Continue reading Don't Get Sucked into the KKR IPO

Don't Get Sucked into the KKR IPO originally appeared on BloggingStocks on Wed, 07 Jul 2010 17:00:00 EST. Please see our terms for use of feeds.

Continue reading Radio Shack: Takeover or Acquisition Target

Radio Shack: Takeover or Acquisition Target originally appeared on BloggingStocks on Fri, 02 Jul 2010 17:30:00 EST. Please see our terms for use of feeds.

Continue reading Harley Davidson Accelerates on Takeover Talk

Harley Davidson Accelerates on Takeover Talk originally appeared on BloggingStocks on Tue, 16 Mar 2010 15:10:00 EST. Please see our terms for use of feeds.

Private equity giant KKR & Co. (NYSE: KFN) posted a $1.2 billion loss last year -- compared to pretax net income of $815 million the year before. This is KKR's first loss in at least five years.

Bloomberg pins the blame on a drop-off in leveraged buyout transactions. A $1.4 trillion market in 2006 and 2007, only $212 billion was spent on takeovers last year, which was bound to put a dent in KKR's top and bottom lines.

Continue reading KKR posts $1.2 billion loss on LBO market fall

KKR posts $1.2 billion loss on LBO market fall originally appeared on BloggingStocks on Mon, 01 Jun 2009 07:00:00 EST. Please see our terms for use of feeds.

Bloomberg reports that Gome Electrical Appliances Holdings Ltd. may sell up to 20% of the company to Bain Capital LLC. The asking price is said to be approximately $500 million. The other companies competing for the piece of Gome are KKR & Co. (NYSE: KFN) and Warburg Pincus.

Gome is the second-largest electronics retailer in China, with more than 800 stores in over 160 cities. So it makes a nice target for investors looking for alternatives to recession-constrained businesses in the United States, Europe and developed markets in Asia.

Continue reading Bain in lead for 20% stake in China's Gome?

Bain in lead for 20% stake in China's Gome? originally appeared on BloggingStocks on Wed, 27 May 2009 07:00:00 EST. Please see our terms for use of feeds.

Leveraged buyout guru Henry Kravis, cofounder of the legendary private equity firm Kohlberg Kravis Roberts, tells Forbes that he believes private equity will come back from the hit it has taken from the financial crisis.

"It's not dead at all, but it will take different forms," he said.

Kravis compares the current economic environment to 1979, when, the U.S. economy was struggling, inflation was at 13%, unemployment at 11%, and zero financing was available. But then, of course, followed the explosion of private equity in the 1980s and 1990s.

Continue reading Private equity is not dead, but no mega deals coming soon

Private equity is not dead, but no mega deals coming soon originally appeared on BloggingStocks on Thu, 30 Apr 2009 16:15:00 EST. Please see our terms for use of feeds.

Buyout funds managed by private equity giants Apollo Management LP and Blackstone Group LP (NYSE: BX) are among a growing number of limited partnerships that have experienced sharp declines in value, reports the Wall Street Journal, which highlights the economy's impact on such funds, as well as the influence of mark-to-market accounting.

Apollo and Blackstone recently disclosed to investors the values of their last buyout funds at year-end. Apollo Investment Fund VI LP, a $10.1 billion investment vehicle that closed in 2005, was held at 34% below cost. Perhaps the most notable Fund VI deal is Harrah's Entertainment Inc., which has struggled with its debt covenants. Apollo and TPG Capital LP acquired Harrah's in January 2008 for $27.8 billion.

Continue reading The hits keep coming for private equity funds

The hits keep coming for private equity funds originally appeared on BloggingStocks on Sun, 26 Apr 2009 13:10:00 EST. Please see our terms for use of feeds.

Were you wondering which sector of the U.S. economy would be next to take a dive from the year-old credit crunch? Well look no further, because Barron's [subscription required] reports that private equity firms like Apollo Global Management, Kohlberg Kravis Roberts, and Blackstone Group (NYSE: BX) are hurting gators thanks to too much borrowed money and the weak financial performance of the companies they bought. And business is way down, Barron's reports that through mid-August, the 2008 total deal volume "stood at $67 billion, versus more than $400 billion in the corresponding 2007 period."

This does not come as a surprise to me. In February 2007, I appeared on CNBC arguing that private equity had peaked. And I began to question its long-term viability back in August 2006 when Barron's Alan Abelson quoted my thoughts on the matter. The basic problem is that when debt is cheap, private equity booms and when it starts selling itself to the public, investors should hold onto their wallets for dear life. People who own private equity firms tap their superior knowledge of the coming downturn to convince the public to bail them out by buying their stock.

Barron's cites -- as evidence of trouble in private equity land -- examples of the declining value of the publicly traded debt in companies that private equity took private at too-high prices with too much borrowed money. It writes that bonds of "many companies taken private in the past two years have plunged to 50 cents on the dollar or less, signaling that investors fear they won't be fully repaid. Many companies that were the subjects of buyouts a year or two ago are so grossly over-leveraged that they're struggling simply to pay interest. If they were to default, debt investors would be stung, but equity investors would be even worse off; the value of their holdings would be deeply impaired or wiped out."

Continue reading Barron's: Private equity is next shoe to drop

Barron's: Private equity is next shoe to drop originally appeared on BloggingStocks on Sat, 30 Aug 2008 10:08:00 EST. Please see our terms for use of feeds.

Continue reading Cramer on BloggingStocks: KKR takes advantage

Cramer on BloggingStocks: KKR takes advantage originally appeared on BloggingStocks on Mon, 28 Jul 2008 08:45:00 EST. Please see our terms for use of feeds.

This post is part of a series on some of the most memorable companies that have disappeared.

The number of brands associated with food processing giant Beatrice Foods was many and varied, including Airstream, Altoids, Avis, Blue Valley, Butterball, Culligan, Ekrich, Good & Plenty, Hunt's, Jolly Rancher, Krispy Kreme, La Choy, Meadow Gold, Orville Redenbacher, Peter Pan, Playtex, Reddi Wip, Samsonite, Swiss Miss, Tropicana, Wesson and World Dryer. Not bad for a small egg and milk packager in Beatrice, Nebraska, that in 1894 named itself after the former occupant of the building it leased.

In 1913 the company moved to Chicago, and by the 1930s it was a leading dairy in the U.S. The post-war baby boom was a boon for Beatrice, which doubled its sales between 1945 and 1955. Expansion continued through the 1970s, and by 1984, annual sales were about $12 billion.

Shortly thereafter, private equity firm Kohlberg Kravis Roberts (KKR) acquired a controlling stake in Beatrice through a leveraged buyout. Over the next few years, KKR sold off Beatrice assets. In 1990, what remained of Beatrice was sold to ConAgra Foods (NYSE: CAG).

Continue reading Companies that vanished: Beatrice Foods, former household name

Companies that vanished: Beatrice Foods, former household name originally appeared on BloggingStocks on Thu, 12 Jun 2008 12:40:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• Bank of America Corporation (NYSE: BAC) is making a $2 billion equity investment in Countrywide Financial Corporation (NYSE: CFC), people familiar with the situation told the Wall Street Journal (subscription required).
• Ticket seller Ticketmaster, which is owned by IAC/InterActiveCorp (NASDAQ: IACI), has halted talks with concert promoter Live Nation Inc (NYSE: LYV), failing to reach a new, long-term agreement. The talks have "grown acrimonious" over the last year and a half, say people close to the situation, with Live Nation CEO Michael Rapino threatening to start his own ticketing company rather than renewing with Ticketmaster, according to the Wall Street Journal.
• Home Depot Inc's (NYSE: HD) sale of its wholesale supply division to a group of private equity firms is in doubt, due to uncertainty about the willingness of three investment banks to fund the deal, reported the Financial Times (subscription required).
  
• The Financial Times reported that Motorola Inc (NYSE: MOT) lost more than 7% of market share in the handset market in Q2, according to new figures.

• Private equity firm Kohlberg Kravis Roberts has reportedly postponed its $1.25B initial public offering, after investors showed little interest in the IPO, reported the U.K. Times.

Newspaper wrap-up: Bank of America invests in Countrywide originally appeared on BloggingStocks on Thu, 23 Aug 2007 09:15:00 EST. Please see our terms for use of feeds.

In the financial world, "contagion" is a Wall Street term that describes marketwide selling in one region of the world, for example in Tokyo or Berlin, that leads to selling in another region of the world, for example, in New York.

But contagion can take place within a market (or intramarket) as well, and that appears to be the case with private equity firm Kohlberg Kravis Roberts (KKR) and its initial public offering.

A repricing of risk sparked by renewed concerns regarding subprime mortgage defaults, as well as a moderate stance regarding the deployment of new capital, has produced more-conservative capital market conditions -- conditions that may prompt KKR to postpone its IPO.

KKR filed to go public on July 3 and planned to raise $1.25 billion. KKR had sought to follow in private equity firm Blackstone's (NYSE: BX) footsteps: in June Blackstone priced 133.33 million shares at $31 in a $4.13 billion IPO. BX's shares have since slipped to around the $26 mark.

More importantly, a new conservative tone has gripped the debt markets, and that mood has spilled into the initial stage equity market -- conditions that will make it harder for KKR to attract an adequate price for its shares, and quite possibly, prevent the company from moving forward with the IPO at this time.

Continue reading Kohlberg Kravis Roberts: Is IPO postponement ahead?

Kohlberg Kravis Roberts: Is IPO postponement ahead? originally appeared on BloggingStocks on Sun, 29 Jul 2007 16:10:00 EST. Please see our terms for use of feeds.

The New York Times [registration required] reports that KKR partner, Henry Kravis, is belatedly and ineffectively entering the battle to keep Congress from raising his taxes. At issue is the 15% capital gains rate which private equity firms pay on the 20% of the profits their funds generate, known as carried interest. Congress wants to tax this 20% as ordinary income -- meaning Kravis and his pals would pay a 35% tax.

Despite his arguments about the jobs KKR created in Rep. Sander Levin's home state of Michigan and his claim that a tax increase could hurt the investment returns of the pension funds which invest in KKR, Kravis appeared not to have dissuaded Levin in his drive to raise the tax rate from 15% to 35%.

I wrote an e-mail to Rep. Barney Frank (D-MA) who chairs the House Financial Services Committee. My suggestion, on which I posted earlier, is that the real problem is that private equity firms and their bankers get rich by taking risks -- such as borrowing too much money -- and they often leave society to pay the costs of failed deals -- as they did with the $150 billion bailout of the junk-bond fueled collapse of the Savings & Loan (S&L) industry.

Continue reading Private equity's taxing matter

Private equity's taxing matter originally appeared on BloggingStocks on Wed, 11 Jul 2007 10:30:00 EST. Please see our terms for use of feeds.

Today's New York Times [registration required] discusses the pending initial public offering (IPO) of Kohlberg Kravis Roberts & Co. (KKR). In so doing, it glosses over the role of its founding partner, Jerome Kohlberg. But just because The Times ignores him, that's no reason for you to.

That's because I interviewed him three years ago for the Swarthmore College Bulletin. So without further ado, here's my interview with him:

"Kohlberg was co-founder of the leveraged buyout specialist KKR and is now special limited principal of Kohlberg & Co. His business success began with the simple yet powerful notion that it was better to risk one's own capital than to be an intermediary. "One of my friend's fathers was a merchant banker,' he recalls. "He didn't act for commissions. He stood and fell on his own investments, which he put beside those of other clients. I realized that being a principal was what I wanted.""

Continue reading KKR's forgotten partner

KKR's forgotten partner originally appeared on BloggingStocks on Wed, 04 Jul 2007 14:00:00 EST. Please see our terms for use of feeds.

Blackstone reserves $26 billion for Hilton buyout originally appeared on BloggingStocks on Tue, 03 Jul 2007 19:35:00 EST. Please see our terms for use of feeds.

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Gordon Pape, editor of The Internet Wealth Builder, chose Brookfield Asset Management (NYSE: BAM) as his favorite stock for 2007, which rose 31% as of 6/1/07. Here is his original recommendation and his current opinion on Brookfield.

For his new favorite, the advisor looks to Precision Drilling (NYSE: PDS). He explains, "If you like to buy good companies at beaten-down prices, take a good look at this income trust.

"Precision Drilling, which provides services to the Canadian oil patch, has been battered and bruised by a decline in oil exploration activity, distribution cuts, and, of course, the proposed new tax on income trusts which is now working its way through the Parliament of Canada.

"Investors were hit with a second distribution cut in six months when the trust announced on May 18 that it is chopping another 32% off its monthly payment, slicing it to 13 cents. That reduces the annual payment to $1.56 a share, less than half last year's level of $3.24.

"There's no doubt this oilfields service provider is going through a tough period and management hasn't tried to sugar-coat the situation. Despite the gloomy outlook, RBC Capital Markets said in a research report that the firm's dividend cut probably represents the last one for the year.

"The trust's payout ratio should now be marginally below that of other oil service providers and it is generally expected that drilling activity will pick up later this year.

Continue reading Top 20 advisors: Gordon Pape picks Precision

Top 20 advisors: Gordon Pape picks Precision originally appeared on BloggingStocks on Thu, 21 Jun 2007 10:00:00 EST. Please see our terms for use of feeds.

• The Wall Street Journal reported that Ford Motor Company (NYSE: F) is looking for buyers for its Jaguar and Land Rover brands, which are valued at a combined $1.3B to $1.5B, but any sale is expected to take a month or longer.
• Airbus is in the final stages of a deal with U.S. Airways Group Inc (NYSE: LCC), which is expected to purchase about 30 A350 jetliners worth about $7B at list price, according to the Wall Street Journal.

• According to the U.K. Times, Imperial Chemical Industries plc (NYSE: ICI) rejected an all-cash offer of GBP$7.2B from Dutch chemicals giant Akzo Nobel NV (NASDAQ: AKZOY), saying the proposal "significantly undervalues" the company; sources believe The Dow Chemical Company (NYSE: DOW) and Germany's BASF AG (NYSE: BF) could launch competing bids.
• BHP Billiton Limited (NYSE: BHP) is again interested in a $40B acquisition of Alcoa Inc (NYSE: AA), an aluminum producer, reported the U.K. Times.
• The New York Times reported that negotiations on a buyout of Cadence Design System Inc (NASDAQ: CDNS) by private equity firms Blackstone Group and Kohlberg Kravis Roberts appear to have stalled over price.

Newspaper wrap-up 6-18-07: ICI rejects Akzo Nobel bid originally appeared on BloggingStocks on Mon, 18 Jun 2007 09:15:00 EST. Please see our terms for use of feeds.

YRC Worldwide (NASDAQ: YRCW) -- implied volatility and call spike on LBO speculation.
YRCW, a transportation holding company with brands including Yellow Transportation, Roadway, Reimer Express, Meridian IQ, New Penn, USF Holland and USF Reddaway, is recently up $0.49 to $40.03 on LBO speculation. YRCW will be speaking at Merrill Lynch's Transportation Conference next week. YRCW has a market cap of $2.2 billion with $1 billion in debt. YRCW reported quarterly March 2007 revenue of $2.3 billion. YRCW call option volume of 6,382 contracts compares to put volume of 207 contracts. YRCW June option implied volatility is at 44, July is at 36 above its 26-week average of 32 according to Track Data, suggesting larger price risks.

Biomet (NASDAQ: BMET) -- implied volatility-risk increases into June 8th shareholder vote.
BMET a designer, manufacturer and marketer of joint replacement products announced on 12/18/06 a consortium including the Blackstone Group, Goldman Sachs and Kohlberg Kravis Roberts will purchase BMET for $44 a share in cash. Institutional Shareholder Services recommended BMET holders vote down the $10.9 billion private equity deal. BMET shareholders are to vote on 6/8/07. Indiana state law requires a 75% vote for the acquisition to be approved. BMET over all option implied volatility of 17 is above its 5-month average of 12 according to Track Data, suggesting larger risk.

Option volume leaders today are: Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG) and Wal-Mart (NYSE: WMT).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Option update 6-5-07: YRC Worldwide spikes on LBO speculation originally appeared on BloggingStocks on Tue, 05 Jun 2007 12:25:00 EST. Please see our terms for use of feeds.

Private equity shifts gears to technology originally appeared on BloggingStocks on Tue, 05 Jun 2007 10:30:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• The Wall Street Journal reported that TPG Capital and Silver Lake are poised to buy telecommunications equipment company Avaya Inc (NYSE: AV) for about $17 a share; Nortel Networks Corporation (NYSE: NT) was also said to be interested.
• News Corporation's (NYSE: NWS) Rupert Murdoch said he is willing to go along with tighter editorial independence, but won't give in to a key demand from Dow Jones & Company Inc's (NYSE: DJ) controlling Bancroft family that they control an editorial oversight board that would protect this, the Wall Street Journal reported.
• Barron's Online's Trader section believes Service Corporation International's (NYSE: SCI) 90% surge since August is the result of funeral service companies' virtual immunity to a slowing economy or rising rates - the market's two biggest fears right now.

• The New York Times reported that software maker Cadence Design Systems Inc (NASDAQ: CDNS) is in talks with private-equity players that include Kohlberg Kravis Roberts and the Blackstone Group about a possible sale of the company.
• Technology Web sites have discovered that Apple Inc (NASDAQ: AAPL) embeds customers' personal data into files the company uses to distribute music from its online iTunes music store, creating fears about privacy, the UK Times reported.
• The UK Times also reported that Royal Bank of Scotland Group (OTC: RBSPY) may be looking to sell Southern Water for GBP4B, a move that could lead to many more deals in Britain's privatized water industry.

Newspaper wrap-up 6-04-07: TPG Capital, Silver Lake may buy Avaya originally appeared on BloggingStocks on Mon, 04 Jun 2007 09:15:00 EST. Please see our terms for use of feeds.