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Blackstone to Go Public?

Blackstone? Public? Say it ain't so, Joe!

I snickered when I first heard the news; it sounded more like a trial balloon.  The air was thick with irony the day Blackstone Group slipped the idea of selling 10% of the firm for a mere $4 Billion clams.

The firm has been in the vanguard of promoting the concept that companies "back away from being public," on the onerous requirements of SarBox, and lastly, the undervalued nature of the equity markets.

I still don't believe it. If it turns out to be true -- and so far, its just a rumor -- I would have to do a 180 on my prior views on the firm and its leadership.

It would mean that all those high falutin' ideas turn were just so much pablum. BG would be like every other Wall Street entity, a crowd of snake oil salesman, only this crew were a little slicker in their patter, a little smoother in the line of bullshit they were pushing.

The first thought that should pop into your head whenever you read or see someone touting a position that seems "off" is to ask "What are these guys selling?"  Now we know: Themselves.

What was in it for them to press an argument that may turn out ot be mere PR spin? More than money -- they created an image, a brand with an air of cool around it, that greased the skids for their takeovers; To hell with the public markets, we have so much cash that we are above all that nonsense. Quarterly conf calls? Fuggedaboutit! I got your Sarbox right here!

Only all those intellectual arguments may turn out to be just another set of lies from another sleazy commission based broker. Now that it has served its purpose, we are on to the next argument. 

Barron's Mike Santoli points out that:

"Many are asking why Blackstone chief Stephen Schwarzman would reverse his stated anti-IPO position and subject himself to the quarter-by-quarter scrutiny of a public company, which he has decried in the past. Well, Schwarzman and other LBO artists buy average companies which they perceive to be under-managed or misvalued by the public, and retool or leverage them up in private.

One thing's for sure: Schwarzman (he of the $3 million birthday party and Fortune magazine's recently crowned "New King of Wall Street") doesn't consider his company anything near "average," or "under-managed." And he and his partners are probably confident that, like Goldman Sachs (GS), Blackstone can enjoy the rewards of public ownership without ever divulging exactly how its money is made. While the investment climate is strong, that is.

But mustn't this mean the peak of the easy-money craze for financial engineering and ever-larger private buyouts? Probably not. After all, Goldman's IPO didn't mean happy days on Wall Street were about to come to a crashing end. That didn't happen until 10 months later."

When the Smart Money sells, ask yourself who is buying.  Answer: Dumb money.

10 Months? That sounds about right . . .

>

Source:
Business as Usual?
MICHAEL SANTOLI
Barron's MARCH 19, 2007      
http://online.barrons.com/article/SB117408671669640044.html

Saturday, March 17, 2007 | 07:15 AM | Permalink | Comments (20) | TrackBack (0)
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Comments

Bravo. Encore.

That was exactly my reaction to the letter yesterday on seeing the news. That said let me take the other side of the debate. Their thesis is that they take companies private and turn them around thru a combination of financial engineering and operational improvements out of view of quarterly scrutiny. And then the need an exit so they take them back public.
1. These companies are apparantly worth more privately but Blackstone is both well-run and private, ergo lots of money is being left on the table.
2. The same leverage-based liquidity on nearly similar terms (low interest, no down, no amortization) have been presented to the PE guys for their deals. IF the credit crunch spreads then their current public market value is at a peak and they would be foolish to not take advantage.

The whole rationale depends on long-term operational performance improvements and the escape from the tyrannies of quarterly reporting. I'd point out for the latter that such world class companies as Expeditors Int'l and Fedex have dealt just fine for decades with quarterly reporting by letting the chips fall where they may and being honest. As for operational improvements I challenge anyone to look at any of the deals, especially the ones with huge special dividends based on borrowing, that aren't reflections of financial engineering, expose the targets to excessive leverage and give little or no attention to operations and the business. Start with Sears, go to HCA and so on. An interesting exercise.

Posted by: dblwyo | Mar 17, 2007 8:36:52 AM