United Rentals Inc. (NYSE: URI) has announced a major self tender offer this morning and is is seeing shares surge in pre-market trading. It isn't going private, but it is cleaning up its books and retiring a large portion of its common stock and preferred shares. It seems it is doing what the old private equity acquisition couldn't do.
The company has announced its plans to tender for up to 27,160,000 shares of common stock through a modified dutch auction. This will be at a price of not less than $22.00 and not greater than $25.00. Shares closed at $19.50 yesterday and its 52-week trading range is $14.83 to $34.98.
The number of shares to be repurchased in the tender offer represents approximately 31.4% of the total outstanding number of shares. If fully subscribed, the total purchase price for the common stock would be roughly $679 million. There is also the retirement of preferred shares outstanding as part of this deal, which ties into Apollo Investment Funds and the associated board members will resign from the board of directors as part of the transaction.
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.
Metals USA Holdings Corp. filed to come public this morning via an initial public offering. The company is taking the proposed ticker of "MUX" on NYSE. For filing purposes, it intends to sell up to $200 million in common stock.
The company is one of the largest metal service center businesses in the United States, and is a leading provider of value-added processed carbon steel, stainless steel, aluminum, red metals and manufactured metal components.
This is a private equity held company, and investment funds affiliated with Apollo Management, L.P. are the principal stockholders. Some proceeds will go to the company and some to shareholders, although those percentages have not been set. It also looks like the company will repurchase some or all of $300 million of senior floating rate notes with the proceeds.
Read the full story from 247WallSt.com. Jon Ogg produces and edits the "10 Stocks Under $10" newsletter and he does not own securities in the companies he covers.
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?".
You know the feeling. You've done a lot of shopping -- and used your credit card heavily. It's so easy, right? Of course, until the heavy interest payments pile up.
Simply put, that has been the story for big-time financiers, such as Goldman Sachs (NYSE: GS), Lehman Brothers (NYSE: LEH), Merrill Lynch (NYSE: MER), Citigroup (NYSE: C), JP Morgan (NYSE: JPM) and so on. They kept committing their balance sheets to provide loans to buy up companies. And, of course, private equity funds -- like KKR, TPG, Apollo, and Blackstone (NYSE: BX) -- were ready, willing, and able to take the largesse.
But now the bill is coming due.
Well, in this week's Barron's [a paid publication], there's an excellent story on this topic. In fact, the lenders were so eager to make these mega loans that they were loosey-goosey on the terms. For example, some loans even allowed for deferring debt payments (perhaps the subprime market was not the only crazy place, huh?)
Oh, the lenders also were willing to forgo escape clauses in loan agreements. Hey, wouldn't the gravy train last forever?
So what happens to the hundreds of billions in buyout debt? Barron's thinks that the lenders will sell the stuff at deep discounts. True, this will mean significant losses. But, if things are bad, might as well get everything written down now and then pave the way for a better future, right? Although, I have a feeling banks are going to be a little more circumspect when it comes to new buyout loans.
Spurning a $25.25-per-share offer from Dutch manufacturer Basell AF, the board of Utah chemicals company Huntsman Corporation (NYSE: HUN) has chosen instead to accept a bid from Hexion Specialty Chemicals, an arm of private equity house Apollo Management LP.
At $28 per share, the all-cash deal is valued at $6.5 billion. Huntsman had earlier agreed to Basell's offer of $5.6 billion, announced June 26. Basell had until yesterday to raise its offer but declined.
Hexion took on several penalties to get the deal done, covering half of Huntsman's $200 million fee for breaking off the Basell deal and agreeing to pay an 8 percent premium for the Huntsman stock if the deal remains unfinalized after nine months. Hexion had raised its bid slightly on Monday, a 2.8% increase over its previous offer of $27.25 per share.
Apollo said that if the deal clears, Hexion will gain notable depth in the Asian markets, expanding to 180 facilities worldwide. Its sales will top $14 billion.
Apollo established Hexion in 2005, combining Borden Chemical, Bakelite, Resolution Performance Products, and Resolution Specialty Materials.
Huntsman shares dropped $1.18, or 4.28 percent, to close at $26.39 on Thursday.
With the mega offering of Blackstone, it's inevitable that other top tier private equity shops will file to go public. In fact, according to a report from CNBC's Charles Gasparino, it appears that KKR is getting its papers together and has even retained Morgan Stanley (NYSE: MS) and Citigroup (NYSE: C).
While Blackstone is a premier firm, KKR is still the pioneer. Back in the 1970s, the firm invented much of the foundation for private equity.
Although, even if KKR can file a prospectus within the next couple weeks, an IPO is not likely until the fall. It's usually tough to get enough investor interest during the doldrums of the summer.
Gasparino also thinks other firms -- like Apollo, Carlyle and Texas Pacific Group -- will go public. Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
EGL (NASDAQ: EAGL) is not in a sexy business; that is, the company is a freight forwarder and logistics specialist. Boring, huh?
Not to Apollo Management. The firm is determined to buy the company and has made a third bid for its shares. The latest is for $46 and that translates into a valuation of about $1.89 billion.
The problem has been that EGL's CEO – Jim Crane -- has also been trying to buy the company. His latest bid was for $45 per share.
But try not to feel too sorry for him. He and his investors get a $30 million termination fee if the deal falls through. Oh, and he also owns 18% of the company.
On the news of the Apollo bid, the stock price of EGL climbed $3.08 to $45.79 per share. The low spread between the market price and the offer indicate that there may be an even higher bid in the offing.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
Private equity firm Apollo Management has lots of discipline when it comes to valuations on its buyouts. So when the firm competes on a deal, the valuation is usually pretty low.
Back in March, a group of investors -- CEO of EGL (James Crane) as well as private equity firms Centerbridge Partners LP and Woodbridge Co. -- made a $38 per share offer for EGL (NASDAQ: EAGL).
According to Apollo, it was left out in the cold. Not to be outdone, the firm made its own offer. It was certainly much better at $43 per share or $2 billion, compared to the earlier offer of $38 a share.
Apollo controls Ceve, which is in the warehousing business. It should have synergies with EGL, which is in the freight forwarding industry.
Well, as should be no surprise, EGL's special committee likes the Apollo offer much better, calling it "superior."
And it looks like it's the end of the bidding. EGL's stock price is up only $0.09 to $42.30.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
The Wall Street Journalraised an interesting question that has been pretty far from the minds of most investors for awhile: Could private equity run out of money and what will happen if it does? For the past few years, the dollar value of the leveraged buyouts in the United States has been doubling annually. While it can't grow like that indefinitely, even significantly slower growth could lead to difficulties in finding lenders.
Some of the top firms including KKR and Apollo are opting for public offerings to raise money, although I'm skeptical about the motives behind those. The private equity IPOs may have more to do with insiders cashing in their chips than any need for additional capital.
Given the huge growth in the number of deals, it wouldn't be surprising if the quality of the deals has deteriorated somewhat. Coverage ratios have been declining, indicating that lenders are taking on greater risk of default. If we see a lot of the buyouts of past couple years turn into the bankruptcies in the next couple years, we could see a major tightening in the borrowing capacity of these buyout shops. But until then, I think they'll be able to raise as much money as they need, for the right price.
As a general principle, investors get concerned if key employees cash out before an IPO. But in the crazy world of private equity and hedge funds, such rules sometimes don't apply – at least for the high-profile firms. This is according to a piece in today's Wall Street Journal.
For example, Fidelity owns 10% of the hedge fund Fortress Investment Group (NYSE: FIG), which recently went public. Yes, some of the founders cashed-out before the offering.
To make this happen, Wall Street bankers are providing mega loans. The money then is paid out as a dividend. Interestingly enough, it looks like Blackstone and Apollo Management are contemplating such an approach (why not?)
So long as a private equity firm or hedge fund continues to generate strong returns, the debt should not be a problem.
But that's a big assumption. After all, the markets have been booming for quite awhile. And nothing climbs forever.
Ultimately, it could fall on the shoulders of public shareholders. And this is something that never seems to change on Wall Street. Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
In the $17.1 billion buyout, TPG and Apollo take on $10.7 billion in debt. Paying down this debt will overshadow any expansion plans for the future.
A number of regulating agencies in areas where Harrah's operates have yet to review and approve the deal. Harrah's expects the deal to be completed by year's end.
Harrah's, by revenue the world's largest casino company, has facilities in the U.S. and around the world, including some of Las Vegas' prime properties.
The often secretive world of private equity may face a turning-point as the funds begin to go public: The famously secretive Blackstone Group, which is currently plotting an IPO will need to disclose some information that is currently not available to the public, but according to the New York Times, "There will be a few juicy morsels about Blackstone's enormous pay packages and perks, and a first true look at the firm's rate of return, but investors should not expect to see much else." The Carlyle Group, Kohlberg Kravis Roberts & Company and the Apollo Group are also mulling going public.
In an interesting catch 22, the fact that these private equity firms are going public makes them a lot less interesting as investments. When they were private, many investors dreamed of buying stakes in them. But with the companies not desperately in need of cash (they've been raising it at record rates), these IPOs would mostly be a way for the already-rich partners to cash out: as compelling a sign of a top as you will ever find.
While I'm not particularly interested in investing in these firms at the IPO, I was looking forward to the prospectuses as a way to learn more about the industry -- now it appears they may not even be good for that.
Brett Hoselton, Keybanc Capital Markets analyst said in a note to investors that a "source" indicated that Cerberus and the Blackstone Group together are the "leading contenders" to purchase Chrysler Group from the global car company -- and that neither Apollo Management Group, Carlyle Group, General Motors, or Canadian auto parts company Magna International (all of which have been said to be looking over the books) are still likely candidates.
Cerberus and Blackstone are currently poring over Chrysler's books; Doug McIntyre brings up the question of whether the firms are running the numbers on selling off brands. That certainly makes sense; the two most popular ways to improve value in a company are to (1) cut costs and to (2) spin off units. I wonder whether Bernhard's specialty is more efficiencies or dealmaking?
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Spurning a $25.25-per-share offer from Dutch manufacturer Basell AF, the board of Utah chemicals company 
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As a general principle, investors get concerned if key employees cash out before an IPO. But in the crazy world of private equity and hedge funds, such rules sometimes don't apply – at least for the high-profile firms. This is according to a piece in today's 
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