Nippon Steel’s mega-deal starts to unravel

Some proposed tax increases to start: Kamala Harris has proposed to increase the top capital gains tax rate for the wealthiest Americans to 28 per cent, softening a centrepiece of Joe Biden’s fiscal proposals as she offers an olive branch to Wall Street.

And a scoop: One of the world’s biggest laboratory equipment suppliers Antylia Scientific has been put up for sale by its private equity owners targeting a valuation of more than $2bn.

In today’s newsletter:

• The political tug-of-war plaguing Nippon Steel

• Aussie deal mints a new billionaire

• AI start-up focused on safety raises $1bn

Nippon Steel’s political tug-of-war

US Steel chief executive David Burritt threw an unexpected hail-mary pass on Wednesday as he tried to breathe life into one of the worst-timed deals of the past decade.

Burritt, who is attempting to keep the company’s $14.9bn sale to Nippon Steel alive, warned thousands of jobs in the election battleground state of Pennsylvania would be put at risk if the takeover wasn’t approved.

“We want elected leaders and other key decision makers to recognise the benefits of the deal as well as the unavoidable consequences if the deal fails,” he said.

It’s a risky gambit to make a nearly $15bn deal an election issue and one that could easily backfire. Pennsylvania, as most Americans know, could very well decide the US election this November.

Both vice-president Kamala Harris and former president Donald Trump have come out against the deal, which also faces intense opposition from the United Steelworkers, one of the most powerful unions in the US.

Harris on Monday said the Pittsburgh-based company should remain “American owned and American operated” while on the campaign trail. Trump has said he would “immediately” block the deal if he wins.

The takeover has been in purgatory since it was announced last December, and it’s unclear how Burritt’s push this week changes the calculus for either the Harris or Trump campaigns.

But a potentially fatal blow arrived later Wednesday, with the FT reporting that President Joe Biden intended to block the acquisition after concluding it posed a national security risk that couldn’t be overcome, said several people familiar with the matter.

That’s surely a painful development for both companies (and the small army of advisers who have toiled away on the merger for months). Nippon Steel was advised by Citigroup, while US Steel was advised by Goldman Sachs and Barclays.

Lucrative advisory fees for the banks are at risk (even as the law firms involved are likely billing large sums for the work they’re doing on the US national security review).

It’s unclear who advised Burritt to raise the stakes with politicians — he threw a rally outside one of US Steel’s plants on Wednesday — but he has gotten some poor guidance already.

Deal documents show one of US Steel’s advisers, the Washington-based powerhouse Covington & Burling, told the company it “did not anticipate that any of those transactions would implicate unresolvable national security concerns based on the identity of the counterparties”.

AirTrunk deal mints a new Australian billionaire

Digital infrastructure — mobile phone towers, fibre optic cables and data centres — have been in vogue for a number of years as the sort of thematic investment private equity and asset managers love to talk up.

Recently, the rise of artificial intelligence has supercharged demand for data centres. A deal Down Under has proved that point.

AirTrunk, a data centre company founded eight years ago, has been bought by Blackstone and the Canada Pension Plan Investment Board for A$24bn (US$16bn), which includes debt and capital expenses AirTrunk has already committed to.

It’s one of the largest transactions ever struck for an Australian company.

What’s remarkable is how the valuation of the business exploded in less than a decade, propelling the company’s immigrant founder Robin Khuda into the country’s newest billionaire along the way.

Khuda, who emigrated to Australia from Bangladesh in the late 1990s, founded AirTrunk in 2015 and two years later secured funding from Goldman Sachs to pursue a plan to build large data centres across Asia.

Macquarie appeared on the scene in 2020 when it acquired an 88 per cent stake in AirTrunk alongside Canada’s PSP Investments, which valued the young business at A$3bn.

AirTrunk has since expanded to 11 “hyperscale” data centres in markets including Japan, India and Malaysia and looks positioned to grow as data demand continues to climb.

Last year, a float at a value of about A$10bn looked on the cards. But instead, a bidding war between Blackstone and a rival consortium that included Silver Lake unfolded over recent weeks.

The biggest beneficiaries from that bidding war? Macquarie and Khuda.

Macquarie said in May that deals had been slipping towards the back end of 2024 and that it didn’t want to rush into asset sales. The multibillion-dollar deal proves that patience is a virtue.

As for Khuda: he’s not packing up just yet. He will remain chief executive under Blackstone’s new ownership, and looks set to retain a 5 per cent stake.

No product, no problem: ‘safe’ AI start-up raises $1bn

This new company doesn’t have a product yet, and has only been around for three months. But according to investors, it’s already worth about $5bn.

We’re talking about Safe Superintelligence (SSI), a new company founded by OpenAI co-founder Ilya Sutskever that plans to build “safe” artificial intelligence models.

Despite being in its infancy, SSI has raised $1bn from investors including Sequoia and Andreessen Horowitz. Sutskever started the company alongside AI investors Nat Friedman and Daniel Gross, as well as Daniel Levy, a former OpenAI researcher.

The huge fundraise at such an early stage isn’t a mystery: soon-to-be rivals in the AI sector have clinched soaring valuations.

OpenAI is in talks with investors about raising billions of dollars at a valuation of more than $100bn, while Anthropic and Elon Musk’s xAI were both valued at close to $20bn in funding rounds earlier this year.

The birth of SSI comes on the heels of accusations of safety violations at OpenAI, which Sutskever left in May after leading a failed coup against chief executive Sam Altman.

Sutskever’s team there — which was focused on ensuring that AI systems that surpass human intelligence will act in the human interest — was disbanded, and other top employees also left.

SSI’s current team is slim, with only 10 employees. It will be entering a competitive labour market for those with AI expertise.

Job moves

• Edelman has hired former South Carolina governor Nikki Haley as vice-chair and former US senator Max Baucus as senior adviser.

• Deutsche Bank has hired Peyman Dadgar to lead technology, telecommunications and media M&A in Emea. He most recently spent more than a decade at Citigroup.

• Freshfields has hired Christopher DeCresce as a partner for the firm’s capital markets practise in New York. He previously worked for Paul Hastings and Covington & Burling.

Smart reads

At a standstill Disney and satellite provider DirecTV are stuck in a messy contract dispute as each tries to survive a new world order in entertainment, Lex writes.

Honey deuces galore It feels like everyone on Wall Street and in New York’s business world is at the US Open this year, sipping on honey deuces. Not everyone’s happy about the record crowds, the New York Times reports.

Arduous path More than 200 countries and the world’s biggest companies have agreed to bring down global emissions. But the US and other rich countries need to lead the charge, Bloomberg writes.

News round-up

Abu Dhabi to invest billions in Exxon’s Texas hydrogen project (FT)

Starwood and Segro agree deals as commercial property heats up (FT)

US homebuilders face credit crunch as banks cut lending (FT)

Verizon nearing deal for Frontier Communications (WSJ)

Investor doubts about Wegovy copycats weigh on health start-ups (FT)

U-turn on fraud refunds prompts UK payment companies to call for more changes (FT)

Elon Musk’s Starlink agrees to block X in Brazil (FT)

Private credit firm HPS has begun discussing IPO with investors (BBG)