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.
Cumulus Media Inc. (NASDAQ: CMLS) has announced that the management-led investor group has terminated the planned merger agreement. While there was a glimmer of hope that this was going to be rekindled, the deal spread on this was so wide that a fleet of trucks could have driven between it.
Cumulus has agreed with the investor group led by Lew Dickey, its Chairman, President and CEO, and an affiliate of Merrill Lynch's (NYSE: MER) Global Private Equity, to terminate the merger agreement which first came on July 23, 2007. The members of the investor group informed Cumulus that after exploring possible alternatives they were unable to agree on terms on which they could proceed with the buyout.
As a result of the termination of the merger agreement, the investor group has agreed to promptly pay Cumulus a merger termination fee of $15 million. In addition, the terms of the previously announced amendment to Cumulus' existing credit agreement will not take effect. Cumulus had a market cap of $253.6 million based upon a $5.81 close on Friday.
The company has also announced that its board of directors intends to explore the possible implementation of a new stock repurchase plan in the near-term in order to provide liquidity opportunities to stockholders.
It appears that the world of porn is getting more attention from private equity and venture capital investors. And, no, it isn't that private equity executives and deal makers are spending more time looking at porn than they are negotiating deals. (Well, maybe.) More importantly, a big investor in the space has won an award and may be opening a floodgate of capital
AdultVest is a private equity venture that we covered on its launch earlier this year. The company concentrates exclusively on adult industry investments, mergers and acquisitions. So far, its initial numbers are pretty stellar.
It claims to have some $7.9 billion in "available capital" to invest in adult themed businesses, and $286 million of that was raised "within the last 7 days." It also claims to have 3,809 registered investors, with 53 of those signing up in the last week. (This data is from the group's homepage.)
The big news is that AdultVest was just selected by Alternative Investment News as one of four funds nominated for the "Hedge Fund Launch of the Year" award. And last month, the company announced it was acquiring iPorn.com.
There are a number of reasons that the investment community is trying to get into and make money from porn. The most obvious one is that you are reading about it right here right now.
An interesting fund raise just closed today in the global energy sector. Lime Rock is a private equity firm that focuses on the global energy sector, and it announced today the closing of its fifth Lime Rock Partners fund, Lime Rock Partners V, L.P., with a total $1.4 billion in investor capital commitments.
Lime Rock has four predecessor Lime Rock Partners funds, and Lime Rock Partners V will make what it calls "creative, value-adding, and long-term growth capital investments" in companies in the global energy industry.
This notes that some 78 institutional investors participated in the fund, including leading endowments, foundations, and pension funds, made capital commitments to Lime Rock Partners V. It also says that it did not actively market this fund, as some 91% of capital commitments came from its existing investors.
Lime Rock Partners funds have invested $1.0 billion in 47 energy portfolio companies worldwide, which are primarily in the exploration & production, energy services, and oil service technology sectors. These funds have also realized some $1.7 billion and "continue to hold significant unrealized value in their portfolio company investments."
Lime Rock also manages Lime Rock Resources, a $450 million fund, which directly acquires and operates oil and gas properties in the United States. Lime Rock manages $3.5 billion of private capital for investment in the energy industry.
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.
First Data Corp. has entered into an agreement to acquire InComm today, only about 7 months after it was acquired by affiliates of Kohlberg Kravis Roberts & Co. The value and terms of the transaction has not been disclosed, however, the deal is estimated to be accretive for First Data and is expected to close next quarter.
InComm is an industry leader in marketing, distribution, and technology innovation of gift cards, prepaid wireless products, reloadable debit cards, digital music downloads, content, games, software and bill payment solutions. InComm generated $300 million in net revenues in 2007 on $8 billion in retail sales transactions. The combination will allow First Data and InComm to provide a full prepaid product suite.
This should be an interesting deal as First Data Corp. is a electronic commerce and payment processing services. At the time that KKR closed its merger, First data said it had over 5 million merchant locations, 1,900 card issuers and their customers, in its network. This may really allow the combined InComm & First Data channel to expand rapidly. Brooks Smith, the CEO of InComm will head First Data's Global Prepaid Services unit once the transaction closes.
Warburg Pincus has recently announced the closing of a $15 billion global private equity fund, Warburg Pincus Private Equity X. Many existing investors increased funds to WP X and includes various investors such as public and private pension funds, endowments, and global financial institutions such as Washington State Investment Board and GE Asset Management.
Warburg Pincus currently manages over $35 billion in assets globally. The global fund will focus on businesses in any growth stage in core industries in North America, Europe, and Asia. The company invests across geographies, industries, and business growth stages from a single global fund, always with a focus on growing businesses and growing regions.
They have significant experience in consumer and retail, energy, financial services, healthcare, life sciences, industrial, technology, media and telecommunications. Typically, Warburg provides funding for the creation of business or to expand them where long run growth and sustainability is a central factor.
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.
Private-equity companies are under attack by union groups such as Services Employees International Union (SEIU) due to worries that the weakening economy will motivate private equity companies to encourage portfolio companies to cut jobs and benefits. The Washington Post ran a great piece outlining this.
Rather than strikes and marches, these protesters are using less-conventional tactics:
Protesters presented a satire in front of Henry Kravis's Long Island home in which they asked passerbys to give the buyout master a cut on his property taxes.
At a recent conference in NYC given by Carlyle co-founder, David M. Rubenstein, protesters sneaked in sporting a banner reading "Why does he pay taxes at a lower rate than the hotel's doorman?"
In addition to shaming, the unions are also pointing to links between Middle Eastern oil money and private equity.
Buyout firms respond by highlighting to the fact they have been responsible managers of their portfolio companies in the past and that unions themselves have actually invested pension fund money in private equity firms. The goal of these unions is for private equity firms to take steps to ensure that employees in their portfolio firms are treated fairly with benefits and job security. Since the movement was initiated, any potential legislation for the benefit of the unions goals has been withdrawn.
The battle of the haves and the proles continues......
It was almost amazing that private equity funds never acquired many banks or other depository institutions, despite the lending woes that came to pass. For some time there was value there before the logic and rationale behind credit evaluations were tossed out the window. We had discussed this with many groups last year and the answer was always that the private equity firms were sitting out to avoid the relative valuation erosion as peer-pressure drove down the value of the solid companies.
Wilbur Ross may soon be making a change to this approach of avoiding the group. Last week there many reports out of Reuters, Crains, and others discussing Ross's intent to go after depository institutions.
The past articles discussed and pondered different aspects that Ross and his new backers might pursue, but new information from today may shed a bit more light on Ross intends to invest this money and how sovereign wealth funds may be involved in this.
An article by South-African based Business Report summarizes private equity trends this year amidst the crunched credit markets and slowing U.S. Economy. While it isn't exactly 2007 or 2006, the numbers are still impressive.
According a Private Equity Intelligence Study cited in the article, in the first three months of 2008, private equity funds have raised $163.5 billion.
Last year, leveraged buyouts tripled the $73 billion posted in the same period this year. This article is also confirming what we have started seeing in many such private equity trends for the start of 2008, as it notes that leveraged buyouts are being replaced with distressed debt. That is amounting to $40 billion being raised by 31 firms so far. For example, Bain Capital's hefty $13.5 billion fund targets distressed debt, as well as venture and property.
IndexAtlas has announced the launch of the $50 million Art Industry Fund, an alternative private equity fund targeting only businesses that serve the art industry.
This will include such operations as auction houses, advisory services, financial and security firms, software and media companies. Each investment is intended to last four years and will range from $3 to $8 million. The fund is expected to close by December 31, 2009.
CEO and founder of IndexAtlas, Sergey Skaterschikov, believes the fund will generate an IRR of 35% and bases his investing strategy on his book, "Skate's Art Investment Handbook." Skaterschikov established IndexAtlas in 2001 and manages $400 million in fully invested funds and has advised on $2.4 billion in transactions.
There have been many such reports in here showing how there has been a convergence of private equity and venture capital. If this isn't a prime example of that, then nothing else is.
If I didn't know better, it almost sounds a lot like a Sotheby's (NYSE: BID) incubator fund, although it's not.
Dubai International Capital and Chinese private equity First Eastern Investment Group have announced a new joint fund, China Dubai Capital.
The fund will focus on China's growing economy in sectors such as infrastructure, health care, and resources and will attempt to capitalize on the growing ties between the UAE and China. Companies with strong growth possibilities and the potential to eventually trade on Dubai national securities markets will be primary recipients of the fund. The first closing of the fund will tag at least $500 million and will close this May. By the final closing expected in October, the fund is expected to reach $1 billion.
First Eastern currently manages over $1.5 billion for direct Chinese investments and is the first Chinese financial company to be established in the Dubai International Financial Center. Dubai International Capital manages Jordan Dubai Capital, a $300 million fund, and plans to launch a fund focused on Saudi Arabia.
$100 per barrel oil is increasing the face amounts of funds being committed. As high oil prices remain, expect more and more from Middle Eastern private equity and sovereign wealth funds to buy up infrastructure projects. That's the new world. If you think this is a big deal for private equity or sovereign wealth funds, check out the Dubai $54 billion proposed eco-project.
Altira Group LCC, a player in energy technology venture capital and private equity funding, has announced an investment in Evolutionary Genomics (EG). Evolutionary Genomics sounds a little misleading in name because the company is focused on developing improved biofuel feedstocks. The funding will come out of Altira's $176 million Altria Technology Fund V.
Evolutionary Genomics developed a patented gene discovery technology platform to screen gene adaptations in biofuel feedstocks, which it hopes to improve yields and make biofuel a more viable and sustainable alternative energy solution.
Altira noted its belief that biofuel production is moving toward long-term commercial viability. the company will support and accelerate that direction as these two note that the in-house technology is among the most promising bioscience in this area.
Money is still heading into this direction, particularly as oil has stayed over $100 per barrel. There is just a huge difference between businesses that are subsidized and those that are not. When these are profitable with no subsidy and profitable with energy prices at much levels, that's when they are interesting. That is also why you are starting to see private equity firms compete with venture capital firms in the sector.
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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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