Henry Kravis

Brave New Films held a screening of “The War on Greed: Starring the Homes of Henry Kravis” this morning in front of the KKR founder’s 625 Park Avenue apartment in an attempt to shame him into…something. Unfortunately, director Robert Greenwald didn’t do any recon before planning the event, and was disappointed to find out that Hank is currently on vacation in Palm Beach, at his 15,000 square foot home on North Lake Way, and would not be able to catch the flick**. Oh well. This is why they invented DVDs, and the WGA worked so hard on those sandwich boards.
The movie is a Cribs-style look at Kravis’s five homes, which he’s undoubtedly already familiar with, and includes some interviews with a bunch of people who make less money per year than the buyout king does in an hour– $51,369–for shock value. (Not too much shock or value, though, because there are no interviews with anyone who makes significantly less than HK, meaning this girl). No sequel starring Stephen Schwarzman (‘s houses) has been planned, because apparently SS’s homes don’t have the height to make them leading men material.
Dan Primack’s problems with the film are that Greenwald “tries to provide some “substantive” context, in a simplistic and damning definition of private equity,” he’s “stuck in the 1980s and early 1990s,” and his “definition of PE fails to point out that some PE-backed firms add employees and increase value for the shareholders – which happen to be public pensioners, universities and charitable foundations.” Mine are that it it doesn’t make me want to hate Kravis, it makes me (and the youth of America I watched it with) want to emulate him. And also, that there weren’t any shots of the gift-wrapping room in HK’s house in the Dominican Republican. Other than that, good movie.

The War on Greed [PEHub]
A Movie and Protesters Single Out Henry Kravis [NYT]
*The best part of every episode of Cribs
**KKR wouldn’t confirm this but I sense it’s true.

The Case Of The Missing Private Equity Kings

KKRIPOPULLED.JPGFirst Steve Schwarzman went missing.
And now Henry Kravis has disappeared. He’s cancelled an October 2nd breakfast talk he was scheduled to give at the New York Public Library, according to Deal Journal’s Dana Cimilluca. No one is saying why. KKR is refusing to comment. The NYPL isn’t returning calls.
So what happened? “The cancellation means Kravis doesn’t have to explain why his firm apparently still plans to go forward with the IPO plan, when things have gotten a bit ugly for the private-equity industry,” Cimilluca writes.
We suppose it could be a move to avoid awkward IPO questions. Or it maybe he got the memo from his fellow private equity poobahs that all this publicity the business has been getting lately hasn’t worked out so well. It’s got the attention of lawmakers and the attendant political leaching class, for one thing, who want to claw and paw their way into private equity profits with taxes and extracted political donations.
Kravis Follows Schwarzman Underground [Deal Journal]

blackstoneiposecondayfirstdaypopletdisapointingipoperformancedownwarddowndowndown.JPGLet’s see what two guys (Kurt Andersen and a friend, who asked requested his name be withheld) had to say about the matter:
* Guy New York contributor Kurt Andersen knows who works around private equity “snarls” when he says the name “Steve,” and “blames the current anti-private-equity spasm not on whiny anti-business liberals, but on Steve Schwarzman”
* “The fucking birthday party” (attribution to same “guy”)
* “Where no one gave a toast, by the way, not one” (same party, same guy)
* “We’re where we are right now because of the unbelievable egos of guys running the private-equity firms like Blackstone. They put big targets on their backs by what I consider stupid actions like throwing these big parties.” (same party, different guy—head of the National Venture Capital Association)
* “Ostentatious, churlish, megalomaniacal, tone-deaf—and a hypocritical dissembler to boot.” (Andersen, in cahoots with “guy”)

Read more »

Inopportune Time To Be A Master Of The Universe

kravisforbes.thumbnail.jpgAlert the National Guard: Goldman has now been left out as a major underwriting playa in two—count ‘em, two—IPOs. First there was the Blackstone slap in the face, and now KKR is jumping on the “Don’t touch me there, Goldman” bandwagon. The same banks who lead the B-stone deal, Citigroup and Morgan Stanley, will be underwriting KKR’s as well.
What’s with 1-2 punch? When it happened the first time, many believed that GS and JP were working on another P.E. IPO, there was a non-compete and so on and so forth. Others wondered if Goldman’s own “aggressive pursuit of private-equity deals alienated Steve Schwarzman,” failing to take into consideration that a 5’6” tall man probably has pretty thick skin. But Blackstone’s in the past—what’s the deal with the second snub?
As Reuters points out, JPMorgan doesn’t have a private equity arm capable of competing with KKR, but Henry Kravis may “have beef with the bank,” re: First Data Corp.

Reuters reported in April that Henry Kravis and crew were fuming at the way JPMorgan handled its proposed takeover of First Data Corp. Long story short, JPMorgan owns a majority stake in a First Data joint venture. KKR tried to reassure JPMorgan that the JV was not under threat, but JPMorgan pushed back, offering to buy out First Data’s 49 percent stake in the venture or dissolve the partnership altogether, sources told Reuters. That didn’t sit well with Kravis, sources say.

So that’s JP Morgan, okay, but the lack of Goldman is still coming as a shock to those who believe Goldman Sachs rules the world and all of its inhabitants (really, though, Goldman does have the ability to make it rain). So what’s up there? Some theories:
• Goldman’s private equity arm competes directly with KKR for deals.
• As noted by the ‘Bookies, in March, Lloyd Blankfein said, “It’s impossible for us to be in every piece of business,” which is kind of like hearing your deity admit to being human and will thusly be chalked up to Blankfein being drunk, and struck from the record.
• Goldman has different looting and plundering strategies from those of KKR
• Goldman needs a nap
• There can only be one bald supermogul per IPO
• Goldman is advising Apollo, Citadel
• Goldman is the midst of a herpes outbreak
• Kravis just doesn’t think Goldman’s all that good at the private equity business
• Goldman has told KKR in the past that it would underwrite its IPO—when small mouth bass rule the world
Goldman, JPMorgan out in the cold for second private equity IPO [Reuters]
Underwriting Henry: Who’s In and Who’s Out [DealBook]
Goldman’s Hedge Fund Alumni Network [Deal Journal]

Blackstone vs. KKR: Primedia Bid

KKR vs Blackstone Colorized.JPG Is personal animosity standing in the way of Blackstone’s bid for the enthusiast magazine titles Primedia has put on the auction block? That’s what the New York Post’s Keith Kelly claimed in his column yesterday.
Although Blackstone is said to have put in a bid for some or all of the titles—which include Surfing, Motor Trend and similar niche magazines—in the first round of the auction, it may have backed out of bidding in the second round, Kelly reports.

One reason is that Schwarzman and Primedia’s chief shareholder, Henry Kravis are bitter rivals on many high-stakes deals.
The deal for the Primedia Magazine Group is expected to fetch over $1 billion.
One source close to the situation said there is “no way” Schwarzman would want to fork over that kind of money to Kravis.

Is it plausible that Steve Schwarzman has personally quashed the Primedia bidding just to avoid giving money to Henry Kravis. We’re rating this story a “sell” because it doesn’t quite make sense. Why would personal rivalry stand in the way of a second round bid but not the initial bid?

Fat chance
[New York Post, second item]

The Elder Barbarians: Not So Barbaric Anymore

kravisandroberts.jpgHenry Kravis and his cousin and business partner George Roberts are the subjects of a Wall Street Journal feature story today. Our first reaction was: leave it to the old boys to get the pro-private equity publicity machine humming after recent news of federal investigations into the industry. Second reaction: these guys seem like sweet, conservative old codgers. Third reaction: we kind of miss the barbarians at the gates days.
It’s kind of long, so here’s the shorter version, with some additional commentary:
• The midtown Kravis office is decorated with an “eclectic collection of books.” More details please! Which books? Like odd-ball, semi-porny dime-store novels? The works of the middle Roman philosophers? Or just the sort of thing that a journalist might find eclectic but someone in finance wouldn’t—like books about Jesse Livermore.
• George Roberts hangs out in Menlo Park, California. Err, that’s what the rest of us call Silicon Valley. Like where Sandhill Road is located.
• Roberts blames the stock market’s short-term, quarterly financials obsession for why going private is such an attractive option for management, but doesn’t say a word about Sarbanes-Oxley. A good idea if you are trying to placate an already uppity SEC!
• In 1981, KKR did eight deals and had just six people.
• Kravis pooh-poohs the financial aspects of the business, saying they spend just 5% of their time on financial engineering. “It’s all about how to make better operating decisions [at our companies]. We have deeper teams. Our processes are better. We have formalized plans before we buy. We also make decisions more quickly on things like whether we have the right management structure,” Kravis says.
• The wrap-up quote is totally worth the read through the whole thing. But because we’re here, you get it without the effort. Kravis’ parting wisdom: “Any fool can buy a company. You should be congratulated when you sell.”
Inside the Minds of Kravis, Roberts [Wall Street Journal]

  • 02 Jan 2007 at 4:00 PM
  • Banks

Henry Kravis, Lloyd Blankfein Top Giuliani Campaign Hit List

giulianihitsupwallstreetforcash.jpgAs a relatively unknown federal prosecutor, Rudy Giuliani made himself a public figure with the prosecutions of several Wall Street financiers in the eighties, including Marc Rich, Pincus Green, Ivan Boesky and Michael Milken. He pioneered the use of anti-organized crime statutes, such as RICO, to go after Wall Streeters. But that hasn’t stopped him from winning friends in the finance industry. Aides formulating his presidential campaign—as detailed in a batch of documents obtained by the Daily News—hope to raise millions from prominent names in the financial world, including KKR’s Henry Kravis and Goldman Sachs’ Lloyd Bankfein.

In a memo that appears in the dossier, Giuliani aides Dickerson and Roy Bailey urge him to court financier Henry Kravis particularly avidly.
“You need him to be a Wall Street industry leader,” the memo says.
McCain announced Kravis’ support last month.
The plan also anticipates his recruiting top GOP fund-raiser Cathy Blaney in New York on a retainer of $260,000 and her Florida counterpart, Ann Herberger, at $216,000. But between the plan’s preparation in the fall and today, Blaney became the chief fund-raiser for the World Trade Center Memorial Foundation, while Herberger reportedly has signed on to the presidential campaign of Massachusetts Gov. Mitt Romney.
Other business leaders targeted by Giuliani remain publicly uncommitted: Paramount CEO Brad Grey, Giuliani’s talent agent after 9/11, is envisioned as leading a “celebrities” fund-raising arm; former Vikings quarterback Fran Tarkenton would raise money from professional athletes. News Corp. CEO Rupert Murdoch, PepsiCo chief Dawn Hudson and Goldman Sachs president Lloyd Blankfein are also listed as “industry leaders.”
The documents depict hedge fund tycoon Paul Singer, a close Giuliani ally, playing a central role in his fund-raising operation.
The dossier doesn’t make clear whether the people named have committed privately to Giuliani or even been approached to support him.

Revealed: Rudy’s ’08 battle plans [Daily News]

Feinberg Goes After Kravis… With Guns

BusinessWeek has a story this week about Cerberus chief Stephen Feinberg’s successful buyout of GMAC:

Wall Street has been buzzing over how the 46-year-old Feinberg snapped up a huge financial-services company for little more than its book value from Kravis, age 62. Kravis may someday look wise for having turned his back on a deal heavily laden with risk. But losing to Cerberus has to sting.

In other words, IN YOUR FACE, KRAVIS!
target.jpgBut not really. The BW piece is extremely flattering to Cerberus**, but the deal terms are fairly restrictive. There are risks associated with the leases and loans, an obligation to invest after tax profits for 5 years, and probably in the fine print somewhere, something about Feinberg’s firstborn.
Related but not: While everyone was paying attention to GMAC, Cerberus bought Bushmaster, LLC, which manufactures assault rifles. We’ve always thought that in addition to Osama Bin Laden shooting targets, there should be Harry Whittington shooting targets. But how about a Henry Kravis shooting target? Just for Cerebus employees!
Cerberus to KKR: Eat Our Dust!
**”sources close to Cerberus” = Stephen Feinberg?