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Mar. 26, 2014, 7:57 AM
- Having had it "up to here" with its low valuation, Carlyle (CG) group is in the market to buy a traditional asset manager - not with its investment funds - but with its own money, reports Reuters. Carlyle trades at 10.3x expected earnings, a steep discount to traditional players in the 14x-18x area - this despite faster earnings growth, faster AUM growth, and generating more earnings for dollar of assets at the P-E firm.
- Carlyle isn't the only one frustrated - Blackstone's (BX) Stephen Schwarzman has expressed the exact same sentiments. KKR and Apollo Global (APO) also trade between 9x-11x earnings. One reason for the gap is the reliance of P-E firms on performance fees as opposed to the predictable income streams of the traditional players.
- Carlyle did buy TCW in 2012, but that was through a buyout fund, and it has bid for Russell Investments, but again also through a buyout fund.
Mar. 25, 2014, 8:11 AM
- U.N. Ro-Ro Isletmeleri AS - an operator of roll-on, roll-off transportation ferries - is expected to be sold for as much as $1B later this year, reports Bloomberg, less than the $1.26B KKR paid in 2007 (KKR also injected additional money into the business in 2010). All told, KKR's investment into the firm was €385M and it would receive back less than a third of that if the sales target is hit.
Mar. 12, 2014, 11:56 AM
- KKR's 4th European buyout fund would be smaller than the most recent one of $6.1B raised in 2008. reports Bloomberg. The reduced size is a trend in P-E, with Carlyle looking to raise €3B for its 4th Europe fund, less than €5.3B for the previous one, and Bridgepoint also expecting to go after a smaller amount than the €4.8B it raised in 2008.
- KKR European Fund III (from 2008) had $1.7B of capital left to invest as of year end, and was producing a 7.8% IRR.
Mar. 7, 2014, 11:43 AM
- KKR is suffering a "black eye" over its investment in headed-for-bankruptcy Energy Future Holdings, but - says Oppenheimer's Chris Kotowski - other investments in that 2006 flagship fund are doing fine and should lead to further gains.
- Among them are Capsugel, Biomet, and Go Daddy. Then there's "works in progress" like First Data and Samson where marks have already been taken, but KKR - traditionally conservative in its marks - is working to improve the situation. Kotowski thinks if the fund were liquidated at current prices, it would generate $0.89 in earnings per share.
- "The news is not always good, but KKR seems to take the bitter medicine early when it needs to," says Kotowski ... [We] think KKR is the best organic growth story in the [P-E] group because it has used its balance sheet investments to fund numerous first generation funds in Energy, Infrastructure, Real Estate, Credit and long/short equities."
Mar. 7, 2014, 7:33 AM
- Biomet has filed to raise up to $100M in an IPO seven years after being taken private for $11.4B. The final size of the offering will probably be higher, with Reuters previously reporting that the firm could look to raise over $1B.
- The medical-device maker didn't say how many shares it would sell, nor the exchange it would list on, although it did say it would trade under the ticker symbol BMET.
- The company's products include dental implants and artificial hip joints, and it competes with Smith & Nephew and Stryker.
- Biomet's main owners are Blackstone (BX), KKR (KKR), Goldman Sach's (GS) P-E arm, and TPG Capital.
- ETF: IPO
Mar. 4, 2014, 4:48 AM
- The nine founders of four of the biggest private-equity firms in the world earned over $2.6B between them last year, more than double what they took home in 2012.
- The executives' base pay is relatively low - in the hundreds of thousands - but they earned the huge amounts from dividends and other payouts as soaring markets allowed their firms to make large profits from cashing out their portfolio investments.
- Apollo Global Management's (APO) Leon Black earned the most with $546.3M, followed by Blackstone's (BX) Stephen Schwarzman with $465.4M. Carlyle's (CG) David Rubenstein, William Conway and Daniel D'Aniello earned a total of $750M, while at KKR (KKR), cousins Henry Kravis and George Roberts took in a mere $161.4M and $165.5M respectively.
Feb. 28, 2014, 5:35 PM
Feb. 27, 2014, 4:41 AM
- Medical-device maker Biomet has hired underwriters to help carry out an IPO that could take place in H1 and raise over $1B, Reuters reports.
- The listing could come seven years after Biomet was taken private for $11.4B. Its owners are Blackstone (BX), Goldman Sachs' (GS) private-equity arm, KKR (KKR) and TPG Capital.
- Biomet's adjusted net profit rose 46% to $368M in FY 2013 as revenue increased 8% to $3B. The company's products include dental implants and artificial hip joints.
Feb. 25, 2014, 10:17 AM
- "We're thinking about it, but not too hard," TPG co-founder David Bonderman tells a P-E conference audience about ideas of going public. Likening the wave of P-E firms going public to that of the investment banks, Bonderman concedes at some point all the players will be publicly owned.
- Of the hot hand for P-E (BX, KKR, APO, FIG, OAK) in general and his firm in particular - last month agreeing to sell Aptalis Holdings for $3B and last year agreeing to sell Neiman Marcus for $6B - it's not sustainable, says Bonderman. "These years are relatively few and far between."
- Blackstone's IPO in 2007 was an all-time bell-ringer. We'll keep an eye on Mr. Bonderman's moves.
Feb. 25, 2014, 8:34 AM
- “We’ve done a lousy job of telling our story," says KKR co-founder, co-CEO, and co-Chairman Henry Kravis, speaking at a P-E conference. "People think private equity is hedge funds. We have not done a good job as an industry.”
- Of the current somewhat-frothy environment, the LBO giant says banks are enabling higher leverage multiples, now as much as 7x on U.S. buyouts. "“This is not a game of financial engineering." Overburdening companies with debt forces them to become disproportionately focused on repayments. "That ain't gonna work."
- At the game for a long time - he and George Roberts founded KKR in 1976 - Kravis reminds private equity remains "unequivocally" central to the firm despite expansion into other areas leading some to describe KKR as an alternative asset manager. Retirement plans? “I love what I’m doing, George loves what he’s doing ... [we'll stay at the helm] as long as we’re…healthy and having fun and our partners don’t kick us out.”
Feb. 21, 2014, 3:32 AM
- Energy Future Holdings is preparing to file for bankruptcy protection after creditors failed to agree on how to restructure the Texas power utility's $40B+ of debt following months of talks, the WSJ reports.
- The filing would probably lead to a break-up of Energy Future's two largest operating units, with the company trying to organize bankruptcy loans of over $4B for its main regulated and unregulated subsidiaries.
- Energy Future's owners, KKR (KKR), Goldman Sachs Capital Partners (GS) and TPG Capital, are hoping to retain some sort of stake in the company.
- One group of debtees includes Apollo Global (APO) and Oaktree Capital, while another involves Blackstone Group's (BX) GSO Capital Partners.
Feb. 20, 2014, 3:09 PM
- "The entire [private equity] group trades at an enormous discount to the traditional asset managers, says Brandywine analyst Charlie DyReyes, sounding like he listened in on Blackstone's (BX +1%) earnings call late last month. The traditional players are at 15x earnings, while the P-E group - with faster growth potential - trades at 10x.
- Blackstone is one of Brandywine's favorite holdings, says DyReyes, and at 15x would be a $45 stock, nearly 50% higher than today's price. Payoff as the firm cashes in on past investments should be one catalyst, and the trend of investors putting more money into alternative asset managers should be another. There's also the payout - if maintained, the stock will yield 7.4% over the coming year.
- "I think the Blackstone model is really the model that all of their peers are trying to emulate," says Sandler O'Neill analyst Michael Kim. "With Blackstone you get a yield story, certainly you get a growth story in terms of distributable earnings, and the valuation gap remains. So investors can win any number of ways."
- Other P-E sector names: KKR, FIG, APO, OAK, CG.
Feb. 20, 2014, 7:58 AM
- The economic slowdown is manna to KKR which plans to put money to work in failing Indian companies and in the stressed loans of domestic banks. "There is a dislocation in Indian markets,” co-Chairman Henry Kravis tells reporters. “There are some very good companies and what is wrong with them is that their capital structure is impaired and we can help them out."
- KKR recently closed on a $2B global fund to provide financing for distressed firms.
- “Indian banks will have to replenish capital and therein lies an opportunity for us ... Now is the time to put money here ... There are really some positive things that I see as a foreign investor. Right now, like many countries, there are a lot of questions. That doesn’t mean it can’t go back to growth again.”
- As for getting controlling stakes in Indian companies - "really tough," says Kravis, noting the prevalent family-owned business structure there.
Feb. 14, 2014, 2:46 PM
- An IPO of KKR-owned payment processor First Data could be in the wings as the company is unable to earn enough money to lighten its debt load, so instead may turn to an equity offering. First Data's paper has been near the distressed level ever since a KKR buyout layered $20B in debt onto the company in a 2007 buyout. Interest expense currently consumes more than 75% of free cash flow.
- The yield spread over Treasurys has narrowed 60 basis points in the past few days to 656 bps after First Data CFO mused about an equity offering on an investor call on Feb. 5.
- KKR's 2007 purchase was funded with the aforementioned debt as well as $6.4B of equity contributed by the buyout firm.
- “The fact that [an IPO is under] discussion at this point is a good thing,” says Canaccord's Michael Drexler. “The home run would be them getting an IPO done relatively soon. It’s really just a matter of how quickly they can get the growth story going.”
Feb. 13, 2014, 2:50 PM
- Characterizing WMI Holdings (WMIH +1.7%) as a "KKR special purpose acquisition vehicle," hedge funder Stephen Errico, thinks the P-E firm will move ahead with acquisitions which can utilize WMI's nearly $6B in tax loss carryforwards.
- WMIH is more than a double since KKR in December announced plans for a strategic investment in the firm, and last month closed on the purchase of convertible stock, committed to buying a chunk of subordinated debt, and received 5-year warrants to purchase common stock.
- "Expect acquisitions to be announced sooner rather than later," says Errico, calling WMIH a small cap, speculative way to invest alongside KKR.
Feb. 11, 2014, 3:11 PM
- "It's a project concerning [loans to] restructured companies, so it's not a bad bank," says UniCredit (UNCFF, UNCFY) CEO Federico Ghizzoni, confirming his bank and Intesa Sanpaolo (ISNPY) are in talks with KKR. Among the possibilities is the setting up of a vehicle to hold the two lenders' restructured loans, with KKR injecting equity into the indebted companies.
- As of the end of Q3, Intesa and UniCredit had a combined $14.5B in gross restructured loans, and the government would be pleased to see them removed from their books.
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