Blackstone: I'm Lukewarm On The Offering

If you're reading this, it's likely you've already gorged yourself on plenty of other commentary out there on the Blackstone Group (BX) IPO. In fact, I've already weighed in on the issue through a piece I did for The Motley Fool on Friday.

The facts on the offering are all pretty much out there, so all that's really left is for everyone to throw in their hats on where they think the stock will be headed. Like I said in the piece for The Fool, I'm pretty lukewarm about the offering.

One of the most obvious things to look at is who is doing the offering. This is mega-dealmaker for Blackstone -- they don't need the money, so the only reason that they'd be doing this is to opportunistically take advantage of a good pricing environment. Do you think Schwarzman is going to leave money on the table if he doesn't have to?

The other point to keep in mind is that Blackstone isn't the only firm of its type. The bulge bracket I-banks that are already public -- Goldman (GS) and Merrill Lynch (MER) to name just two -- are doing PE buyouts, just like big Blackstone. Some might argue that you can pick up the stock of those firms at pretty good prices right now. And with KKR Financial Holdings (KFN) hiring Morgan Stanley (MS) and Citi (C) to potentially headline its IPO, we may be seeing more shares that are directly comparable to Blackstone's coming to market soon.

For me, Blackstone is too much hype and has too many eyes on it. With thousands of stocks out there, I figure there are better deals out there than this.

Comments

[Andrew:]

Blackstone and GS are not in the same business. GS is much larger and operate more like the toll operator of Wall Street....no deal will get done without their blessing. Although both have "hedge funds", they operate very differently. GS's hedge funds purpose is to give private clients' overall portfolio diversity (more conservative). BX operate their hedge fund as source of funding, and the end game is doing deals.

When compared to other PE's, such as KKR and Apolllo, recent history shows BX to be more strategic and better execution. Take a look at Celanese and EOP. Compare the margins of these deals vs. what KKR, Cerbrus, Apollo have done in the past couple of yaears.

The $26B Hilton deal should not be compared to TXU or Chrysler. Hilton is one of the premier brands in the Western Hemisphere. But, the best value for Hilton acquisition lies in China, where there were only 5 as of end of 2006. The economy of China has grown to the point where business travel will start growing astronomically. How to fund the $26b buyout?? Oh yeah, the Chinese government also bought a small stake in BX.

No doubt, headwinds are strong at this point in time with "subprime" fears and taxation issues, but please don't use a dull knife to cut your meat.

2007 Jul 29 07:42 PM