Continue reading Blackstone crumbles as Schwarzman's eyes legacy

Blackstone crumbles as Schwarzman's eyes legacy originally appeared on BloggingStocks on Fri, 25 Apr 2008 17:21:00 EST. Please see our terms for use of feeds.

KKR playing catch-up with Blackstone originally appeared on BloggingStocks on Tue, 26 Jun 2007 13:05:00 EST. Please see our terms for use of feeds.

As I posted earlier this month, Blackstone Group's CEO Stephen Schwarzman gave an interview to the Wall Street Journal with a compelling theme -- Schwarzman is the Napoleon of private equity. Napoleon-watch tracks his moves on the business battleground.

Yesterday I posted that The Blackstone Group's (NYSE: BX) IPO was close to breaking below its initial offering price. And today, it happened -- Blackstone's master limited partnership units currently trade 13 cents below its initial offering price of $31.

One reason could be that the market for lending to private equity appears to be cooling off. According to The New York Times [registration required], one recent deal was unable to raise the amount sought. Thomson Learning, a former division of the media publisher Thomson Corp. (NYSE: TOC) is seeking $1.6 billion -- $540 million less than the $2.14 billion it initially requested for a private equity financing of its management takeover.

Moreover, lenders are no longer as willing to accept potentially worthless payment-in-kind financing -- which pays back a loan in the form of more debt. For example, Thomson needed to eliminate a $540 million provision for a pay-in-kind toggle, a type of debt that allows interest to be paid in cash or with the issuing of more bonds. The entire offering must now be paid back in cash, and Thomson Learning agreed to add more covenants -- which set strict requirements a borrower must meet to satisfy the lender -- to both the loan and the bond portion of the sale.

The point? The golden era of private equity may be over for this cycle. And BX investors don't want to stick around for the scary part of the movie.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.

Napoleon-watch: Blackstone's IPO breaks originally appeared on BloggingStocks on Tue, 26 Jun 2007 11:35:00 EST. Please see our terms for use of feeds.

Continue reading Expert interview: Blackstone's impact on private equity compensation?

Expert interview: Blackstone's impact on private equity compensation? originally appeared on BloggingStocks on Mon, 25 Jun 2007 11:53:00 EST. Please see our terms for use of feeds.

In this week's Barron's [a paid service], there's an in-depth look at the mega IPO of the Blackstone Group (NYSE: BX). It's the most important IPO since the offering of Google (NASDAQ: GOOG), although investors shouldn't expect the same kind of returns.

While Google signaled a burst of growth in online advertising (which appears to be long-term), it looks like Blackstone is really signaling a top in the private equity space. Why?

Here are some bullet points:

Competition: KKR, Goldman Sachs (NYSE: GS), TPG, Apollo Management and others all have big war chests and are competing for deals. This drives up valuations -- making it more difficult to get strong returns. This is essentially what happened with venture capital during the internet boom.

Institutional Pushback: Institutions and hedge funds are pushing for higher prices on buyouts. An example is the Clear Channel (NYSE: CCU) deal.

Higher Interest Rates: Private equity has been blessed with dirt-cheap interest rates and this makes it easier to generate returns. But with interest rates climbing, things are getting more difficult.

Politics: Capitol Hill needs more tax revenues. So why not raise rates on private equity?

Yes, Blackstone has posted a stunning 22.6% average annual rate of return (adjusted for fees) since 1987. But, with all these ominous trends, will Blackstone continue the pace? And, is it worth paying 2 times the multiples of companies like Goldman Sachs and Morgan Stanley (NYSE: MS)?

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Barron's: Blackstone is no Google originally appeared on BloggingStocks on Sat, 23 Jun 2007 18:19:00 EST. Please see our terms for use of feeds.

In its much-watched New York Stock Exchange debut Friday, private equity firm The Blackstone Group LP (NYSE: BX) closed at $35.06 on volume of 113.1 million shares, up 13.10% from its initial-public-offering price of $31. Blackstone's shares did however finish $1.39 lower than Friday's opening price of $36.45 after spending most of Friday's session stalled between $35 and $36.

Blackstone raised $4.13 billion Thursday in its 133.4-million-share IPO, the largest in the U.S. since CIT Group Inc. (NYSE: CIT)'s $4.6 billion IPO in 2002. The shares outstanding represent a 12.3 percent stake in the buyout firm; Friday's $4.06-per-share gains bring Blackstone's capitalized value from $33.5 billion to just under $38 billion -- not too shabby.

More Blackstone coverage on BloggingStocks

• Tom Taulli: Blackstone sixth among IPOs
• Tom Taulli: Expert on Blackstone IPO
• Peter Cohan: Napoleon-watch: Blackstone's disappointing debut
• Joseph Lazzaro: Is the Blackstone IPO right for you?
• Sarah Gilbert: Blackstone Group IPO: Do you want in?
• Peter Cohan: Blackstone IPO not a great deal for bankers or public
• Georges Yared: Blackstone Group: Going public because it can
• Tom Taulli: Blackstone IPO: Looking for the greater fool

Blackstone closes up 13.1% in market debut originally appeared on BloggingStocks on Fri, 22 Jun 2007 16:21:00 EST. Please see our terms for use of feeds.

Expert interview: The politics of Blackstone originally appeared on BloggingStocks on Fri, 22 Jun 2007 16:10:00 EST. Please see our terms for use of feeds.

As I posted earlier this month, Blackstone Group's CEO Stephen Schwarzman gave an interview to the Wall Street Journal with a compelling theme -- Schwarzman is the Napoleon of private equity. Napoleon-watch tracks his moves on the business battleground.

Yesterday I predicted that The Blackstone Group (NYSE: BX) would close its first day of trading at $90 a unit. Instead, it's currently trading up a mere 14.9% from its offering price of $31.

It's a bit silly I realize to say that an IPO is disappointing which leaves its CEO worth about $8 billion. But there are a couple of reasons why this modest first day rise bodes poorly for the stock and sector:

Continue reading Napoleon-watch: Blackstone's disappointing debut

Napoleon-watch: Blackstone's disappointing debut originally appeared on BloggingStocks on Fri, 22 Jun 2007 12:53:00 EST. Please see our terms for use of feeds.

As I

As Sarah Gilbert posted this evening, Blackstone priced its IPO at the top of the range, $31 a unit. It's worth emphasizing that people who buy these units will not be getting shares of stock -- not at all. Instead they'll receive master limited partnership units.

And as I discussed this afternoon on CNBC with Maria Bartiromo, the value of these units is likely to skyrocket tomorrow when they begin trading on the New York Stock Exchange. The reason is that the offering is seven times oversubscribed -- that means that orders for Blackstone's units exceed supply by a factor of seven!

I will go out on a limb here and predict that these Blackstone units will end the day at $90 a unit. This will leave Steven Schwarzman in the enviable position of having a net worth of roughly $23 billion. Not bad for a day's work. No wonder KKR wants to do an IPO.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.

Napoleon-watch: Blackstone's units to triple tomorrow, close at $90 originally appeared on BloggingStocks on Thu, 21 Jun 2007 19:40:00 EST. Please see our terms for use of feeds.

Blackstone IPO priced today at $31, will start trading tomorrow, June 22 originally appeared on BloggingStocks on Thu, 21 Jun 2007 17:23:00 EST. Please see our terms for use of feeds.

Blackstone set for takeoff on Friday originally appeared on BloggingStocks on Tue, 19 Jun 2007 11:00:00 EST. Please see our terms for use of feeds.

Investors who worry about tax increases, socialized medicine and Hillary Clinton picking out fabric swatches, should be petrified by the recent polling data showing how low President Bush's popularity has sunk.

A recent NBC/Wall Street Journal poll showed that by a margin of 52% to 31%, Americans want the Democrats to win the presidency next year. Politico.com is reporting that "Republicans across the country are warning that increasing public discontent toward President Bush, the Iraq war and the GOP brand in general threatens to send the party's 2008 campaign planning into a tailspin."

Even though the economy is fairly strong and the stock market continues to set record after record, Wall Street seems out of step with Main Street. People are fed up with high gas prices, the war in Iraq and the bursting of the real estate bubble.

They also don't like corporate fat cats either, so Blackstone Group LP CEO Steve Schwarzman, who stands to earn as much as $677 million from the private equity firm's upcoming IPO, might want to watch how he spends his money before the election. For instance, he should avoid lighting cigars with $100 bills.

Members of Congress are already grousing about the favorable tax treatment that hedge funds and private equity companies enjoy, which was underscored by the Blackstone IPO. There will be more and more complaining about private equity and hedge funds over the next few months.

In fact, there will be such noise about issues of interest to investors ranging from taxes to free trade that it will be difficult to figure out what to believe.

About the only thing that's for certain is that big changes are coming.

Should investors fear a Democratic president? originally appeared on BloggingStocks on Fri, 15 Jun 2007 09:30:00 EST. Please see our terms for use of feeds.

The Chinese government is going to invest $3 billion in US private equity giant Blackstone. Even the communists cannot resist the returns that these firms are getting by taking companies private. The Chinese will have non-voting shares after the Blackstone IPO, and have agreed not to invest in any Blackstone competitor for at least year.

According to The Wall Street Journal: "Investing at the management-company level -- rather than just giving Blackstone money to manage -- appealed to China as a way of benefiting from the plethora of fees Blackstone takes from its investments."

The announcement may be a signal of several things. The first is that governments may be looking at ways to invest money to give more aggressive returns. While corporations and institutions do this now, it would not be surprising to see other countries decide to make investments similar to the Blackstone deal. There are enough large private equity firms to make this possible.

Another aspect of the announcement is that it may be a signal that private equity has peaked. Obviously, smart money has been in firms like Blackstone and KKR for some time. But, to think that the Chinese government has come to the point where it is not happy with the returns that it can get in US government securities and traditional investments may mean that money flow into operations like Blackstone could further fuel what may becoming a buyout bubble.

Too much money chasing too little value.

Douglas A McIntyre is a partner in 24/7 Wall St.

China comes to Blackstone originally appeared on BloggingStocks on Mon, 21 May 2007 10:11:00 EST. Please see our terms for use of feeds.

The prospectus for the Blackstone Group IPO is certainly massive. Then again, the deal involves some complex legal matters.

I had a chance to talk to Bob Kennedy, who is a partner at Jones Day. He works in the company's private equity group.

According to him: Blackstone's corporate structure for the IPO is the basic structure Fortress Investment Group (NYSE:FIG) is using as well. It makes sense because the economics of the fund manager (which is basically the entity that is going public) involve receiving distributions from the operations of the funds it manages, then distributing those payments on to the owners. It would be tax-inefficient to have a corporation receive and make these distributions, so instead it's set up as a limited partnership, offering limited partnership units.

Another interesting thing I saw was the "priority return" that the new holders will receive relative to the existing owners' retained interest. It's described on page 16 of the prospectus: "Accordingly, until December 31, 2009, our existing owners will not receive distributions in respect of their Blackstone Holdings partnership units unless and until our common unitholders receive aggregate distributions of $___ per common unit on an annualized basis." The amount remains to be filled in but I think this is an unusual feature designed to make the offering more attractive.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Legal expert talks about the Blackstone IPO originally appeared on BloggingStocks on Fri, 23 Mar 2007 19:29:00 EST. Please see our terms for use of feeds.

Even though private equity firms have been around since the 1970s, there haven't been any IPOs of these outfits -- at least not until recently. In fact, back in the late 1980s, private equity was red hot . Yet, there were still no IPOs.

But, the recent IPO of Fortress Group (NYSE:FIG) has changed everything. There is no doubt that the public markets have a big appetite for these kinds of issues. The big question: Is this really a sign of selling at the top?

That's the tone in a front page article in yesterday's Wall Street Journal regarding the anticipated IPO of Blackstone [the WSJ is a paid service]. Keep in mind that the most successful private equity operators have a pretty good sense for timing. That's why they make the big bucks. Then again, there is still lots of momentum in private equity -- and tons of money coming into funds. This should continue to for awhile.

The interesting thing is that a credit crunch would be a good thing for a Blackstone IPO. It will have billions of its own capital to finance its deals -- and could even use its stock. This would certainly give the firm a big competitive advantage.

So, it's no wonder that Blackstone is spending 24/7 to get this deal done.

• March 22, 2007: Blackstone files for IPO
• March 22, 2007: But CEO called public markets 'overrated'?
• May 16, 2007: AFL-CIO objects to Blackstone IPO
• June 13, 2007: Should you invest in Blackstone IPO?
• June 19, 2007: Blackstone IPO prices Thursday, June 20; offered to public Friday, June 21
  
• June 21, 2007: Blackstone IPO no good for private investors
• June 21, 2007: Blackstone IPO priced at $31/share, sets BX value at $33.6 billion
• June 22, 2007: Blackstone opens 18% higher in NYSE debut
  

Blackstone IPO: Looking for the greater fool originally appeared on BloggingStocks on Sun, 18 Mar 2007 07:40:00 EST. Please see our terms for use of feeds.