

In today’s newsletter:

The Bill Ackman-Starbucks connection

On Monday evening, while hedge fund billionaire Bill Ackman tuned into Elon Musk’s hours-long interview with Republican presidential candidate Donald Trump on social media platform X, Starbucks was putting the final touches on a historic leadership switch-up.

The coffee giant’s recent saga came to a crescendo early Tuesday morning, when Starbucks announced that it would abruptly replace chief executive Laxman Narasimhan with Chipotle Mexican Grill’s chief Brian Niccol.

For two months, the company has been under pressure from activist hedge fund Elliott Management to turn around its lagging share price. But people close to the company said the leadership changes should settle the talks.

The coffee giant isn’t wasting any time. Narasimhan is stepping down immediately, with chief financial officer Rachel Ruggeri stepping up to run the company in the interim. Niccol will start on September 9.

Investors had a strong reaction to the news, with both companies’ stock prices moving sharply. Starbucks rose more than 24 per cent and Chipotle fell more than 7 per cent by the end of trading in New York on Tuesday.

So where does Pershing Square founder Ackman fit into all of this? He’s made headlines for myriad other reasons recently, but he also has ties to Starbucks’ soon-to-be chief.

While it’s unclear if he had any involvement in recruiting Niccol to Starbucks, he played a critical role in bringing the executive over to Chipotle six years ago.

The hire proved a huge win for the Mexican food chain — and Ackman’s portfolio. Under Niccol, the company’s stock price rose nearly 800 per cent (which Starbucks, of course, boasted in its press release yesterday morning).

Ackman might have missed this trade, but he previously minted a huge profit from Starbucks. He bought the stock in 2018 and owned it for just over a year. He made a 73 per cent return during the period.

So far, at least, he’s been quiet on X, with no mention of Niccol’s move. Instead, his focus as of Monday evening was on Musk’s Trump interview.

While Starbucks was finalising its leadership overhaul, Ackman was instead posting through the interview’s initial technical difficulties.

“It hasn’t started yet. All I hear is the sound of silence,” he wrote. “There is a certain peace in the sound of silence.”

Private credit giant HPS nabs $30bn

Scott Kapnick has spent the better part of the past two decades building HPS Investment Partners into a giant in riskier corners of credit markets.

Now Kapnick and his team are pushing upmarket into an area that has captivated the attention of rivals: private investment-grade debt.

It’s the phrase du jour in the asset management industry (others sometimes call it asset-backed finance) and an area HPS sees as one key to its future.

In a deal the FT revealed on Monday, HPS is taking on $30bn of assets from Guardian Life Insurance to manage. It will swell HPS’s assets under management to $146bn. Critically, it’s money that must largely be invested in investment-grade debt.

Asset managers like HPS see a huge opportunity as insurers and pensions look to boost their returns over traditional investment-grade bonds, which yield about 5 per cent today.

These private investment- grade deals have taken many flavours: loans backed by railcars, planes, corporate loans, real estate and even music royalties. They include deals like Apollo’s recent $11bn financing of an Intel plant in Ireland.

HPS’s expansion in private investment-grade debt broadens the business as executives at the firm contemplate their next act, which could include a merger or initial public offering.

The investment from Guardian gives HPS a much more significant outside investor — Guardian’s stake in the business will rise from less than 10 per cent to about 14 per cent — and puts it in the same breath as publicly listed peer Blue Owl, which manages $192bn and commands a $26bn valuation.

Notably, the firm has taken a different approach from larger rivals like Apollo and KKR, which own insurers outright.

“We have been very fortunate,” Kapnick told DD’s Eric Platt. “I say to people every day, ‘You have got to perform. You have got to keep putting up results.’ It doesn’t always go according to plan but you’ve got to work through that. This deal is a natural evolution and a positive statement around why investors are comfortable giving us capital.”

Commodities trading hangover hits Cargill

The world’s biggest crop traders were on a high the past few years, reaching record revenues as Russia’s full-scale invasion of Ukraine drove up prices. But now, a commodities hangover appears to be kicking in.

On Tuesday, Cargill — the world’s biggest crop trader — reported that its revenues had declined after hitting a $177bn record the previous year, the FT’s Susannah Savage reports.

And it’s not the first trader to lose ground. Last month the company’s publicly listed rivals Archer Daniels Midland and Bunge reported declining profits, with both companies’ earnings per share falling to their lowest levels since 2020.

Cargill is part of the so-called ABCD of global food commodities traders, which also includes ADM and Bunge from the US and Louis Dreyfus in Europe.

The quartet made record profits in recent years amid the volatility and price surges driven by the pandemic and Russia’s invasion in 2022. But prices have since tumbled as crop supplies have swelled — squeezing the traders’ margins.

Cargill’s chief executive Brian Sikes, who took the helm in 2023, isn’t sitting idly by. He’s overhauling the company’s operations by streamlining the business from five to three units: food enterprise, agriculture and trading, and specialised portfolio.

But the crop traders’ success during a period of historic inflation raised eyebrows. The UN said in a report last October that the conditions faced by ordinary people lay in “stark contrast” to the “surging profits of commodity trading giants”, underscoring “a troubling reality”.

Job moves

• Tate & Lyle has appointed Sarah Kuijlaars as chief financial officer. She was previously the CFO of De Beers Group. She will start the role in September.

• Davis Polk has hired Andrew Ahern, Alisa Waxman and Luke Eldridge for the law firm’s investment management practice in New York. They all previously worked at Debevoise & Plimpton.

• Paul Hastings has hired Reena Gogna for its finance practice as a partner in London. She previously worked for Weil Gotshal.

• Akin Gump has hired Payson Lyman as a partner in Boston for the firm’s private capital division. He previously worked at Kirkland & Ellis.

Smart reads

Back seat boss Starbucks’ new chief executive should beware of its former boss Howard Schultz, who tends to be a back seat barista, Lex writes.

‘ChatGPT, write me a CV’ About half of job applicants are using tools such as ChatGPT to help write cover letters. But without editing, that could come with a big risk, the FT reports.

Rich advisers The secretive Reimann dynasty allocated their wealth to managers who became billionaires. They would have done better investing in a low-cost index fund, Bloomberg reveals.

News round-up

Hipgnosis sues Barry Manilow over bonus payments (FT)

China’s Hesai to be removed from US defence department blacklist (FT)

Elliott prepares to launch proxy fight at Southwest Airlines (WSJ)

US considers a rare antitrust move: breaking up Google (Bloomberg)

Volkswagen’s Porsche-Piëch family hunts for bargains in deflated market (FT)

Just Group raises profit outlook after surge in corporate pension deals (FT)

Home Depot cuts sales outlook as consumer spending weakens (FT)

AstraZeneca hits £200bn valuation (FT)