Barnes & Noble Inc (NYSE: BKS) is considering a bid for rival bookseller Borders Group Inc (NYSE: BGP), the Wall Street Journal reported, a move which would allow Barnes & Noble to improve profits and reduce costs. Antitrust issues could prevent a deal.
The Wall Street Journal also reported that Carl Icahn's effort to remove Yahoo! Inc's (NASDAQ: YHOO) board has picked up new supporters, including T. Boone Pickens, who acquired a 0.75% stake. Some Yahoo shareholders believe it is still too early to predict whether Icahn will be able to carry July 3's shareholder vote.
A Financial Times investigation discovered that Moody's Corporation (NYSE: MCO) incorrectly awarded top ratings to billions of dollars to debt products due to an error in its computer models. Moody's said it is in the process of "conducting a thorough review" of the rating of the constant proportion debt obligations, which should have been up to four notches lower.
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According to the people briefed on the matter, the New York Times reported that the buyout of Penn National Gaming Inc (NASDAQ: PENN) by Fortress Investment Group (FIG) and Centerbridge Parters may involve revised terms. The sources said the negotiations may "delay or even imperil" the deal.
It's been a year since Fortress Investment Group (NYSE: FIG) went public. At that time, the offering got a nice reception. After all, investors were hungry for hedge fund and private equity operators.
Of course, that's no longer the case. And the stock of Fortress has gone from $34 to a low of $9.50.
Well, this week, the firm announced its fiscal Q4 results. There was a net loss of $29.3 million, or $0.43 per share and pre-tax distributable earnings were down 43% to $78 million, or $0.18 per share. Revenues were also lackluster – falling 22% to $196 million. Although, with a large amount of assets under management (roughly $33.2 billion), Fortress saw a 43% spike in management fees.
With the roiling credit and equity markets, it's tough to complete deals. As a result, there hasn't been much opportunity to realize gains.
Despite all this, the Fortress conference call was upbeat. Keep in mind that the company focuses on asset-based investments, which tend to have less leverage and lower valuations. Besides, as major banks repair their balance sheets, there should be opportunities for players like Fortress to get some choice deals.
Interestingly enough, Fortress thinks that the second half of 2008 will be quite active. And, if the company can scoop up some transactions at compelling valuations, it could position itself nicely for the next couple years, when things get back to normal. Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.
Well, there was some relief (it also helped that there was a big rally in equities). The company, which operates private equity and hedge funds, posted a net loss of $38 million, or $0.52 per share in Q3. Although, if you strip various elements -- such as certain tax and compensation -- the firm earned $111 million, or $0.19 per share (which is known as pretax distributable earnings).
It was a relief that Fortress indicated there was little exposure to the subprime mess. If anything, the firm sees opportunities in the sector.
In fact, Fortress has some big plans. The firm is in the process of raising funds, with assets of $10 billion to $15 billion. The initiatives will range from infrastructure, commodities, emerging markets and Asian real estate.
What's more, Fortress had a nice realization on its Crown Castle investment. The original investment came in 2002, which involved an initial $120 million stake. The total proceeds since then? A cool $1.7 billion.
Yes, it's a reminder that the private equity business can be very enticing indeed.
There's been lots of buzz that the upcoming Kolberg Kravis Roberts & Co. (KKR) IPO is dead. In fact, a recent report from the Times of London indicated that the offering has been postponed.
Well, maybe not. That is, KKR has indicated that the rumor is not true.
I have to admire the optimism of KKR (hey, it's probably been a key the firm's success).
But, private equity is about the long-term. And, it's in bad markets where the opportunities seem to pop up (especially for those firms that are well capitalized).
What's more, a key test will be KKR's upcoming financing of the mega buyout of First Data Corporation (NYSE: FDC). If the deal can get done, there may be some hope for the KKR offering.
Also, if you want to check out other IPOs planning to hit the markets, click here.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
This week, private equity firm Fortress Investment Group (NYSE: FIG) reported its Q2 earnings. Well, as should be no surprise, compensation costs were higher (not cheap to hire investment gurus). In fact, there was a net loss of $55.1 million. Although, the firm thinks a better metric is "pretax distributable earnings," which came to $143 million in Q2.
What's more, revenues fell from $328.3 million to $268.1 million. No doubt, the private equity game can be volatile.
On the conference call, Fortress CEO Wesley Edens had some interesting things to say about the turmoil in the financial system.
He said that it's going to take some time to clear out the huge amounts of debt that have yet to be placed for buyouts. Much of the debt is on balance sheets of firms like JPMorgan Chase (NYSE: JPM), Lehman Brothers Holdings (NYSE: LEH), and Goldman Sachs Group (NYSE: GS).
Private equity fund, hedge fund, and REIT manager Fortress Investment Group (NYSE: FIG) is expected to report earnings before the bell on Tuesday. Although I expect the company to report earnings that surpass expectations and raise guidance, I'd remain out of the stock in coming quarters.
For the quarter, I think the company stands to report in-line or better than expected earnings. As a Goldman Sachs research report noted, "The firm's dividend guidance of $0.225/share (75% of DEPS) offers a hint at 2Q2007 results, which ought to come in ahead of expectations.
The company should also increase its guidance for full year 2007 and 2008 as the company stands to recognize its surplus incentive income. This should increase the guidance rather significantly. In fact, this modeling revision lead Goldman to increase its 2007 estimate by 4 cents to $1.24 and its 2008 estimate by 14 cents to $1.59 per share. Clearly, if recognized, this incentive income will boost the company's bottom line.
Trump Entertainment Resorts Inc (NASDAQ: TRMP), Donald Trump's casino company, this morning said that following a three-month search, it would conclude its strategic review. Although it has held talks since March with groups of investors that included former Trump Taj Mahal manager Dennis Gomes and Boyd Gaming Corporation (NYSE: BYD), the company said the offers it has received "weren't likely to lead to a transaction."
It seems a little strange that Trump Entertainment couldn't find a buyer, particularly because the market for casinos and their assets is hot. Recent examples of casino sector activity include the in-process $17B acquisition of Harrah's Entertainment Inc (NYSE: HET) and the announced $6.1B acquisition of casino and racetrack operator Penn National Gaming Inc (NASDAQ: PENN) by Fortress Investment Group LLC (NYSE: FIG), a U.S. hedge fund and private-equity firm.
What gives? Why hasn't Trump found a buyer? Sources have speculated that its casinos, located in Atlantic City, NJ, have been struggling in comparisons to Las Vegas "entertainment destinations," a partial smoking ban and competition from new gaming venues in Pennsylvania and New York. Additionally, the announcement that the company would end its efforts to sell comes weeks after CEO James Perry said he would retire and, effective yesterday, would be replaced by COO Mark Juliano.
Trump's Atlantic City casinos are still working on a $250M project to update its gaming floors and add new restaurants, although it hasn't seemed to help. The company posted losses in earnings per share loss and revenue when it reported Q1 results in May. The Trump Taj Mahal Casino Resort, its largest casino, with 786 rooms, is set to open next summer.
The casino company said that while it was ending the initiative to sell the company, it would continue to review other strategic alternatives, including a cost cutting effort. The company laid off Chief Information Officer Virginia McDowell and executive vice president of design and construction, Paul Keller. It doesn't plan to fill these positions.
Ironically enough, now Penn has decided to go private. The deal is valued at about $5.73 billion and the buyers include Fortress Investment Group LLC (NYSE: FIG) and Centerbridge Partners LP. There will also be a repayment of $2.8 billion in existing debt.
While casinos generate lots of cash flows, it's still not easy to pull off a buyout deal. A big problem is dealing with the mind-numbingly complex gambling laws. In other words, it should take at least a year to close the Penn transaction.
Although, at 10 times EBITDA, the deal has a reasonable valuation.
On the news of the transaction, Penn's stock climbed 21.92% to $62.35. The buyout offer is $67.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
Could it happen? Could News Corporation (NYSE: NWS) pull its offer? They could, and the fear is absolutely there. That's why the stock has fallen. For one, the Bancroft family, which controls the majority of Dow Jones' shares, hasn't formally accepted Rupert Murdoch's $5B, $60 a share offer. And no one else has come forward with a competing bid. But it does seem that both sides are moving together in the same direction. Okay, but somebody should make up their mind -- either way -- and stop fiddling around.
Barry Diller is back at it. The chairman and CEO of IAC/InteractiveCorp, who is also chairman of the board and a senior advisor to Expedia, is working to take online travel firm Expedia private at $30 a share. Part of any deal will involve Expedia's TripAdvisor being spun off with about 400 jobs being lost in that shuffle.
After many, many laps around the track, this race is over, as race track and casino operator Penn agreed to be acquired today by Fortress Investment Group LLC (NYSE: FIG) and private equity firm Centerbridge Partners. All cash, baby, in a deal worth $8.9B that includes $2.8B of assumed debt. Everyone to the Winner's Circle.
Earlier this year, private equity firm Fortress Investment Group (NYSE: FIG) had an IPO. Blackstone is also preparing its own offering and even got China to invest in its firm.
More and more, private equity firms are taking money off the table. The latest? It's Ares Management. The firm sold a minority interest for $375 million this week.
Who was the buyer? Well, Ares didn't disclose that. But, according to a press release, the buyer was a "long-standing client."
And Ares has some biggie clients. Examples include the Canada Pension Plan Investment Board and California Public Employees' Retirement System (CalPERS).
Based in Los Angeles, Ares manages has about $13 billion under management and has been in operation since 1997. The firm invests in a variety of areas, such as high-yield bonds, mezzanine debt, and bank loans.
Like other private equity firms, Ares has been growing at a staggering rate over the past few years. So, why not take some money?
Tom Taulli is the author of various books, including The Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
A few months ago, Fortress Investment Group (NYSE: FIG) was the first alternative investment fund to go public in the US (the firm has $35.1 billion in assets under management). Well, it's starting to flex its muscles.
Today, the firm said it will shell out $62.50 per share or $2.2 billion for Florida East Coast Industries (NYSE: FLA). Keep in mind that there is a special $21.50 special dividend due – so the ultimate price tag is $84 per share. If you throw in the debt, the transaction comes to $3.5 billion.
FLA has two major divisions. There's Flagler Development that focuses on commercial real estate and has 8.6 million square feet of Class-A office and industrial space. Next, there is the Florida East Coast Railway, which is a regional player in hauling freight (that covers about 351 miles or so).
In 2006, revenues increased from $362.3 million to $458.2 million.
I think it's a good bet that Fortress will split up the company so as to realize more value. For example, Fortress recently purchased RailAmerica.
On the news of the FLA deal, the stock traded up 11.97% to $83 per share.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
Suppose you have a wildly successful business in an ultra hot market. Time to sell?It's probably something to consider. Well, that's certainly the state of affairs in the private equity world.
Based on the market multiples -- such as for Fortress Investment Group LLC (NYSE: FIG) -- it looks like he can take home about $1.5 billion selling a minority stake of 10% but still keeping control of his destiny. To me, this is having your cake and eating it too.
What's more, by selling the stake to private investors, there's no need to go through the hassles of the IPO process. In other words, Black has more time to do deals. Although, if the Apollo stock is registered – which is likely to happen – it will become publicly traded within the year.
It's an interesting structure and is typical for small companies. As for Black, he does think out of the box and the back-door IPO does make a lot of sense.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
It must be something in the water, but Blackstone Group LP's workers produce nine times the profit as their counterparts at Goldman Sachs Group Inc. (NYSE:GS), according to an analysis by Bloomberg News.
Blackstone's 770 workers produced an average of $2.95 million in net income last year compared with $360,000 at Goldman Sachs which has about 31,000 workers, Bloomberg says. This raises some interesting questions about how the market will value the New York-based hedge fund company.
If investors value it like Goldman, it will trade at about 10 times earnings with a market capitalization of $23 billion while a Fortress Investment Group LLC (NYSE:FIG) multiple would value Blackstone at about $29 billion, Bloomberg News says. Goldman's market capitalization is $87 billion and Fortess Investment Group's is $37 billion.
Blackstone, though, will trade at a premium to both companies -- at least at first -- because its performance has been amazing over the past few years.
Since the story of private equity firm The Blackstone Group's potential initial public offering has been out only a couple hours, it is still very much developing. With so few details out, the implications are as yet unknown. Here is Tom Taulli's earlier piece on the subject.
From CNBC's Faber (you can watch the video here, partial transcript's here) we know that the Goldman Sachs Group Inc. (NYSE:GS) and Blackstone attorneys are preparing a prospectus. Preparing is one thing and filing is another, and yet Faber is quite adamant in his belief Blackstone will file within two weeks or by the end of March. Also, the decision to go public rests on Chairman and Chief Executive Stephen Schwarzman. Once again, an adamant Faber says "the decision has been all but made."
While Faber said that Blackstone's market value could be easily in excess of $20 billion according to bankers, MarketWatch points out that it isn't clear yet what kind of an IPO this would be. The shares could represent
the Blackstone Group itself, or they could represent a fund that's managed by Blackstone Group, much like Kohlberg Kravis Roberts & Co. KKR Financial Corp. (NYSE:KFN) real-estate investment trust and Apollo Management's Apollo Investment Corp. (NASDAQ:AINV).
Regardless, and especially if the Fortress Investment Group (NYSE:FIG) is any indication, there would be strong interest in the IPO. Considering all the noise and after the year private equity had had, I, for one, think that this IPO is going to be the real thing.
CNBC's deal reporter David Faber who got the scoop on the TXU Corp. (NYSE: TXU) buyout has another big one. Apparently, the big-time private equity firm, The Blackstone Group, is planning to file for an IPO within the next couple weeks.
Funny enough, Blackstone's CEO, Stephen Schwarzman, has indicated -- on many indications -- that an IPO was not in the cards. Why deal with all the hassles? Well, I guess Schwarzman could not ignore the huge $10.4 billion IPO of Fortress Investment Group (NYSE: FIG).
Faber thinks a Blackstone offering could fetch a valuation at least twice that. It's stunning considering that it was in 1985 that Schwarzman, who owns about 40% of Blackstone, invested $200,000 to start the company. How about that for an ROI?
I think it's a good bet that other premier private equity firms are preparing for IPOs. Yes, things are going to get very interesting – very soon.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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