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For some reason, private equity has refrained from aggressively investing into energy and oil & gas plays. Perhaps it was that energy prices spiked too fast or perhaps it was because the fears would be that the projects only merited investing if prices were assured to stay high in oil and gas. That may be changing.
The Blackstone Group (NYSE:BX) will invest $500 million in a new pipeline company, Crestwood Midstream Partners LLC. A Blackstone-owned hedge fund called GSO Capital Partners is participating in today's deal.
Crestwood was formed in December 2007 with an initial investment of $150 million from the Kayne Anderson, which has several public entities in the space:
Crestwood is headed by industry veteran Robert G. Phillips, who is former chief executive of Enterprise Products Partners, who joined Enterprise following its merger with GulfTerra in 2006.
Apria Healthcare (NYSE: AHG), a home healthcare services firm, agreed to be acquired by an affiliate of Blackstone Group (NYSE: BX) for approximately $1.6 billion. AHG share holders will receive $21 in cash for each share they own.
AHG closed at $15.82. AHG July option implied volatility of 46 is near its 26-week average according to Track Data, suggesting non-directional risk.
Buyout Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
The Blackstone Group L.P. (NYSE: BX) has just announced that Laurence Tosi will become the new Chief Financial Officer for the private equity giant. He comes to the company from Merrill Lynch & Co. (NYSE: MER) where he served as Chief Operating Officer for the Global Markets and Investment Banking Group. He will also serve on the executive committee and is expected to take up this position "after the summer."
Blackstone also noted that Michael Puglisi, the current CFO, will remain on board as a senior managing director and will remain a member of senior management while he will take leadership of other firm matters and special projects for Stephen Schwarzman.
In a report (subscription required) out of the Dow Jones LBO Wire, Carlyle Group L.P. has delayed its deadline for the fund-raising efforts for its new Carlyle Partners V LP. The delay is said to have been moved to the end of the year for it to close on its fund raising efforts. Carlyle V's original closing date was May 30, and it received investor consent to extend the final closing date to Dec. 31 at the very latest.
Fund V efforts started in 2007 and was said to have quickly held an $8 billion first closing with a target of $15 billion and a hard cap of $17 billion.
The company's market cap is almost $1.9 billion, so it would seem within the realm of deal sizes even in an environment where private equity types have not been able to do many deals. Whether or not the deal is made, that is yet to be seen.
Chemtura products are used in flame retardants, polymer additives, PVC additives, agriculture, plastics, and more.
Even on a deal this size, do we need club deals in a private equity environment in need of simplification? Either way, until we have an announcement. this should be treated as just a rumor.
Yesterday was a tough day in the markets, with the Dow falling 199 points. But if you follow some of the legends of finance – such as Carl Icahn, T. Boone Pickens and The Blackstone Group's (NYSE: BX) Steven Schwarzman – you will notice that they are getting aggressive.
Keep in mind that these guys have been through multiple market cycles. And if history is any worthy benchmark, it's during times of instability where the big money is made.
Pickens is focusing on the energy industry. He sees major demand/supply imbalances and is buying various stocks. He is also interested in natural gas and alternative fuels.
As for Icahn, he's doing what he does best – shareholder activism. He senses when companies are vulnerable and seems to relish an attack on corporate managements and boards. Of course, he's gearing up for a fight with Yahoo! (NASDAQ: YHOO). Interestingly enough, he persuaded Pickens to buy 10 million shares.
And with Schwarzman, he's buying up the bank debt of companies that went private. Because Blackstone sees many deals, it has an extensive database of opportunities.
In other words, the legends of finance are confident in the long-term. They are making some big bets -- based on lots of experience and due diligence -- and not listening to the short-term noise. All in all, these are some valuable lessons for investors.
About a year ago, the rage in private equity was the so-called megabuyout. It seemed like no company was immune. There was even talk of $100 billion dollar deals.
Of course, the credit crunch ended the megabuyout. In fact, it ended most of the activity for private equity folks.
Yet, according to the co-founder of the Carlyle Group, David Rubenstein, things are perking up [subscription required]. His firm – like other veterans, such as The Blackstone Group (NYSE: BX) – understands market cycles. After all, these players have dealt with variety of credit crunches, such as in 1991-1992, 1998 and 2001-2002.
Rubenstein predicts we'll see a pick-up in deals over the next few months. Although, the deals are likely to range from $2 billion to $4 billion, with less debt. And expect more foreign deals.
Funny enough, Rubenstein seems to be leading the charge with its recently announced a $2.54 billion deal for a majority stake in Booz Allen Hamilton.
The struggles of the big boys in private equity have been well chronicled: Blackstone Group's (NYSE: BX) declining stock price, the Linens n' Things bankruptcy, and so on.
But NexCen Brands (NASDAQ: NEXC), a smaller, less diversified buyout shop, is also in trouble, according to The New York Times. The firm's portfolio companies include Bill Blass, Athlete's Foot and ice cream chain MaggieMoo's. With other brands including Pretzel Time and Great American Cookies, the fast-growing company had planned to make millions in the franchising business. But in recent months NexCen has fired its CFO, delayed the filing of its 10-Q, disclosed that there is "substantial doubt" about its ability to continue as a going concern, and announced that investors should no longer rely upon its 2007 financials.
Basically, NexCen is looking like yet another failed conglomerate, at least for now. Rather than buying, improving, and selling businesses like many private equity firms, NexCen had hoped to acquire various franchise brands and run them under a larger umbrella, taking advantage of synergies and opportunities for integration. Yes, that's the dreaded S-word. I wonder how many billions of dollars in shareholder value have been destroyed by promises of synergy.
With the company badly in need of cash, it's currently looking to sell some or all of its brands. But in this market, that might not be so easy. Athlete's Foot and Pretzel Time sure didn't create a lot of value for NexCen shareholders.
The Blackstone Group L.P. (NYSE: BX) has reported earnings this morning, and the initial response is lower. The private equity giant posted a GAAP net loss of $246.7 million after items, and its "economic net income" was also a loss at -$93.6 million.
The company said that its total net reportable segment revenues were $32.3 million, driven down by declines in all business segments from $1.23 billion in 2007. Its GAAP revenues were $68.5 million.
Corporate Private Equity had negative first quarter revenues; Real Estate revenues down 94%; Marketable Alternative Asset Management down 81%; Financial Advisory Revenues decreased 24%
You can look through the entire release, but as the company noted, most business segments were indeed lower.
Interestingly enough, the company now has $113.53 billion in assets under management. It has also decided to make a dividend payment of $0.30.
Shares of Blackstone are down about 4% at $18.70 in pre-market trading.
The Blackstone Group LP (NYSE: BX) is planning to launch Blackstone Altius Advisors, a business focusing on event-driven investments in the Asia Pacific region and led by Aaron Nieman. The business will be based in Hong Kong and additional team members will operate from New York and Tokyo.
Aaron Nieman, Atius' Senior Managing Director and Chief Investment Officer, joins Blackstone after significant experience at S.A.C. Capital Management's Asia Pacific merger arbitrage division and at Lehman's Brothers Tokyo and Asia Pacific Global Trading Strategies Division. Also joining the team as Chief Operating Officer is Christopher Pesce. He has experience as Bank of America's Global Head of Prime Brokerage and with Goldman Sachs in New York and Hong Kong.
Blackstone Altius Advisors joins Blackstone Capital Partners and Blackstone Real Estate Partners, as well as a hedge fund and two closed-end mutual funds in Blackstone's Asia operations.
Shares of Blackstone were up a marginal $0.04 at $19.01 in early market trading, and now shares are down marginally by $0.05 at $18.92.
The Blackstone Group L P (NYSE:BX) has announced the closing of three newly created collateralized loan obligation funds totaling $1.3 billion. Those CLO's are trading again. These were all created over the past month, and these are just the CLO's that Blackstone participated in.
In March, Blackstone merged its existing CLO group with the team from its newly acquired GSO Capital Partners. This 35 person CLO team has offices in New York and London. The combined CLO group now manages $14 billion across 26 funds in the US and Europe.
This shows a breakdown in the actual amount per CLO, compares it to Q1 and to 2007, and it even puts the lower volume blame now on the lack of AAA rated part needed for each CLO.
Interestingly enough, Blackstone shares are up almost 50% from their post-IPO lows.
The company still has to report earnings as though it was a public company because of its ratings and because of its public debt. The company has shown that over the last twelve months, the company's adjusted EBITDA was $1.55 billion.
Net sales for Q1-2008 were $1.405 billion, up from $1.361 Billion in Q1-2007 and down from $1,539 billion in Q4-2007. Unfortunately, the company is still posting an operating loss of $152 million for the quarter, compared to $654 million in operating losses in Q1-2007 and $595 million in Q4-2007. The net loss after items for this last quarter was $245 million, also down from a loss of $539 million in Q1-2007 and down from a loss of $525 million in Q4-2007.
Its cash and total short term investments were $1.25 billion on March 28, 2008, compared to $751 million at the fourth quarter ending December 31, 2007; and its accounts receivable were $680 million and inventory was $732 million. But here is where things get tricky. Its long-term debt is $over $9.3 billion alone. Of the company's total asset base of $15.197 billion, more than $5.3 billion is goodwill and more than $3.6 billion was listed as intangible assets.
If you go back to the BloggingBuyouts article, "Why private equity firms avoid technology companies," you'll see that being a highly leveraged technology company that requires high capital expenditures isn't always the greatest place to be be. Unfortunately for all the private equity partnersm the company can't live on EBITDA alone and many believe that Freescale will need more capital and thus more leverage.
The original private equity deal was put at $17.6 billion for an enterprise value. So far that isn't turning out too great. Who knows, maybe a re-IPO of Freescale isn't too far off.
Jon Ogg is a producer and editor of the Special Situation newsletter for 247WallSt.com.
This is the second time Alliance has sued Blackstone over the proposed merger. In January, they withdrew a law suit that attempted to force the completion of the merger after Blackstone assured them the deal would go through. Apparently and no one can blame them, they backed out again, prompting the latest law suit.
Blackstone said the pull out is due to a $400 million backstop requirement imposed by the Office of the Comptroller of the Currency to support OCC regulated Alliance. Alliance alleges Blackstone failed to use "its best efforts" to earn OCC approval and that Alliance took many steps to solve the problem.
Blackstone maintains they did not breach any conditions outlined in the merger agreement and the accusations will be strongly contested. Alliance shares are down over 2% today to $51.55 on a 52-week range of $39.54 to $80.79. The deal valued Alliance shares at $81.75. Blackstone shares are also down by 2% to $18.50 on a 52-week range of $13.40 to $38.00.
A class action law suit was filed yesterday against The Blackstone Group LP (NYSE: BX) "on behalf of its shareholders." The law suit was filed by Abraham, Fruchter & Twersky, LLP and it alleges that Blackstone failed to disclose the declining value of portfolio companies in the prospectus filed before the offering. Another suit also found its way to them as Coughlin Stoia Geller Rudman & Robbins LLP filed a class action suit against Blackstone.
Since its IPO, the stock has lost over half of its value. In the annual report filed in March, Blackstone wrote down $122 million on its investment in Financial Guaranty Insurance Company.
What is interesting from Blackstone is the disclosures and caveats in the various filings it has made. Some go on and on, while some other descriptions are vague or brief. What this boils down to more than anything is that suits like this get filed after shareholders lose money.
The company went public in June 2007 at a share price of $31.00 per share in an approximate $4.0 billion public offering. Since then, the stock has declined by over 50% to recent lows, although shares opened today at $17.85. The company hit a low of $13.40 in mid-March and has since recovered over $4.00 to its current trading level. The 52-week high is $38.00.
Today, shares are up almost 3%, on normal trading volume to $17.85. The suit(s) that have been filed and may still be filed might have had more of an emphasis a few weeks and few months ago. Since shares have recovered some 33% from the lows, this one might not get quite as much attention as class action suits against other public companies.
A recent article out of The Economist that was featured on CFO.com this morning, "The Comeback of Private Equity," discusses that private equity firms could be an uncertain remedy for the credit crunch.
The private equity industry possesses two main characteristics as of late. First, huge leveraged buyouts are being replaced with purchases at distressed prices with less leverage. The second private equity factor lies in the fact that these companies have a lot of cash and capital to spend. With all this capital and all the distressed debt, private equity firms can buy loads of debt at low prices.
TPG has just gone after a major finance deal and The Carlyle Group recently closed a $1.4 billion fund that capitalized on low prices. TPG, Blackstone and Apollo are currently negotiating with Citi to pick up $12 billion in frozen loan off their balance sheet. Yet another example-Apollo, a firm with a historical focus on distressed debt, plans to go public.
While this shift in the market may help alleviate some of the credit crisis and earn private equity some returns, the jury is still out. Some regulators are wary of this new trend in private equity, wondering who will run the banks.
The article also points out that the true value of a private equity firm depends on its ability to improve portfolio company performance, not in "working magic" for financial institutions.
While I agree on the verdict still being out, this is actually a relief to see. Frankly, the cash has to be put somewhere and the good news is the debt markets have thrown out the baby with the bathwater. There will be real winners and real losers in this. There always are. But this will kick back a steady flow of funds or will at some point, and those funds will either be paid to partner/client groups or will be used to fund investments when a better climate is present. We won't be seeing any major club deals like we used to for $10 billion and $20 billion or more.
Someone has to act as a vulture. The issue always boils down to "at what price is this worth the risk?".
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BloggingBuyouts is the best resource for news, opinion, and research on the least understood, most powerful force driving financial markets today -- private equity investing. Michael Rainey, editor.
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Yesterday was a tough day in the markets, with the Dow falling 199 points. But if you follow some of the legends of finance – such as Carl Icahn, T. Boone Pickens and 
and 
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About a year ago, the rage in private equity was the so-called megabuyout. It seemed like no company was immune. There was even talk of $100 billion dollar deals.
The struggles of the big boys in private equity have been well chronicled: 
