Category ArchivePrivate Equity

Private Equity 20 Dec 2006 10:28 pm

Blackstone CEO Worries about Income Inequality

Stephen Schwarzman

TAM Money and Finance has written plenty on private equity firms buying everything under the sun. They’re our current Masters of the Universe so it’s not a shock that a newspaper like the Financial Times gives Blackstone chief executive Stephen Schwarzman credence on U.S. income inequality:

“People like to have the American dream: everybody successful. I think Wall Street is doing so well now, it’s certainly not an object of any sympathy for anyone,” he said in an interview for the Financial Times’ “View from the Top” series. “The middle class in the US hasn’t done as well over the last 20 years as people at the high end, and I think part of the compact in America is everybody has got to do better.”

But Mr Schwarzman, a Republican supporter, suggested that political action such as higher taxes for the wealthy was not the best solution. “Better to deal with this by having the middle class do better rather than whacking somebody on either side of that,” he said.

Schwarzman is good at making money by buying and selling companies. He’s not a social scientist. He doesn’t explain why growing income inequality is bad, and his only suggestion is to not tax the rich. Let him stick to what he’s good at.


Mergers and Acquisitions & Private Equity 19 Dec 2006 11:04 pm

Texas Pacific Gets into Casino Business

Texas Pacific Group logo

Texas Pacific still had a few billion burning a hole in its pocket. The private equity firm strikes again joining Apollo Management to buy Harrah’s for a deal, including debt, worth $27.8 billion. You can do big deals like buying part of Sabre, Qantas, and now Harrah’s if you raised $15 billion in the world’s second-largest buyout fund.

Even with forking over a lot of money they bought the casino group for cheap:

At $90 a share, Texas Pacific and Apollo would be paying less for Harrah’s earnings than what Las Vegas Sands’ or MGM’s profits are worth on the stock market. Harrah’s is being valued at 21.4 times projected 2007 earnings, based on the average estimate of 18 analysts surveyed by Bloomberg. That compares with a 23.1 ratio for MGM Mirage and 51.5 for Las Vegas Sands Corp., according to Bloomberg data.

That’s what I call smart money.


Airlines & Private Equity 13 Dec 2006 07:02 pm

Qantas Goes Private

Qantas logo

We know where all the private equity for airlines went: down under:

QANTAS Airways has accepted an $11 billion takeover offer from an international consortium including Macquarie Bank of $5.60 a share in the biggest private equity deal in Australian history.

Qantas’s non-executive directors have unanimously recommended that shareholders accept the offer from the consortium known as Airline Partners Australia (APA) after it was bumped up from $5.50.

Qantas chairman Margaret Jackson said the offer from the Airline Partners Australia consortium was 33 per cent higher than Qantas’s closing share price of $4.20 on November 6, when the prospect of a bid was first raised.

“The directors believe this offer allows Qantas shareholders to realise significant value for their shares that has not been fully recognised in the public market,” Ms Jackson said.

“If this acquisition is successful, Qantas will remain a majority Australian-owned, Australia-based airline,” Ms Jackson said.

The investor group sweetened the deal after it was rejected the day before.

On the heels of buying part of Sabre Holdings Texas Pacific Group grabbed a chunk of Qantas. Rumor has it a piece of the moon is next on their list.

For Qantas stockholders this is icing on the cake (or another shrimp on the barbie?). The stock has been on a tear since late summer.


Private Equity 12 Dec 2006 04:13 pm

Sabre Holdings Goes Private

Travelocity's Roaming Gnome

Another company goes private, another online travel company to be exact. Texas Pacific Group (TGP) and Silver Lake Partners will be roaming with the gnome by buying Sabre Holdings, operator of Travelocity for $4.45 billion. TGP’s Karl Peterson let the buzzwords fly in his statement [PDF] about the deal:

We are excited by the opportunity to invest in Sabre given its leadership position in travel technology and distribution and the strength of Travelocity and its other leading online brands. Sabre is well positioned to continue innovating and we look forward to helping management profitably build upon this strong franchise.

In human-speak he means a lot of people know about Travelocity (and presumably the gnome), when people go online to buy airline tickets or hotel rooms one of the places they go is Travelocity, and he thinks they can make a boatload of money.

Marshall Lebovits asked, “Will the torrid pace of the mergers and acquisition market continue?” His answer comes from a Green Manning & Bunch note: “[W]e believe that the sheer velocity driven by idle capital available from lenders and the private equity community will cause today’s competitive landscape to continue for the near term.” Of course they’re investment bankers. What else are they suppose to say?


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