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One scoop to start: The UK government is seeking to line up bankers to run a sales process for British Steel after taking control of the steelworks earlier this year.

And another thing: Paramount’s David Ellison held preliminary talks with Saudi Arabia’s sovereign wealth fund and other big Gulf investors about backing his company’s effort to buy Warner Bros Discovery, according to people briefed on the matter.

In today’s newsletter: 

• Elliott shakes up the gold industry

• Oracle becomes a proxy for OpenAI 

• AkzoNobel’s big US deal 

Elliott takes aim at a new gold-mining giant

Times are anything but golden at miner Barrick Mining, despite bullion having soared to record highs of more than $4,000 an ounce as investors flock to the precious metal as a safe haven amid economic jitters. 

Mining projects, such as Mali’s Loulo-Gounkoto, have gone awry. Barrick’s swashbuckling boss Mark Bristow was shown the exit in September after repeatedly missing production and cost targets. 

Now, activist hedge fund Elliott Management has built a large stake in the gold miner, the FT revealed on Tuesday. 

Elliott’s position, which puts it among Barrick’s 10 largest investors, could have the effect of making market rumours of a break-up at the world’s second-biggest gold producer a reality. 

Barrick’s board had discussed splitting the group in two, separating the higher-growth North American operations from those in higher-risk territories across Africa and Asia, Reuters reported last week. 

Barrick stands out as the laggard in a sector that has been on an almighty bull run in recent times. 

The market value of Barrick has more than doubled over the past year to about $63bn. But its shares are up less than 55 per cent over the past five years, compared with 232 per cent and 144 per cent gains for rivals Kinross Gold and Agnico Eagle, respectively. Barrick’s share rose by 2 per cent on Tuesday.

Elliott was encouraged by the possibility of Barrick considering a break-up, the people said, but the hedge fund’s exact demands and engagement with the company couldn’t be established.

The Florida-based hedge fund, founded by Paul Singer in 1977, is well acquainted with the mining sector, having built positions in mining giant Anglo American and Kinross. 

Bristow, a larger-than-life former South African army officer with a penchant for game hunting, was replaced on an interim basis by Barrick veteran Mark Hill, who reports to chair John Thornton, the former Goldman Sachs executive. 

Barrick’s remedy is to double down on its North American business, with Hill highlighting a new Nevada gold mine that he’s said could be the biggest this century. Meanwhile, Barrick’s emphasis on improving operational performance and value creation suggests an openness to a break-up. 

If that’s what Elliott wants, it may have a low bar to clear in convincing Barrick to act.  

Oracle’s $300bn AI bet garners investor scepticism 

Two months ago, Oracle inked a $300bn deal with OpenAI that sent its shares soaring and briefly turned the company’s founder Larry Ellison into the world’s richest person. 

But the software group has shed $315bn in value since announcing that deal as investors begin to question its expensive push into artificial intelligence.

It turns out what’s beneath the AI hype is massive and uncertain spending commitments that could weigh on the finances and balance sheets of the tech giants that used AI-fuelled bets to become stock market darlings. 

Oracle has fallen by a quarter over the past month amid a broader pricking of a bubble in AI optimism.

Now Oracle is in many ways a bellwether for the world’s most important investment theme. Alphaville’s Bryce Elder examines how Oracle’s AI commitments have turned it into the public market’s proxy for OpenAI, the world’s most valuable private company. 

The deep dive highlights critical issues (accompanied with charts) that the market is now digesting. There are a few points in particular that stood out to DD.

First, 58 per cent of Oracle’s outstanding contracts are concentrated in a single client: OpenAI. 

Second, Oracle is forecasting negative free cash flow for the next five years due to significant commitments to invest in AI infrastructure.

And third, the cost to buy protection against Oracle’s debt has recently surged to a three-year high.

In hushed voices, many top financiers have told DD that a plethora of circular AI spending deals in the tech industry all lead to OpenAI. While that remains true, many roads also lead to Oracle’s balance sheet.

M&A bankers watch paint deals dry

In broad brush strokes, the dealmakers that framed the $25bn merger between AkzoNobel and Axalta were not painting on a blank canvas.

Nearly a decade ago in 2017, the two companies had also discussed a tie-up in talks that were ultimately unsuccessful. 

But the paintings and coatings industry is undergoing another round of dealmaking, including Carlyle’s recent acquisition of BASF’s coatings unit.  

That set the stage for Tuesday’s announcement that Amsterdam-listed AkzoNobel — maker of Dulux paint — and the New York-listed Axalta would merge in a stock deal to create a business with a $25bn enterprise value.

AkzoNobel shareholders will own 55 per cent of the combined company, with Axalta investors taking 45 per cent. As part of the deal, AkzoNobel will pay a cash dividend of about €2.5bn to its shareholders

The combined group will have a single listing in the US, where companies garner higher multiples. However, it will maintain dual headquarters in Amsterdam and Philadelphia.

There are other similarities between current events and 2017. Earlier that year AkzoNobel had seen off the activist hedge fund Elliott and fended off an unwanted takeover approach from the large US competitor PPG Industries.

Once again, the Dutch company faces an activist shareholder on the register in the form of Cevian Capital, which took a stake earlier this year as AkzoNobel sought to boost performance.

And there remains the risk of an interloper. Eight years ago Japan’s Nippon Paint gatecrashed Axalta and Akzo’s takeover talks.  

As Lex writes: “The new guard has a chance to paint a rosier picture this time round.”

Job moves 

• Jeff Bezos has co-founded an AI start-up called Project Prometheus, and is the company’s co-chief executive officer, The New York Times reports.

• Tikehau Capital has appointed Daniele Germano as co-head of Italy. Germano was previously at BNP Paribas Real Estate Investment Management.

• ICR has appointed Donna Anderson to the firm’s governance and shareholder advisory practice as senior adviser. She joins from T Rowe Price, where she was global head of corporate governance.

• Simpson Thacher & Bartlett has hired Michelle Cheh as a partner in the firm’s private funds and funds transactions practices in Hong Kong. She joins from Kirkland & Ellis.

• Ropes & Gray has hired Amanda Morrison as co-leader of its global private capital transactions practice. She rejoins the firm after three years at Advent, where she was general counsel and chief legal officer.

Smart reads

Big data centre Tech companies are turning to Wall Street to fund massive AI infrastructure projects, The Wall Street Journal reports. And virtually everyone in finance wants in on the boom.

Uninsured The deterioration of life insurer PHL Variable Insurance shows the perils of one of private equity’s biggest plays in recent years, Bloomberg reports. PHL policyholders may be left holding the bag.

Bait and switch Oracle co-founder Larry Ellison is scaling back his academic research centre in Oxford. The tech billionaire has cut initiatives at the eponymous Ellison Institute of Technology and senior figures have left in recent months, the FT reports.

News round-up

Meta wins US case that threatened split with WhatsApp and Instagram (FT)

Judge rules Purdue Pharma must pay $7bn in bankruptcy settlement (FT)

Microsoft and Nvidia to invest up to $15bn in OpenAI rival Anthropic (FT)

Fund managers warn AI investment boom has gone too far (FT)

Callaway sells stake in Topgolf driving range unit to private equity (FT) 

Amundi to take 10% stake in ICG as it pushes into private credit (FT) 

The start of passenger services on the new East West Rail line will be delayed until at least 2026 with no start date confirmed, the operator has said, partly due to a row over guards on the trains.

Passenger trains were supposed to come into service between Oxford and Milton Keynes this autumn, the first stage on the new railway along the Oxford-Cambridge arc where the government hopes for rapid economic growth.

However, the operator, Chiltern Railways, has yet to formally notify authorities of the start of services – meaning trains on the flagship project will not be timetabled for several months.

The track and infrastructure has been completed and passenger trains have been leased but stand idle. More than a year has elapsed since Network Rail finished work on the line and the first test trains ran, and freight trains are running on the route.

A looming row over how trains are staffed is understood to be the main stumbling block. An existing agreement is understood to only allow Chiltern to operate trains without guards on certain parts of its network.

Both the RMT union, representing guards, and Aslef, representing train drivers, formally oppose any extension to driver-only operated trains on the UK railway – a position that is likely to have been reinforced by the recent knife attack on a train in Cambridgeshire.

Unions said Chiltern only recently notified them of plans to run the East-West trains without guards. An RMT spokesperson confirmed that Chiltern management had written spelling out the plans and the union was seeking talks. Aslef said it was approached last month but was awaiting the outcome of the RMT negotiations.

The single new station so far built on the route, Winslow, has also yet to be completed. Work is continuing.

A Chiltern Railways spokesperson said: “We are working with the Department for Transport, trade unions and other industry partners to deliver the first stage of East West Rail for customers and businesses.

“As well as creating nearly 100 new permanent jobs at Chiltern, this new service will deliver immense benefits across the region, so we are eager to ensure that these benefits are realised for the community as soon as possible.”

A DfT spokesperson said: “We are supporting Chiltern Railways as they work closely with unions and other industry partners to get services on the first phase of East West Rail up and running as soon as possible.”

The transport secretary, Heidi Alexander, said East West Rail would be a “catalyst for growth, more jobs and opportunity, and this project will make rail travel faster, greener and more reliable for millions of passengers … laying the foundations for long-term prosperity in one of the UK’s most dynamic regions.”

East-West Rail will eventually be a critical component of the Oxford-Cambridge corridor that ministers have earmarked as “Europe’s Silicon Valley”, delivering economic growth and tens of thousands of new homes, including a possible new town on the route at Tempsford.

The phased opening of the railway will next involve upgrades to the line from Milton Keynes and Bletchley to Bedford, and then a new line built east of Bedford to Cambridge.

The full opening is also likely to be pushed further back into the 2030s after the government confirmed changes to the scope and route to allow more trains and another station to serve the planned Universal theme park near Bedford.

The East West Railway Company building the multibillion-pound line said it hoped to run up to five trains per hour, with up to 70% more seating across the route, due to greater forecast demand.

Its chief executive, David Hughes, said the updates “reflect our commitment to listening to communities while designing a railway that delivers long-term benefits for the region. Our latest proposals better reflect what matters most to people and will deliver better outcomes for passengers, local communities and the environment”.