Is Saudi Arabia’s spending spree over?

One yacht tragedy development to start: Italian authorities believe the chances are “minimal” that UK tech entrepreneur Mike Lynch and five other passengers missing after a luxury yacht capsized off the coast of Sicily are still alive.

In today’s newsletter:

• The Public Investment Fund’s global pullback

• Hilco Global aims to become a merchant bank

• Bronfman gatecrashes Paramount-Skydance deal

Saudi wealth fund’s easy money era comes to an end

The pace of spending and dealmaking that accompanied Crown Prince Mohammed bin Salman’s rise to power made Saudi Arabia a magnet for financiers and dealmakers.

But it was never going to be sustainable, and at some point the kingdom was going to have to take stock of how it was deploying its petrodollars.

The moment has arrived, bankers say, as Riyadh manages falling oil revenues due to production cuts and softer prices, while at the same time facing huge financial commitments to meet Prince Mohammed’s highly ambitious domestic goals.

Much of the spending over the past decade has been led by the Public Investment Fund, the $925bn sovereign wealth fund that Prince Mohammed, or MBS, tasked with developing a swath of megaprojects in the kingdom and building up its overseas exposure.

But this year, the pace of international deals has slowed. The focus has instead shifted inwards, with the message to fund managers being that if you want new money, you have to be prepared to reinvest in the kingdom.

It doesn’t mean the world’s top oil exporter is going to stop spending: MBS has big ambitions in AI, and the PIF has incubated a plethora of new companies, including airline Riyadh Air, that will need to splash the cash to meet their goals.

Riyadh also wants to expand its mining portfolio and develop manufacturing. And the kingdom has a series of international events to prepare for, including the Asian Winter Games in 2029 and the 2034 Fifa football World Cup — it was the sole bidder for the latter.

But it does mean, for now at least, the PIF, which has the daunting task of financing and developing the domestic projects, is likely to be more strategic on where and how it spends. Don’t expect another headline- grabbing deal similar to the $45bn the PIF pumped into SoftBank’s Vision Fund eight years ago.

The reality is the state investment funds across the oil-rich Gulf are being more selective as they mature and focus on sectors they deem strategic.

But of course, the PIF’s strategy can always change on the whims of one man — its chair, MBS.

Hilco Global’s merchant bank ambitions

For nearly four decades Hilco Global has built a name for itself in the world of bankruptcies and distressed investing.

The Chicago-based firm is the one to call if a company needs help valuing assets or liquidating its stuff. Now, it’s looking beyond that work, to a future as a merchant bank.

Jeffrey Hecktman, the company’s 70-year-old founder, has built a billion-dollar fortune by trafficking in unwanted pillows at Bed Bath & Beyond, obsolete baking pans from Twinkies maker Hostess, and even a polluted Bethlehem Steel mill.

As Hilco pivots to this new era, Hecktman plans to capitalise on the mountains of data he’s amassed through America’s most infamous corporate train wrecks, DD’s Amelia Pollard and Sujeet Indap report.

While the company has already dabbled in underwriting and investing, it now wants to make those banking services the centrepiece of its business. To do that, Hecktman is trying to secure a new infusion of capital, potentially by selling a stake in the firm.

He’s spent the past few months travelling the world, including to New York and London, as he courts potential investors. (Executives like to think of the company as what Goldman Sachs was 60-odd years ago.)

He’s not alone in this endeavour.

The firm made two star hires in the past year, bringing on David Kurtz, formerly a luminary at Lazard, and Jamie Sprayregen, who helped build Kirkland & Ellis into a bankruptcy powerhouse, to help usher the company into its merchant bank era.

Hilco’s ambitions are timely. There’s been a surge in recent years of private credit and asset-backed finance, a multitrillion-dollar industry that requires valuation of underlying collateral.

Edgar Bronfman gatecrashes Paramount deal

What do a crypto bro, a Gulf sheikh who owns an investment firm and the grandson of a Kazakh autocrat all have in common? They’re teaming up to go after Paramount Global.

Last month, the media company behind classics like The Godfather and Titanic had agreed a merger with Skydance Media, the film studio founded by billionaire David Ellison.

The race to acquire Paramount over the past several months has felt like a never-ending saga. When the group finally agreed a deal with Ellison’s firm in July, exhausted advisers and bankers sighed with relief.

But at the eleventh hour, another bid emerged: that of the former Warner Music chief executive Edgar Bronfman Jr.

He has raised $5.5bn for a last-minute Paramount offer, gatecrashing the previous deal with Skydance, DD’s James-Fontanella Khan and Eric Platt, and the FT’s Anna Nicolaou report.

His initial bid of $4.3bn on Monday night came just before the 45-day “go shop” period ended — when Paramount could consider other offers.

It’s an eclectic group behind Bronfman. He has secured a commitment from Fortress, which is majority owned by Abu Dhabi’s Mubadala investment arm.

And there are other backers including BC Partners Credit, film producer Steven Paul, crypto entrepreneur Brock Pierce and Nurali Aliyev, the tech investor and grandson of the autocratic former ruler of Kazakhstan.

Bronfman’s initial bid values National Amusements — the family holding company that has controlled Paramount for three decades — at $2.4bn including debt.

The bid also matches Skydance’s planned $1.5bn injection into Paramount, and would pay Ellison’s company $400mn to terminate its existing deal.

While the initial offer lacks clarity on how it would benefit Paramount’s non-voting shareholders, Bronfman plans to improve the bid in the coming days — likely to sweeten the deal for them.

Which will Paramount choose?

Job moves

• Citadel has hired Atte Lahtiranta as head of core engineering, according to a spokesperson. He was most recently the chief technology officer at Goldman Sachs and will begin his new post early next year. 

• Latham & Watkins has hired Leen Zaza as a partner in Riyadh, where she will work with the firm’s M&A and private equity practice. She previously worked for Khoshaim & Associates.

• Rothschild & Co has closed its Miami office after opening it last year with Eric Hirschfield, who led the base, retiring, Bloomberg reports.

Smart reads

Regulatory hurdles The Canadian conglomerate Couche-Tard has submitted a bid for 7-Eleven’s owner, but US antitrust hurdles are likely to be steep, the FT writes.

Brokerage turmoil Investment firm B Riley’s stock collapsed after it was ensnared in a federal investigation. Its founder is trying to stop the bleeding, Bloomberg reports.

Tips galore Some Americans think tips in the US have gotten out of hand. But the system itself might be broken, the FT’s Brooke Masters writes.

News round-up

BT suffers blow as Sky opts for CityFibre’s network in broadband deal (FT)

Qatar Airways signals appetite for more deals after Airlink investment (FT)

‘People are walking away’: UK windfall tax hits North Sea oil investment (FT)

Tiger Cub Goel closes $11bn firm, citing health issues (Bloomberg)

Jonathan Bloomber: missing City executive who was key witness in Mike Lynch trial (FT)

Wells Fargo to sell most of its CRE loan servicing business to Trimont (Bloomberg)

Alaska Air, Hawaiian Airlines clear key antitrust hurdle (WSJ)