Two new Belles of the Billionaire Ball

Footbinding[2].JPG The old Tang Dynasty (618-907) may have been responsible for starting the practice of foot binding, but the new Tang Dynasty, 3,828 retail outlets strong, is responsible for binding women’s feet in pure comfort.
Tang Yu, the chairman of Belle International Holdings, and daughter Tang Ming Wai are the world’s latest paper billionaires, controlling 34% ($2.9bn worth) of the leading retailer of ladies footwear in China. Belle began trading yesterday on the Hong Kong exchange. Shares of the company shot up by almost a third, giving Belle a $8.6bn market cap and culminating an IPO process that was 500 times oversubscribed. The IPO brings the number of billionaires in the world closer to that 1,000 mark (from 946 last year).
Even though gals are not as shoe crazy in China (they only purchase 2.3 pairs of shoes a year on the Mainlaind, opposed to the 7.3 pairs a year of furry, pointy or jellied abominations American girls “need”), Belle International does considerable business, offering 300-400 new styles a year in several brands commanding prices up to $260. Spending $260 for shoes in China has to be the equivalent of something insane in the US with the lower cost of everything over there.
Tang Yu is seen as a visionary of sorts, or at least one of the first people who realized that Chinese women would not always be wearing tightly bound ropes and cloths on their feet, kidnapped into villages (most sandals are built in-house) or aborted. Eventually these women, sans deformed lower extremities, would need shoes. Tang got a late start into the shoe game, starting in 1981 at the age of 46. His daughter went to UT-Austin with a degree in business administration, proving that even Longhorns can be billionaires if they just move to China.
Belle IPO Makes Tangs Billionaires [Forbes]

Blackstone Keeps Growing and Growing

blackstoneipoprospectussecfilingrevisedtitlesmall.JPGJust because some of Blackstone’s managed funds had a tougher first quarter this year than last year doesn’t mean the private equity firm has slowed down its growth. The most recent filing suggests that the firm’s assets under management grew by nearly $10 billion between March 1 and May 1, from $78.7 billion to $88.4 billion. That would mean that Blackstone tacked on an additional $163,934,426.23 each day. If the last twenty-one days have followed the pattern, Blackstone would now have over $90 billion under management.
Despite the lower rate of return earned by its funds of funds, one of its hedge funds and its mutual funds, the alternative asset fund management business is clearly driving this growth of assets under management. The bulk of the additional $9.7 billion came from this area—which grew from $29.9 billion on March 1 to $35.3 billion on May 1.
Blackstone has also been adding finance professionals, tacking on five more “investment and advisory professionals” since March. The total headcount of finance professionals now stands at 340. With $88.4 billion under management, that breaks down to around $260 million per man or woman.

Blackstone’s Fund Management Biz Slips

blackstoneipoprospectussecfilingrevisedtitlesmall.JPGBlackstone’s fund management business is growing but its performance slipped a bit over the past year, the firm’s most recent filing with the Securities and Exchange Commission suggests. The revised IPO prospectus filed by Blackstone on Monday said the firm had $35.3 billion in its funds of hedge funds and hedge funds, nearly $6 billion more than it said it had in March. But it also shows modestly lower returns in several categories of funds.
The new prospectus provides a rare glimpse into something like a quarterly earnings statement for Blackstone by revealing changes in the past few months. Until now, only Blackstone the wealthy individual and institutional investors in the firm’s funds have received reports on their investments. But the public has not been privy to such detailed information. After the IPO, Blackstone will have to begin filing quarterly reports with the SEC.
The new information came to light because the updated prospectus dates uses different dates to measure the performance of the funds than the earlier prospectus. The original prospectus measured annual returns from January 2006 through December 2006. The new prospectus measures the returns from April 2006 through March 2007. This allows the public to see how the performance of the funds has changed and may even provide a glimpse at their prospects. In most areas, the returns have declined. This suggests that returns in the quarter beginning January 2007 were lower than returns from the first quarter of the prior year.
[Details on the changing returns of Blackstone’s funds after the jump.]

Read more »

Blackstone IPO: A Bigger Offering But A Smaller Firm?

blackstoneipoblackstoneipoblackstoneipo.jpgThe Blackstone public offering is back in the news. The private equity firm today released a revised prospectus in a filing with the Securities and Exchange Commission, revealing for the first time the price it expects its shares to fetch at the initial public offering—between $29 and $31 dollars. Blackstone also said it expects to sell 133.3 million units. (The revised prospectus also revealed that Blackstone will be getting another infusion of cash from a different equity sale—the sale of limited partnership shares to China for $3 billion. More on that later.)
At the mid-range of the expected price—$30 a share—the offering would fetch $4 billion, which the number everyone was talking about when the offering was first announced. In the original prospectus, DealBook reminds us. Blackstone had estimated that $4 billion was the upper-end of what it expected from the IPO. Today’s pricing suggests that Blackstone might get as much as seven hundred and fifty million more than that, for a total of $4.75 billion.
DealBook points out that while the estimated share price indicates the IPO might fetch more than expected, the new prospectus also suggests that the firm might be valued lower than the $40 billion often cited in reports on the IPO.

The proceeds may be getting larger, but the new filing also suggested that Blackstone won’t quite reach the $40 billion valuation that was previously reported. Based on the firm’s own estimate of 1.085 billion units outstanding after the offering and a per-share price of $31 — the high end of the expected range — that would value the firm at about $33.6 billion.
By way of comparison, that figure would make Blackstone larger than securities firm Bear Stearns, which has a market capitalization of about $21.9 billion, but smaller than Lehman Brothers, whose market cap is about $38.9 billion.

Eddy Elfenbein points to another comparable—Fortress Investment Group, which sold shares in an IPO earlier this year. At the high end of the price range, Blackstone would be valued at about three times Fortress, Elfenbein writes on his Crossing Wall Street blog. Of course, that might be comparing apples to oranges. Fortress has a much higher market capitalization than its IPO price would have suggested in advance—shares traded up as much as 68% as soon as they hit the public exchanges. It’s possible Blackstone’s shares saw a similar rise on the first day of trading. “Of course, if Blackstone’s shares rise after the I.P.O., its market cap could easily top the $40 billion mark,” DealBook writes in its initial reading of the new prospectus.
There will no doubt be lots more on this story once everyone has a chance to read through the new prospectus.
Blackstone Seeks Up to $7.75 Billion in Stock Sales [Bloomberg]
Blacktone Prospectus [Sec.gov]
Blackstone I.P.O. Could Reach $4.75 Billion [DealBook]
The Blackstone IPO [Crossing Wall Street]

  • 26 Apr 2007 at 10:36 AM
  • Apollo

Does DealBook Owe CNBC An Apology?

At the beginning of the month a dispute broke out between CNBC’s Charlie Gasparino and DealBook’s Andrew Ross Sorkin. Gasparino had reported that Apollo was considering going public, following the footsteps of the Blackstone Group and the map laid out by Fortress Investment Group into the public markets. Sorkin declared that CNBC had simply got the story wrong. “It’s not true. Apollo is not going public next month, nor the month after that — and probably not the month after that either,” Sorkin wrote.
As the story progressed it seemed that Sorkin was at least half-right. Reports were published indicating that Apollo was not yet getting ready for a public offering of shares. It was said to be considering a private offering of equity instead. Since these privately sold shares would probably come complete with registration rights that would allow them to be sold on the public markets eventually, the CNBC story didn’t look quite as far off as Sorkin’s item made it seem.
But the reports coming out from the Milken Institute’s annual Global Conference indicate that Sorkin may have overshot in his takedown of Gasparino’s report. Apollo founder Leon Black stopped short of commenting on his firm’s plans for an equity offering, but it seems clear they are at least considering a public offering.
Here’s how Business Week describes Black’s remarks at the conference:

But Black did build his case for public ownership of the businesses. He said publicly traded shares would allow him to retain top managers and recruit new ones by offering them stock in the firm. He also said such an offering would give him currency to acquire other, smaller firms. One of the ways Black said he’s been able to achieve superior returns was by hiring investment managers with experience in specific industries. He said he’d like to expand that expertise, noting that health care and energy were two areas in which his firm was weak.

Does that sound like someone who isn’t considering a public offering?

The Predator’s New Ball
[Business Week]

  • 23 Apr 2007 at 10:48 AM
  • IPO

China’s new richest person, courtesy of Country Garden

yang country garden.jpg As of last Friday, Asia has a new richest woman, and she’s completely alive. Yang Huiyan, the daughter of Yang Guoqiang, founder of Guangdong property developer Country Garden Holdings Co., is now worth more than twice the formerly living Nina Wang, who left her $4.2bn to feng shui proponent Chan Chun-cheun. Guoqiang gave his Country Garden shares to Huiyan in 2005, giving her around 60% ownership of the company worth about $9bn after Friday’s IPO. According to the extremely reliable and complete accounts in Chinese media, Guoqiang started out as a poor farmer in the city of Foshan. He moved to construction work and married a bricklayer. Then he moved to real estate in the early 1990s and grew a billion dollar corporation. It’s just that easy. We couldn’t find any pictures of Huiyan, so imagine her father, shown here, with a wig.
Country Garden raised $1.6bn in its IPO on the Hong Kong Stock Exchange, about as much as Google in 2004. Morgan Stanley and UBS were involved in the deal.
China Adds Billionaires With I.P.O. – [DealBook]
Woman tops rich list after IPO – [ChinaDaily]

Blackstone’s ‘Enron’ Accounting

blackstoneipoblackstoneipoblackstoneipo.jpgThe Blackstone Group’s accounting methods are under further scrutiny today. The Wall Street reported on the first page of it’s C section that Blackstone plans to book estimated future gains from investments as current revenues. Under the plans disclosed in the filings for its public offering, Blackstone would book the present value of fees it expects to receive on its investments at the time the investment is made. If the expected fees increased, the firm could book additional fees prior to the receipt of any actual revenue from the sale of the investment.
In some sense this accounting method will allow Blackstone to present the capital markets with a picture of itself that more closely resembles its own internal perspective. Private equity firms have made tremendous gains in recent years, in part because they have longer time-horizons than the average stock holder. By employing what accountants call “fair value” accounting, Blackstone hopes it will be able to meet market expectations for smooth current revenues while maintaining its traditionally longer term outlook.
But some look at this as gaming the system, and fear that Blackstone can use “fair value” accounting to deceive capital markets. One investment banker we spoke to called it “Back to the Future Accounting” because it allows the firm to capture gains from the future and bring them into the present, if only on paper.
The Wall Street Journal goes so far as to bring up the dreaded E-word: “This method once was used by many companies, most notably Enron Corp., and led accounting rule makers a few years back to ban firms from booking immediate gains from certain transactions that didn’t trade in active markets.” And just in case you miss the point, the Journal quotes three experts who disapprove of Blackstone’s accounting choice. Only one expert in favor of fair value accounting is quoted. (Although the paper notes that “fair value” is officially approved and that Blackstone refused to comment for the story.)
Blackstone Tests Fairness of Using ‘Fair Value’ Rule [Wall Street Journal]
Earlier on DealBreaker: Blackstone Delving Into Black-Scholes Book-Keeping [3.30.07]

  • 05 Apr 2007 at 9:01 AM
  • Apollo

Apollo Looks For A Private Placement

apollo-d.jpgIt’s the story that won’t stand still even long enough for a blog to report on it. Last night the Wall Street Journal’s Kate Kelly and Susan Pulliam reported that Apollo has retained Goldman Sachs and JP Morgan to explore a private placement of ten percent of it’s equity, possibly for as much as $1.5 billion.
Some highlights from the WSJ:
• If 10% of Apollo goes for $1.5 billion, Apollo founder stands to make a cool $750 million because he owns half the equity of the firm. [DealBreaker’s note: Damn it feels good to be Leon Black.]
• The private placement would allow Apollo to cash in some of the value of its equity while the market for private equity is still hot while avoiding hitting the public markets with private equity offering too close to the Blackstone IPO. [DealBreaker’s note: So Apollo avoids the risk of a public market slow-down before the IPO and pushes that onto the private purchasers? Great work if you can get it.]
• A private placement wouldn’t require immediate registration with the Securities and Exchange Commission and would postpone the need to make SEC compliant financial disclosures. [DealBreaker’s note: This means the deal could get done very, very quickly. Registration and compliant disclosure take time. Roadshows and financials for institutional investors—much easier to put together.]
• Despite all these details, it’s still not 100% that this thing will even happen.

[Editor’s note: Graphic is “Birth of Apollo.” Hopefully more pleasing to the eye than that Blackstone IPO thing we’ve been throwing around lately.]

Apollo Explores Sale of 10% Stake In a Private Deal [Wall Street Journal]
Equity Firm Is Seen Ready to Sell a Stake to Investors [New York Times]