It’s a deal for TXU (Fort Worth Star-Telegram)
Well, it happened. Late on Friday came word that KKR was about to announce the purchase of Texas utility TXU, in what would be the largest private equity buyout of all time, eclipsing a record that’s stood untouched for about two weeks. Including debt, the deal will come to around $45 billion. There seems to be a big environmental angle to the deal. The Times is framing the whole thing in terms of the deal’s “greenness”, as it points out that KKR will not invest in 11 new, much-maligned coal plants. Of course, it could easily be that the buyers aren’t interested in making any new capital outlays after such a big purchase — smart of them to paint it with this environmental brush, particularly after last night’s stirring Oscar ceremony. Who will ever forget Melissa Etheridge singing her song for “An Inconvenient Truth” with messages on the screen behind her about how we can reduce our carbon emissions. Riveting stuff.
Salesforce.com’s big customer: Mystery solved (Between the Lines)
Salesforce.com is the web-based software company that goes against heavyweights like Oracle, Microsoft and SAP. It’s now got a new target in its sights: Bloomberg. Not the mayor, but the provider of financial data to Wall St. The company has put together a comparable offering that doesn’t require its own terminal, and costs only $500 per month, well below what Bloomberg charges. It’s going to be an uphill battle for Salesforce, since Bloomberg terminals are so entrenched and people are so familiar with them. But the idea of a special terminal designed for data from one company does seem a bit quaint. Already, Merrill Lynch says it will use the service for 25,000 employees.
Daimler mulls GM stake to pay for Chrysler unit (Reuters)
There continues to be a lot of chatter about the fate of Chrysler, although it doesn’t sound like anything is even close to certain. Apparently, the idea that it might go to GM in some way is still on the table, and that GM might pay for the unit by giving Daimler an equity stake in itself. Again, this is all just rumor (this particular one originated at the Financial Times). So, in other words, GM would like Chrysler, but not if it means actually paying money for it. Giving up an equity stake is much more palatable.
Tribune Mulls Revamp As Auction Founders (WSJ)
The whole Chicago Tribune auction pretty much fizzled out. Sam Zell has put in a late bid, but it doesn’t appear to be to management’s liking. Now the management is left figuring out how to turn around the company on its own. At this point, it’s going to do a “self help” restructuring, which doesn’t sound much different than any other restructuring. Current plans include spinning of its TV unit and disbursing a big one-time dividend to shareholders.
Archive for February 2007
- Posted in:
Private Equity
Breaking: KKR To Reclaim Title For Biggest LBO Ever With TXU Acquisition, David Faber Reports
By John Carney
CNBC’s David Faber broke the story:
In what will be the largest leveraged buyout of all time, the private equity firms of KKR and Texas Pacific Group are close to announcing a more than $40 billion purchase of TXU, the giant Texas utility that is the largest producer of power in that state, CNBC’s David Faber has learned.
TXU’s board is expected to vote on the deal this weekend and an announcement is likely on Monday morning, people familiar with the situation told Faber.
TXU, KKR and Texas Pacific officials declined comment.
The exact price KKR will pay is unclear, Faber said. TXU’s current market cap is $27.5 billion. It also has $12.3 billion in debt. Since the consideration will be in cash and given TXU’s current enterprise value is roughly $39 billion, the addition of any premium will make it the largest LBO ever, topping Blackstone’s recent $39 billion buyout of Equity Office Properties.
The deal itself will require at least $6 billion to $7 billion in equity and in what is a recent trend, it appears banks will bridge some portion of that commitment until KKR can sell down its overall commitment. That was done in Blackstone’s purchase of Equity Office Properties.
$$$Correction: THIS is the LBO to end all LBOs. [CNBC]
$$$Bankers Go Long on Bling and Beach Houses [DealBook]
$$$The most successful webshow in the history of our world finally sits down with Rocketboom. [WallStrip]
- Posted in:
Business Media
How Many Corporate Crimes of the Century Can There Be, Anyway?
By John CarneyOne recurring theme around these parts is the danger of criminalizing business failure and the role of the media in over-hyping so-called corporate scandals. Executive pay is probably the prototypical media manufactured scandal, and many in the business press have been trying their best to make the backdating story look like into an especially egregious form of abusive executive pay. But it happens with private equity takeovers that get management cooperation, hedge fund collapses and allegations of dirty-deeds by specialists and brokerages. Then there are the much-hyped stories of insider trading, hedge fund scammers and fraudulent financial officers. Underlying all this is some sort of morality tale playing out in the minds of many reporters and editors—where the rich are greedy, greed is a sin, and eventually the sinful are revealed and punished. Sometimes it seems like some of these journalists believe it’s all crime, all the time in corporate America. Most especially on Wall Street.
We’re hardly an exception. To tell the truth, we can’t resist the pull of a particularly good bad insider trading scam. And we’re fascinated by these characters who start up “hedge funds” that are clearly (at least to those of use with the benefit of hindsight) vehicles for parting the gullible from their savings. But we offer two defenses—one dirty and ironic; the other more earnest and wholesome—for our own conduct. First up, the dirty excuse—we’re an online tabloid covering finance. A scandal sheet, if you will. We’re in the business of making fun of things and digging up dirt. Second, the cleaner excuse—we do our best to distinguish between genuine scandals and pseudo-scandals, between the misleading and the malicious, between the culpable and the criminal. In short, not ever corporate misdeed is a crime, and not every, uhm, mis-doer is a criminal.
And there are some folks in the business press who get it right. We think Charlie Gasparino does a great job with his reporting. Holman Jenkins is amazing. Andrew Sorkin does a good job over in his corner of the New York Times website. Gary Weiss is like the Batman of genuine corporate crime, except that he’s real. Herb Greenberg is good enough to make the right enemies. But we’re not naming names of the guilty or the great here. Our point is merely that there are capable, even excellent, reporters writing about business today. But the exceptional are all too often exactly that: exceptions.
So what’s everyone else’s excuse? There was a time where the business pages were a place you put reporters who were too drunk to be trusted with the obituaries. But that’s not true anymore. These folks are professionals. Why is so much of the business media in the business of criminal scare stories these days? Why does there seem to be so little space between the stories glorifying corporate heroics and those decrying the latest Crime of the Century. Why do so many business stories seem pressed into the alternate models of boot-polishing or much-raking? Well, today we came upon a little item that seemed to shed some light on this phenomenon. Basically, crime sells, and journalism is a business like any other and that means it’s got to sell stuff.
Here’s the opening paragraph of an abstract of the paper by Sara Sun Beale on “The News Media’s Influence on Criminal Justice Policy: How Market-Driven News Promotes Punitiveness.”
This Article argues that commercial pressures are determining the news media’s contemporary treatment of crime and violence, and that the resulting coverage has played a major role in reshaping public opinion, and ultimately, criminal justice policy. The news media are not mirrors, simply reflecting events in society. Rather, media content is shaped by economic and marketing considerations that frequently override traditional journalistic criteria for newsworthiness. This Article explores local and national television’s treatment of crime, where the extent and style of news stories about crime are being adjusted to meet perceived viewer demand and advertising strategies, which frequently emphasize particular demographic groups with a taste for violence. Newspapers also reflect a market-driven reshaping of style and content, resulting in a continuing emphasis on crime stories as a cost-effective means to grab readers’ attention. This has all occurred despite more than a decade of sharply falling crime rates.
She’s talking about more than business news but it seems pretty clear to us that a lot of her argument can easily be applied to our little corner of the world. It’s a good cautionary paper for journalists who may think they’ve uncovered the latest, greatest corporate scandal ever and have their eyes on those Pulitzer prizes.
We’re not promising to be any more responsible than we already are. And hopefully we won’t get too much more irresponsible. There’s always room for a good scandal story. But we are glad that we’re not alone in finding some of this criminalization of business business a bit out of whack with reality. Our slogan when we started this thing was simple: “Greed is good entertaining.” We still like that much better than the operating morality of too much of the business press—that greed is criminal.
We apologize right now for getting all preachy and righteous on you. We promise we’re done with the lessons for the day. Now it’s back to making fun of things. And drinkng whiskey. That’s what Friday afternoon is for, right?
The media and criminal justice [Ideoblog]
The News Media’s Influence on Criminal Justice Policy: How Market-Driven News Promotes Punitiveness [Social Science Research Network]
There are a few people we love around here in the DB HQs: Brian Hunter (Carney), that fish (Carney), Jon Corzine (me), and CNBC man candy Charlie Gasparino (both of us—though Carney claims he’s just using CG to get to Erin Burnett—which I don’t buy for a second and neither should you). Of late, we’ve got a new crush and there’s really no point in dancing around the fact that it’s Bulldog’s Philip Goldstein. Why? For starters, we’ve just got a thing for hedgies hags. Then there’s the “pompous ass” line a few weeks back; the 9 minute catfight on CNBC the other day; and the “older man” role he so conveniently fills in our lives. So it shouldn’t come as a shock that we were practically doubled over in delight to get our hands on a little more gossip about the father of our future children the hedge fund manager, from a sleuthful reader.
1.Apparently, after taking part in a conference call with our guy, an analyst friend of the reader was found crying in her cubicle. It may have been the part about Goldstein calling the crybaby a “useful idiot” to her boss that did the girl in. (Please note: John’s called me worse–much worse– and do you see me crying at work? No, because he is not worth my tears!).
2.During a deal with Brantley Capital, specifically a shareholder meeting, Goldstein gave a “Teldar Paper-worthy speech.” While votes were being cast, he stepped outside to make a phone call (to contact a manager he thought would be good for a few) and the CEO announced that the meeting was adjourned and the voting was over (Goldstein had yet to cast any votes). Upon hearing the banging of the gavel, Goldstein ran back into the room and in a “full battle-cry voice,” pointed to the board and said something along the lines of “You mother fuckers aren’t going to get away with this!” Apparently a full on cage fight ensued, with people having to being physically held back and directors running out side doors.
Earlier: Philip Goldstein Makes Watching CNBC Bearable: Brass Knuckles Edition
We write quite a lot about hedge funds here. And one of our constant debates is what should we call people who work at hedge funds. Other than, say, “people who work at hedge funds.” They aren’t bankers. Sure some of them are fund managers, analysts, traders or physicists. But we need a broad term to encapsulate everyone in the industry.
A few rejected attempts were: hedge fundster, hedgie or hedge fundie, hedge hog and two-twenties. The first few are too obvious or cutsie. Hedge hog seems to describe a particular kind of hedge fund bloodsucker. Two-twenty is a bit too obscure.
Our leading candidate write now: Hag. That’s right. Hag. H-A-G. As explained on the etymology website Wordhumper, the word Hag is derived from a few old words.
[Hag's first] element is probably cognate with [Old English] haga “enclosure” [which is related to our modern hedge]…Or second element may be connected with [Norwegian} tysja "fairy, crippled woman"...from PIE *dhewes- "to fly about, smoke, be scattered, vanish."...Haga is also the haw- in hawthorn, which is a central plant in northern European pagan religion. There may be several layers of folk-etymology here. If the hægtesse was once a powerful supernatural woman..., it may have originally carried the hawthorn sense. Later, when the pagan magic was reduced to local scatterings, it might have had the sense of "hedge-rider," or "she who straddles the hedge," because the hedge was the boundary between the "civilized" world of the village and the wild world beyond. The hægtesse would have a foot in each reality...
So "hedge-rider"="hag." That's about as good as we're going to do today.
Obviously, we need your help. Leave suggestions in the comments section below please.
The Daily Hump: (Sea) Hag [WordHumper]
- Posted in:
Hedge Funds
Hedge Fund Scammers Give “Let’s Do Lunch” Entirely More Sinister Meaning
By John Carney
Another hedge fund scammer has been caught allegedly posting false gains while he burnt lost investors money on questionable investment, the Washington Post reports today. The latest accused hedge fund con-man and his Canadian partner Stephen Chesnowitz had a unique way of getting investors—they took them out to lunch!
Over the past two years, the two traders sent out mass mailings advertising a free “gourmet meal” and the opportunity to “earn excellent returns with a guarantee against market risk.” More than 150 people, mainly from Montgomery and Prince George’s counties, attended the seminars and gave Williams a total of $9 million. He transferred the money to Chesnowitz’s hedge funds in Canada and the Cayman Islands.
As always, the way to a man’s wallet is through his stomache.
William’s “investments” included a Canadian bed-and-breakfast and two vintage cars. Presumably one for himself and the other for Chesnowitz. After posting phony gains on his website, Williams allegedly took a standard 20% hedge fund commission on the gains. Nice work if you can get it.
Hedge Fund Manager Charged in Fraud [Washington Post]
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