What’s Blackstone really worth? 22 Mar 2007 In reality, the answer is whatever investors caught up in their fervour to own a slice of the buyout leader will be willing to pay for it. But the firm s IPO filing for the first time offers a roadmap for a more measured valuation. Something close to $25bn looks about right.
Blackstone’s big idea: leverage 22 Mar 2007 The buyout giant has enjoyed Googlelike growth. And like the internet firm, Blackstone wants to be a different kind of public company. Whereas Google promised not to be evil, Blackstone wants to load on debt. Earnings will be supercharged but so will risk.
EU gives itself a 50th birthday present 22 Mar 2007 The open skies agreement doesn t come to much, in the short term. But it is a worthy example of the EU s history of messy compromises. The end of flag carriers will eventually make travel cheaper and more efficient. Small steps like this have helped the EU thrive.
Valeo fast sailing to proxy fight 22 Mar 2007 Apollo is considering a bid for the French carparts company while two activist shareholders want to pull it in opposite directions. As most of the board is up for renewal, management should clearly articulate its vision on how to maximise value. Before it s too late.
Balance sheet blinders cause pain in tech 22 Mar 2007 Motorola s $11.2bn cash pile attracted Icahn and other investors looking for a quick buyback. They got it and a lemon investment. The lesson from the company s seven decade ride on the technology rollercoaster is that good times, and flush balance sheets, are fleeting.
UK public-to-private isn’t that easy 22 Mar 2007 But how many of these deals will actually get done? Private equity may have the cash. But public company boards still have the whip hand. Sainsbury s, Boots, Whitbread, Pearson: hardly a day passes without another UK public company being linked to a possible private equity bid.
Telenor’s dash into emerging markets runs into trouble 22 Mar 2007 The Norwegian telecoms group has had to admit that it has lost control of its Ukrainian venture after a dispute with its Russian partner. That s a timely warning to Telenor s peers, like France Telecom, Deutsche Telekom and Vodafone, who are rushing into emerging markets.
The Godfather has some advice for BP in Russia 22 Mar 2007 Don Vito Coreleone used to say it s important to keep your friends close but you need to keep your enemies closer still. It s not ideal but may be the only way BP can do business in Russia by teaming up with enemy stateowned firms like Gazprom or Rosneft. Don Vito Corleone used to say it s important to keep your friends close but you need to keep your enemies closer still.
Bertelsmann finds clever ways to do deals 22 Mar 2007 By putting E500m into its own private equity fund, the cashconstrained German media company could find itself doing up to E16bn of deals. But it might be hard to pull off. Trade buyers and private equity groups rarely make easy partners.
Cadbury drinks buyout could deliver a big pop 22 Mar 2007 High margins and strong brands like Dr Pepper make the confectionery group s drinks business well suited to the private equity treatment. Even at £8bn, a buyer would only need to juice up profitability a little and pour on plenty of debt to get a 25% annual return.
The Fed increasingly looks irrelevant 21 Mar 2007 Modestly lower rates would bring little benefit to mortgage defaults or the housing market. Higher rates wouldn't stop inflation's march. In this damned if you do, damned if you don't environment, the Fed's nonaction looks like the safest course.
Brown should not be quite so smug 21 Mar 2007 The UK chancellor s eleventh budget offered a few new tricks, amounting to very little, and lots of his trademark boasting. The longterm record is pretty good. But inflation is 4.6% and the government deficit is too high. Brown should practice modesty.
Mid-sized private equity firms take relaxed stance on buyout debate 21 Mar 2007 Some say they should be more engaged. Sir David Walker s transparency group is stuffed with big firms that may impose more red tape on them. But there's not an obvious conflict of interest between big firms and smaller ones. And anyway, any code Walker produces will be voluntary.
Mack’s traders mask bankers’ lull 21 Mar 2007 The Morgan Stanley boss s push to pile on the risk paid off again in the first quarter. Trading revenue jumped more than at rival Goldman s. But his bankers weren t so lucky. True, advisory work isn t nearly as important to the bottom line. But it still carries bragging rights.
What should Steve Schwarzman pay himself? 21 Mar 2007 As little as possible, probably. Or, after Blackstone s IPO, private equity critics may have a field day over his compensation. But for Schwarzman, there s a better reason. Each dollar he foregoes will boost his firm s earnings and make his stake balloon in value.
ACS shareholders should resist LBO offer 21 Mar 2007 The consulting company deserves to be private. Shareholders haven t earned money in years while executives have enjoyed many perks. But the management buyout offer on the table of $5.9bn looks insufficient. After all, the company turned down a higher bid just last year.
Whitbread not cut out for LBO treatment 21 Mar 2007 A buyout firm might covet the UK leisure group s £4bn property stash. But there s not much they could do that the company itself couldn t. Investors may have the spectre of private equity to thank for highlighting the value gap. But thanks is probably all they should give away.
Spain’s ACS turns itself into an investment trust 21 Mar 2007 Its 25% purchase of Germany s Hochtief adds yet another asset to its eclectic collection of stakes in large quoted companies. To be fair, the strategy has worked pretty well so far. But it s still far from clear ACS can add much value to its investments.
Private equity tax: US Senate shows the way 20 Mar 2007 The US Senate is considering changing the tax treatment of private equity s carried interest so that it is taxed as income not capital. The UK chancellor Gordon Brown should take note. Private equity does not need this tax break. He should use tomorrow s budget to remove it.
UK inflation at highest level since 1991 20 Mar 2007 The RPI index, which includes housing, rose 4.6% in the last 12 months. That makes the overnight interest rate of 5.25% look low. The Bank of England looks at the more restrictive CPI index. Its 2.8% increase is less alarming, but still worstof class in Europe.
Slovakia’s revaluation is dangerous but necessary 20 Mar 2007 As it gets richer, Slovakia s domestic wages rise to meet those of richer countries. The currency has to rise to keep inflation away. But revaluation is risky for a country with a big trade deficit. Tight world liquidity could cause a currency crisis.
Shell could be the model for ABN-Barclays 20 Mar 2007 The Dutch have always been sensitive about economic power shifting abroad. The takeover of a large bank will be supersensitive. Barclays will need to find a way to assuage Dutch national pride. Fortunately, Royal Dutch Shell offers a handy template.
ABN shouldn’t ram through Barclays deal 20 Mar 2007 The Dutch bank has entered exclusive talks, raising concerns that CEO Groenink is more worried about a dignified exit than a profitable one. Selling to Barclays may be one way forward but it may not deliver the most value. Groenink needs to consider all the options.
Could Sainsbury’s pension deficit be a deal-breaker? 20 Mar 2007 The pension fund trustees could insist private equity closes the scheme s full buyout deficit, given an LBO will provide a weaker covenant. That would scupper any deal. But in practice, this is unlikely. There are other ways for bidders to assuage concerns, including ringfencing.
Subprime meltdown echoes dotcom death spiral 20 Mar 2007 Why would a hedge fund lend to a mortgage firm that has been cut off by its banks, selling loans on the cheap and burning through cash? Because it gets a juicy interest rate and a slug of stock in return. And if the company fails, the fund can still benefit. Sound familiar?
France keeps foreigners out of water business 20 Mar 2007 French politicians effectively blocked PAI from selling Saur to Macquarie. The company is being sold to stateowned CDC instead. France keeps protecting its water business even though French companies keep on acquiring assets abroad. It s high time to open up.
Commerzbank salvages E1bn from Jupiter 20 Mar 2007 Jupiter Asset Management was a disaster for Commerzbank. The German bank got the top end of expectations, but it still lost a packet. A private equity sale gives the bank a clean exit and probably a better price than an IPO. And it s over.
BSkyB sweats under regulatory glare 20 Mar 2007 The UK media watchdog is investigating the pay television market after Sky s rivals complained. This may not lead to action. But Sky may find that having its every move scrutinised will cramp its style.
This 13D comes with parental warnings 20 Mar 2007 A clash between an activist investor and his corporate target descended into obscenity. What else is new? Well, the exchange was captured in an SEC filing. The erosion of corporate civility now has an official benchmark.
CVC spreads out with possible E4bn steel deal 20 Mar 2007 Steel has traditionally been highly cyclical and capitalintensive. That sounds like a nogo for private equity. BoehlerUddeholm is in the more stable specialty sector, but CVC would still be taking its chances on profitability staying high.