According to the latest issue of Barron's, it looks like buyout loans could be headed for trouble.

Well, that's not scaring investment maestro, Warren Buffett. Actually, he's getting interested in the sector. A report from Fortune indicates that Buffett, through Berkshire Hathaway, has purchased more than $2 billion in the debt of TXU, the massive energy provider.

The TXU deal, which was priced at $45 billion, was spearheaded by KKR and TPG, and the deal closed in October. Of this, about $26 billion was composed of debt financing.

So, is Buffett's move a signal that the credit crunch is less than fatal? Not necessarily. Keep in mind that he's a long-term investor -- and definitely sees some value in the TXU bonds. After all, the company has a dominant position in the Texas market. Besides, Buffett likes utilities.

Nonetheless, it's still good news. Wall Street needs to unload tons of buyout debt for existing deals (especially for risky bridge loans) -- and, so long as the price is right, there are buyers coming to the table.

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.

Warren Buffett binges on buyout bonds originally appeared on BloggingStocks on Mon, 03 Dec 2007 14:18:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• Alain Dassas has been named CFO of Nissan Motor Company (NASDAQ: NSANY), filing a position that has remained open for four years, reported the Wall Street Journal. Dassas runs the Formula One race car team at Renault, which has a 44% stake in Nissan.

• Goldman Sachs Group (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup Inc (NYSE: C), Lehman Brothers Holdings (NYSE: LEH) and JP Morgan Chase and Company (NYSE: JPM), The banks involved in the underwriting of the TXU Corporation (NYSE: TXU) buyout by Kohlberg Kravis Roberts and TPG, have offered to pay the $1B breakup free to convince the private equity buyers to back out, according to the U.K. Times.
• GlaxoSmithKline (NYSE: GSK) is currently looking for someone to succeed CEO Jean-Pierre Garnier, who will retire next May, and investors are thought to want a CEO that will 'radically overhaul' the company and possible break it up, reported the Guardian.
• The Seattle Times reported that Boeing Company (NYSE: BA) is expected to announce that the first flight of its 787 Dreamliner jet will be delayed at least until late October, according to an inside source.

• Herb Greenberg noted in his MarketWatch blog yesterday that International Rectifier Corporation (NYSE: IRF) disclosed on Friday after the market close how it was committing fraud by having a subsidiary hide products already booked as revenue in "off-books warehouses."

Newspaper wrap-up: Boeing expected to announce more Dreamliner delays originally appeared on BloggingStocks on Tue, 04 Sep 2007 09:13:00 EST. Please see our terms for use of feeds.

Continue reading Private equity: Can buyers walk from mega deals?

Private equity: Can buyers walk from mega deals? originally appeared on BloggingStocks on Tue, 21 Aug 2007 16:10:00 EST. Please see our terms for use of feeds.

Whenever I hear some market pundit who sounds like they've got all of the answers behind the current crisis in the world's financial markets, the classic Frank Zappa line "Look here brother, who you jivin' with your cozmic debris" echos in my head. Zappa's point that people should avoid simple answers to complicated questions is especially relevant today.

The world's major central banks today added more than $137 billion into the banking system, keeping today's loss in the Dow Jones Industrial Average to 31.14 points following a turbulent trading session. This seems like a temporary, albeit expensive, Band-Aid on a very large wound. The bad news is far from over.

For example, Goldman Sachs Group Inc.'s (NYSE: GS) Alpha Fund may be the next hedge fund to implode. So far this year, it has dropped 26%, according to Bloomberg News. The Wall Street Journal (subscription required) points out that many hedge funds will see increased redemptions during August. Bloomberg also reported that many of the big buyout deals that have been announced over the past few months including TXU Corp. (NYSE: TXU) and First Data Corp. (NYSE: FDC) will have to be renegotiated.

Are there bargains to be had? Of course, markets act on irrational fear and irrational exuberance. But be careful, sometimes stocks are cheap for very good reason, such as exposure to subprime mortgage securities. It will pay to be selective in your bargain hunting.

Some investors also might want to consider shifting some of their assets into more conservative investments such as municipal bonds, utility stocks such as Exelon Corp. (NYSE: EXC) and defense companies such as Lockheed Martin Corp. (NYSE: LMT).

Don't overdo it, though. Over time, the market will right itself.

Meanwhile, people need to take a deep breath and exhale.

Central Banks help slow market meltdown for now originally appeared on BloggingStocks on Fri, 10 Aug 2007 16:50:00 EST. Please see our terms for use of feeds.

Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he'll offer advice to investors who are just getting started.

It's a good time to be a little defensive in the stock market, to look at stocks with a history of increasing earnings as well as dividends. While these don't tend to have a catalyst that will vault them into the stratosphere the way a tech or biotech stock can, they give a lot of comfort when there's so much turmoil in the market.

The first thing to think about when you're on defense is the shape of the economy and the kinds of items consumers always buy, no matter what the economy is doing. Consumer spending makes up about 2/3 of the U.S. economy. What the consumer does matters. Right now many consumers are having trouble paying their mortgages. Housing prices are going down in many areas of the country. Large mortgage lenders such as Countrywide Financial Corp. (NYSE: CFC) and IndyMac Bancorp. (NYSE: IMB) k are having problems with their portfolios. Defensive investors won't be looking into the mortgage lending stocks for comfort.

More likely they'll be looking at companies that supply things that people must buy, things like drugs, toothpaste, gasoline, toilet paper (also known as bathroom stationery), soap, food, utilities, etc. These are the basics. They're supplied by many different companies, and many of those companies are improving, even in these difficult times. Here are just a few ideas (not recommendations for investing, but recommendations for more investigating):

Continue reading Comfort Zone Investing: Defensive stocks -- your bridge over troubled waters

Comfort Zone Investing: Defensive stocks -- your bridge over troubled waters originally appeared on BloggingStocks on Sat, 04 Aug 2007 10:30:00 EST. Please see our terms for use of feeds.

It's been a long process, but there's finally a deal. BCE (NYSE: BCE), which is the largest telecom company in Canada, has agreed to a $48.82 billion deal. The buyers include the Ontario Teachers Pension Plan, Providence Equity Partners, and Madison Dearborn Partners.

And, yes, it's the biggest buyout in Canada's history. It's even bigger than the TXU (NYSE: TXU) deal.

The transaction involved several other potential suitors, such as KKR and Cerberus Capital.

Because of increased competition and slower growth, BCE was ripe for a buyout. It also helps that the company has juicy cash flows.

So, by being a private company, BCE will have more leeway in making some key operational changes (such as layoffs and spin-offs).

The biggest winners are BCE's shareholders. After all, since late March, the shares have surged about 40%.

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

BCE makes Canadian buyout history originally appeared on BloggingStocks on Sat, 30 Jun 2007 18:10:00 EST. Please see our terms for use of feeds.

Global M&A: Scorching hot originally appeared on BloggingStocks on Tue, 15 May 2007 13:47:00 EST. Please see our terms for use of feeds.

Insider trading probe targets Credit Suisse banker originally appeared on BloggingStocks on Fri, 04 May 2007 14:45:00 EST. Please see our terms for use of feeds.

TXU's CEO: The $279.3 million 'success fee' originally appeared on BloggingStocks on Tue, 01 May 2007 15:15:00 EST. Please see our terms for use of feeds.

Since December, utility stocks have been star performers, aided by takeover speculation, optimism about the economy, and momentum-based buying. So far this year, the S&P 500 Utilties sector (which has an equivalent exchange-traded fund, or ETF (AMEX: XLU)) has gained 13.3% and has outperformed the S&P 500 index by almost nine percentage points.

At this point, however, several factors suggest the run-up may be overdone and the shares due for at least a short-term pullback.

For one thing, May is a seasonably weak month for utilities, with the sector wracking up a median loss of 1.8% relative to the broad benchmark over the past 15 years.

Continue reading Utility sector: poised to blow a short-term fuse?

Utility sector: poised to blow a short-term fuse? originally appeared on BloggingStocks on Tue, 01 May 2007 14:38:00 EST. Please see our terms for use of feeds.

Expert shows how to value a buyout originally appeared on BloggingStocks on Wed, 25 Apr 2007 17:00:00 EST. Please see our terms for use of feeds.

The rumor is that Carlyle is paying MBA graduate students salaries of $350K+. Given the action in the space -- with billions going to buy mega companies like TXU Corp. (NYSE: TXU) and First Data Corp. (NYSE: FDC) -- I'm not surprised.

I guess the question is: What do private equity firms look for in an MBA?

I had a chance to talk to Charley Polachi, who is a seasoned recruiter and founding partner of Polachi & Company. He has conducted a variety of searches for CEOs, partners and board members for private equity clients.

Polachi says that recruiting for the private equity world is changing quickly. "The traditional model was that a new recruit would be mentored for seven years or so," he said. "This transferred the knowledge and the protégé would eventually become a partner. It was essentially an apprenticeship."

Continue reading How to break into private equity and make 350K?

How to break into private equity and make 350K? originally appeared on BloggingStocks on Wed, 04 Apr 2007 10:25:00 EST. Please see our terms for use of feeds.

Kohlberg Kravis Roberts & Co., reportedly has BCE Inc. (NYSE:BCE), the owner of Bell Canada, in its sights.

A deal for the telecom company would be worth about CAD$30 billion (over USD$25 billion), making it the largest acquisition in Canadian history and one of the largest buyouts ever, according to the Globe and Mail newspaper. KKR is looking for Canadian partners such as the Ontario Teachers' Fund since foreign firms are prohibited from owning more than 46% of a telecom company's voting shares.

Shares of BCE were up 12% pre-market trading. They have dropped about 4% this year.

KKR already has its hands full:

The New York-based buyout firm is part of the $45 billion TXU Corp. (NYSE: TXU) deal, the largest buyout ever. KKR also is among the companies in the hunt for Australian retailer Coles Group Ltd. Last month, it agreed to buy Dollar General Stores Corp. (NYSE: DG).

Apparently, there's no limit to the number of multi-billion acquisitions that KKR can juggle at the same time.

KKR eyes deal for Bell Canada owner originally appeared on BloggingStocks on Thu, 29 Mar 2007 09:40:00 EST. Please see our terms for use of feeds.

Goldman Sachs Group Inc. (NYSE:GS) is planning to raise $19 billion to $20 billion for the largest corporate buyout fund ever.

This isn't a total shock. As Reuters points out, rival bankers have argued that Goldman was excluded from the Blackstone Group IPO because it's viewed as too much of a competitor. Goldman Chief Executive Lloyd Blankfein disputes this characterization.

Last month, Goldman joined forces with Kohlberg Kravis Roberts & Co. and Texas Pacific Group for the $45 billion TXU buyout, the largest ever.

Buyout funds are surging in popularity because of the growing demand by large investors for alternatives to stocks and bonds

But this is far from a sure thing.

``They have been leaders in identifying new trends and clearly this is where they feel their profit margins have the most growth opportunity,'' said Financial Advisory Service portfolio manager Douglas Ciocca told Bloomberg News. ``But this is risky if it decreases their liquidity.''

It will be interesting to watch to see how private equity firms and rivals on Wall Street react to Goldman's move.

Meanwhile, I bet hotel rooms are booking up fast near Goldman's headquarters in New York from companies both large and small eager to be acquired.

Goldman Sachs plans huge LBO fund originally appeared on BloggingStocks on Wed, 28 Mar 2007 11:15:00 EST. Please see our terms for use of feeds.

Texas Pacific Group's (TPG) David Bonderman and KKR's Henry Kravis got a civic lesson yesterday. These buyout wizards met with the Texas House Committee on Regulated Industries on the issue of TXU (NYSE:TXU). Four proposed board members of TXU were there too: Don Evans, former U.S. Secretary of Commerce; James Huffines, Chairman of Plains National Bank Central Region; Ambassador Lyndon Olson, a former member of the Texas Legislature; and William Reilly, former Administrator of the U.S. Environmental Protection Agency.

The message: don't pass legislation that would require a regulatory review of the mega deal.

Hey, but don't politicians like to intervene -- especially when it concerns what consumers may ultimately pay?

Definitely. And it does look like the legislation is getting traction.

This does not mean the deal is doomed. Basically, it looks like TPG and KKR will need to make even more concessions, such as selling off assets and not piling debt on the regulated business units. TXU will also need to report its quarterly filings to the SEC.

The big problem is that the legislation will probably delay the process even more. And that's why TXU's stock has been lagging.

While the buyout offer is $69.25, TXU's stock is currently trading at $63.90.

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

More cracks in the TXU deal originally appeared on BloggingStocks on Wed, 21 Mar 2007 12:07:00 EST. Please see our terms for use of feeds.

The $45 billion deal for TXU (NYSE: TXU) has been dragging lately. It's certainly a complex deal and involves some novel approaches, such as agreements with environmentalists.

But this does not seem to be a problem for the Blackstone Group and Carlyle. According to a recent Reuters report,it looks like they are preparing a bid for TXU.

Typically, once a deal is agreed to, rival private equity firms do not disrupt things. There's kind of a gentlemen's agreement.

But lately, such niceties are just that.

Of course, a bidding war for a high-priced deal certainly has its risks. After all, that was the problem with the massive RJR deal back in the 1980s.

Also, keep in mind that TXU has a 50-day "go shop" provision. So it makes sense that other buyers are taking a look -- which doesn't mean another bid is necessarily a slam dunk.

And Wall Street is skeptical. TXU's stock was up only up $0.89 to $63.64 in today's trading.

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

Blackstone making a move on TXU? originally appeared on BloggingStocks on Mon, 19 Mar 2007 12:04:00 EST. Please see our terms for use of feeds.

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.

CNBC: Blackstone prepping for mega IPO originally appeared on BloggingStocks on Fri, 16 Mar 2007 10:13:00 EST. Please see our terms for use of feeds.

With big companies like Harrah's Entertainment (NYSE:HET) and TXU Corp.(NYSE:TXU) going private, a buyout of The Home Depot (NYSE:HD) is not far-fetched. In fact, it does look like there's lots of potential to improve things. The real estate assets are also juicy. And, oh yea, the fees would be juicy for Wall Street.

But, according to a report in Reuters, a deal looks unlikely. That's the word from Home Depot's new CEO, Frank Blake. Oh, there is likely to be some dealmaking. For example, Home Depot says it might sell its massive supply business. Unfortunately, the problem remains: Housing is weak and is likely to remain weak for some time, especially with the recent blow-up in the subprime market.

At least Blake is stepping up to the plate. He's been tireless in reaching out to shareholders, which is refreshing. And he's a pretty good politician. He even had some nice words about his predecessor, Robert Nardelli.

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

Can we fix it? Yes we can! Home Depot says it's not going private originally appeared on BloggingStocks on Wed, 14 Mar 2007 15:46:00 EST. Please see our terms for use of feeds.

In the history of deal-making, there are probably no examples of an environmental group retaining an investment bank. But in the mega buyout for TXU (NYSE: TXU), things are not going according to the textbook. If anything, the deal-makers are creating a new textbook.

According to a press release today, Environmental Defense (which is a nonprofit organization) has engaged Perella Weinberg Partners, a top investment bank.

Why? Well, the idea is that Perella will help clarify "the financial aspects of the transaction which could affect the environmental commitments made by prospective buyers."

Huh? I'm not sure how much experience Perella has with these matters.

Typically, an investment bank charges a monthly retainer. There is also a success fee if a deal gets done -- which is where the big payoff is.

In this case, it's not clear what "success" would be.

But, hey, it does look like a cool gig for Perella.

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

Environmental group hires an investment bank? originally appeared on BloggingStocks on Thu, 08 Mar 2007 12:00:00 EST. Please see our terms for use of feeds.

The TXU (NYSE: TXU) deal looks more like a political campaign, not a buyout.

That is, according to the Dallas Morning News, the private equity buyers - KKR and the Texas Pacific Group (TPG) - had some important meetings yesterday. For example, there was a get-together with the mayor of Dallas, Laura Miller. There was also a meeting with members of the Texas Business for Clean Air.

How did it go? Like any political situation, it's a bit complex.

Basically, it looks like the politicians are still skeptical - but they are still not saying "no."

Keep in mind that TXU has had a myriad of fights with political groups over the past couple years. Thus, it will definitely take some time to build trust.

Apparently, KKR and TPG are exploring the idea of bringing a Texas company into the deal. This could help ameliorate some of the concerns.

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

TXU's buyers make the rounds originally appeared on BloggingStocks on Tue, 06 Mar 2007 11:52:00 EST. Please see our terms for use of feeds.