With its plans to become a public company in Q4, the folks at KKR have a lot on their plate. However, the company realizes it needs to keep bolstering the firm.
In light of the credit crunch and slowing economy, this is a tough thing. After all, much of KKR's business comes from its buyout business, which has been mostly frozen for the past year.
But, KKR understands that private equity is a long-term proposition, and there are certainly some great investment opportunities. One attractive area is infrastructure. In fact, in May KKR announced plans to raise a $10 billion infrastructure fund and retained a top Lazard (NYSE: LAZ) executive, George Bilicic, to manage things.
Well, this week there was more activity on this initiative. KKR retained John Bryson as a Senior Advisor. No doubt, he's a maestro about infrastructure. He was formerly the CEO of Edison International (he joined the firm in 1984) where he had to deal with complex regulations as well as find ways to grow operations. Before this, he was a partner at the law firm, Morrison & Foerster and even served as the president of the California Public Utilities Commission.
Of course, KKR is facing lots of competition in the infrastructure category, such as from other tier-1 private equity operators and even sovereign wealth funds. Take a look at TPG, which has recently made a preliminary $6.5 billion bid for Australia's Asciano (a port and rails firm).
Yet, infrastructure is a massive space with room for many players. More importantly, private equity firms are bulging with cash and need to find places to put it.
The credit crunch should be bad news for investment banks, right? Not necessarily. After all, strategic buyers have been aggressive lately, perhaps because there's not much competition from private equity operators.
One of the beneficiaries is Lazard (NYSE: LAZ), which reported its Q2 numbers. Eearnings came to $64.6 million, or 54 cents per share, which compares to $61.5 million, or 53 cents per share in the same period a year ago.
Simply put, Lazard has been snagging some choice client engagements. For example, Q2's revenues on merger assignments spiked 37% to $225.1 million.
In fact, the firm is an advisor on InBev's $52 billion deal to purchase Anheuser-Busch Cos. (NYSE: BUD). Another high-profile assignment is Gaz de France's 44.6 billion euro deal with Suez.
Keep in mind that Lazard has worked on about $100 billion in announced deals in July alone. This is certainly a nice momentum boost.
Besides, Lazard has a strong restructuring division. While the business is still fairly small – at $32.7 million – there should be lots of potential for growth. Just look at some of the major bankruptcies lately, such as Mervyn's, Steve & Barry's, Linen 'n Things and so on.
The stock is up 150% over the last year but with its move into the consumer marker BlackBerry maker Research in Motion Limited (NASDAQ: RIMM) is entering the fickle world of consumer trendiness, reported the Wall Street Journal's "Heard on the Street". Analysts are concerned about how big the consumer market can be for them, and then there's Apple Inc (NASDAQ: AAPL) and Nokia Corporation (NYSE: NOK) beating down the consumer path. Smart products will help, but price is an issue, and the shares could face a hard fall.
The Wall Street Journal reported that Wachovia Corporation (NYSE: WB) acknowledged it has hired The Goldman Sachs Group Inc (NYSE: GS) to study its troubled portfolios of mortgages, a move which many believe indicates the bank is gauging the market value of the loans in order to eventually sell them.
OTHER PAPERS:
Lazard Ltd (NYSE: LAZ) was hired by UBS AG (NYSE: UBS) to undertake a strategic review of the Swiss bank's businesses, the New York Post learned.
The New York Post also reported some reported turmoil at Live Nation Inc (NYSE: LYV), following the abrupt departure of the concert promoter's chairman, Michael Cohl. Employees in the unit that was led by Cohl fear that the company will lay some of them off, and CEO Michael Rapino is accused of not being strongly committed to the company's mega-deal strategy.
The Boston Herald reported that its unions were told the newspaper will lay off 130 to 160 workers, under its new plan to outsource printing operations elsewhere in the state.
Despite the volatility in the global financial markets, Lazard Ltd. (NYSE: LAZ) has held up nicely. But according to its Q1 report, there are now signs of weakness.
Net income came to $7.8 million, or $0.14 per share, which was a 71% drop from the same period a year ago. A big culprit was the fall-off in M&A activity. Such revenues dropped 15% to $166 million.
Another issue was the corporate debt portfolio, which sustained a $28.5 million write-down. However, compared to other investment banks, this does look fairly minor. What's more, Lazard has been taking actions to improve things.
Interestingly enough, Lazard has snagged some plum advisory assignments on large capital infusions -- such as from sovereign wealth funds -- for financial institutions. This is a business that should continue to grow. And with Lazard's focus on advisory services, the firm should be in a nice position to be a major player in the space.
But in today's trading, Lazard's shares are down 2.59% to $36.53.
Joseph Perella is an uber investment banker. He has structured a variety of multi-billion dollar deals and has worked for firms like Morgan Stanley (NYSE: MS).
Then, back in June 2006, Perella created a new investment bank, Perella Weinberg Partners. In fact, he raised a cool $1 billion for the venture. The vision: to provide unbiased advice on major transactions.
But, with the slowdown in Wall Street dealmaking, is Perella Weinberg in trouble? Well, according to a piece in Reuters, things may actually be OK.
After all, since Perella Weinberg is a pure advisor, there is no need to deal with credit risk from financing deals. Also, the firm hasn't been focused on private equity deals. Instead, the firm's kind of high-end advice is primarily for strategic buyers. Keep in mind that other boutiques -- such as Lazard (NYSE: LAZ) -- have fared well.
What's more, Perella Weinberg knows how to be creative, providing advice that goes beyond pure M&A deals. For example, the firm has advised the New York insurance regulators for bond insurers as well as the sovereign wealth investments for Merrill Lynch (NYSE: MER). And with the complexities of the current financial environment, I'm sure Perella Weinberg will have no shortgage of problems to solve. 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.
Fortune (which shares parent Time Warner (NYSE: TWX) with BloggingStocks) provides at least two examples which raise questions about whether Apple Inc. (NASDAQ: AAPL) CEO Steve Jobs pushed the Apple board into violating the law.
Two revelations in the article -- that Apple's board decided not to disclose Jobs's pancreatic cancer, for which he delayed surgery because he wanted to try a diet cure, and that Jobs set a backdated options date of January 16, 2001 which the board rubber-stamped, giving recipients a profit of either $1.6 million or $3.9 million -- make me wonder whether Jobs convinced Apple's board to break the law.
As I posted in 2006, Lazard, Ltd.'s (NYSE: LAZ) board may have failed to disclose the illness of its CEO, Bruce Wasserstein, when reports surfaced that he was out of the office with a heart ailment. A lawyer I spoke with said that if a CEO is unable to do his or her job due to illness, the board must disclose it. If Jobs's pancreatic cancer surgery kept him away from doing the CEO's job, how did Apple's lawyers defend the failure to disclose? It surely couldn't have been the lack of materiality -- some estimated that if his illness had been disclosed, Apple stock would have lost 20% of its value.
Bruce Wasserstein's New York Magazine published a list of Wall Street titans who have seen their personal net worth decline in the last year. One name was conspicuously absent from that list: Bruce Wasserstein, who would rank second on the list of biggest losers if he not decided to exclude himself from his own publication. This type of omission has a proud history, as I have never seen Steve Forbes's name on his magazine's rich list.
Nevertheless, here are the top three biggest losers when Wasserstein's name is added accompanied by the amount they have lost:
Lazard Ltd.'s (NYSE: LAZ) CEO Bruce Wasserstein's net worth has fallen fallen $260 million. (This is calculated by multiplying Wasserstein's 11,394,504 shares by Lazard's stock tumble -- from its May 2007 high of $56.90 to January 24, 2008's $34.09); and
The fourth quarter was brutal for investment banks. But for Lazard Ltd. (NYSE: LAZ), things weren't so bad. After all, the company focuses on corporate advisory, and as a result didn't get dinged by principal trading and investments in subprime deals.
In Q4, Lazard's earnings spiked 43% to $122.6 million, or $0.104 per share. Revenues were up 26% to $618 million.
The main boost came from advisory fees, such as for M&A transactions and restructurings. This business increased 27% to $313.6 million in revenues. Oh, and restructuring revenues were up 58% to $32.3 million. In light of the wreckage in the market, I suspect that this segment will continue to thrive.
Of course, a key to the success is Bruce Wasserstein, who is Lazard's CEO and uber dealmaker. For his efforts, he got a hefty $96.3 million restricted stock grant as well as a five-year employment agreement.
However, with the credit crunch and economic uncertainty, the M&A market has been fairly soft in January. If this continues, Lazard will certainly feel some pain.
But in today's trading, Lazard's stock was up 4.46% to $37.25.
FT.com reports that last Thursday my brother William D. Cohan's The Last Tycoons beat out Alan Greenspan's TheAge of Turbulence to win the 2007 Financial Times and Goldman Sachs Business Book of the Year Award.
Reportedly Greenspan had his public relations firm arrange for him to fly to London on a private jet and to have a limousine at his disposal. At the last minute Greenspan canceled his trip to London but not without preparing a video of his acceptance speech. Alas poor Alan -- his video was for naught.
While Rachel Lomax, deputy governor of the Bank of England and one of the judges, said Greenspan's book was "source material for future historians as well as an entertaining read," The Last Tycoons was judged to have provided "the most compelling and enjoyable insight into modern business issues," in line with the official aim of the award.
At a talk on September 20th at New York's 92nd Street Y, Lazard Ltd. (NYSE: LAZ) CEO Bruce Wasserstein took a swipe at Time Warner Inc. (NYSE: TWX), BloggingStocks' parent, for its moribund stock price. At the same time, Wasserstein patted himself on the back for taking all his chips off the table when the stock levitated above $18 following the publication of a Lazard report on Time Warner.
Lazard, which was hired by corporate raider Carl Icahn in February 2006, authored a 343 page report that argued for a breakup of Time Warner and a big stock buyback. Beyond its $5 million fee, Lazard's reward from Icahn was a bonus based on how far above $18 Time Warner stock went. Lazard's report estimated that Time Warner's breakup value ranged between $23.30 and $26.57. Following the report, Time Warner stock rose -- peaking at $22.73 on January 12, 2007 -- before declining to its current $18.99 -- about 50 cents a share above its price in February 2006.
While he claimed to like Time Warner management -- he called CEO Dick Parsons "a lovely, well-liked guy" and president Jeff Bewkes, "a highly regarded management kind of guy" -- Wasserstein blamed Time Warner's moribund stock price on their decision not to follow the recommendations in his report. Wasserstein thought Time Warner took one of his ideas -- a $20 billion stock buyback (Time Warner bought back $12 billion) -- but ignored his other suggestions -- to do more spin-offs and to run AOL more effectively.
MarketWatch reports that the United Auto Workers (UAW) ended its strike against General Motors Corp. (NYSE: GM) due to a settlement reached early this morning. 74,000 production workers will return to work. GM shares are up 8% in pre-market trading. This deal will benefit the reputation of Lazard Ltd. (NYSE: LAZ) which represented the UAW.
Details have not been revealed. On the surface it appears that the UAW got something it wanted as did GM. The new four-year contract agreement gives the UAW an independent retiree health-care trust -- estimated to cost GM $51 billion. The Associated Press reports that it would also give workers bonuses and lump-sum payments. Meanwhile, GM will be able to boost its competitiveness -- getting more flexibility to hire new workers at lower costs -- helping to reduce what GM claims is a $25-per-hour labor cost disparity with its Japanese competitors.
The health care trust GM is establishing would pay about 70% of GM's $51 billion pension obligation, or $36 billion, into a Voluntary Employees Beneficiary Association (VEBA). The UAW would manage the VEBA for 340,000 GM hourly retirees and spouses. If the VEBA's investments appreciate enough in value, those 340,000 pensioners will have their pension obligations satisfied. If not, it will be the UAW's fault.
To reach $51 billion in, say, five years, the VEBA will need to achieve a 7.2% annual rate of return -- sounds like a profitable job for Lazard!
DealBook reports that Lazard Ltd. (NYSE: LAZ) CEO Bruce Wasserstein has purchased more than $5 million worth of Lazard stock -- 140,000 shares between this Tuesday and Thursday himself and 329,500 during the same time through a Wasserstein family trust. Lazard stock was down 37% from its May 2007 all-time high of $55.19 when he may have bought at $34.81
Last month I attended a party at which one of the attendees noted that she had recently seen Wasserstein at a social event. According to her, Wasserstein was stooped and appeared much more frail than his 59 years would suggest. At this party, my brother, William D. Cohan's New York Times best-selling book on Lazard, The Last Tycoons, was prominently displayed.
But his move to buy shares in Lazard -- although a fraction of his holdings -- is obviously trying to send a signal to investors about his view of the firm's prospects. If the current credit crunch persists, it could have trouble doing LBO deals. The question is whether its debt restructuring practice could take up the slack.
With its plans to become a public company in Q4, the folks at KKR have a lot on their plate. However, the company realizes it needs to keep bolstering the firm.
Here are some highlights from this past week's 
The credit crunch should be bad news for investment banks, right? Not necessarily. After all, strategic buyers have been aggressive lately, perhaps because there's not much competition from private equity operators..gif){kind=logo}
Despite the volatility in the global financial markets, 
Joseph Perella is an uber investment banker. He has structured a variety of multi-billion dollar deals and has worked for firms like 
The fourth quarter was brutal for investment banks. But for 
Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
Bet on T&A with J&J (JNJ)
