Corporate activism has also dominated the headlines - both for its high returns and high-profile activities. Experienced managers, including Dan Loeb of Third Point Management, Bill Ackman of Pershing Square Capital Management, and Robert Chapman of Chapman Capital were there to explain how it is done.
Last year Franz Munterfering, who then chaired the country's Social Democratic Party, compared private equity firms to locusts that "fall upon companies...devour them and move on." The comment was prompted by the news that The Blackstone Group pocketed US$3.5 billion after it had acquired Celanese, a German chemical company, and floated it on the New York Stock Exchange.
On something of a debugging mission, heavy p.e. hitters Henry Kravis of Kohlberg Kravis Roberts, Stephan Schwarzman of The Blackstone Group, David Rubenstein of The Carlyle Group, David Bonderman of Texas Pacific Group and Leon Black of Apollo Management have descended on the annual Super Return, a private equity conference, in Frankfurt, The New York Post reports.
P&G’s awkward takeover of Wella is a proving to be a lesson in the pitfalls of German takeover law. Having bought a controlling interest in Wella in February 2003, P&G didn’t seek the legal authority to push through decisions—under a Domination and Profit Transfer Agreement—until June 2004.
Purchase Price Allocation - fördelning av köpeskilling vid förvärv
De nya reglerna innebär att den tidigare behandlingen av goodwill ersätts av ett krav på att fördela övervärden som uppkommer i samband med förvärvet på identifierbara immateriella tillgångar såsom exempelvis varumärken, orderstockar och patenträttigheter, vilka skall skrivas av. Endast övervärden som inte kan hänföras till sådana identifierbara tillgångar kan klassificeras som goodwill.
Celanese AG
Buyer: Blackstone
Dealrunner: Blackstone Senior MD Chinh Chu
Leverage: 75% debt -- $650m equity
Return: Bought for $2bn, worth $bn a year later
IRR: Realized 400% -- Realized and unrealized 800% -- $650m to 4$bn in 12 months
November 2004 - Blackstone Crystal Holdings Capital Partners (Cayman) IV Ltd. (the controlling legal entity of Celanese subsequent to the successful takeover of Celanese AG by Blackstone) changes its name to Celanese Corporation. Celanese Corp. is headquartered in Dallas, Texas, and is the parent company of Celanese’s North American operations and Celanese AG. Henceforth Celanese AG is the holding company for Celanese’s European operations and most of its Asian activities.
The offer values Celanese's stock at about $2 billion. Another $550 million in Celanese debt and $1.3 billion in commitments to retirees brings the deal to $3.8 billion.
On a conference call between Celanese executives and analysts, one investment banker told Celanese: "I am going to voice my displeasure about the price. It's ridiculous. We're in the beginning of an upturn in the business cycle for your type of company, and I'm sure two years from now we'll be asked to buy this back at a much higher price in an IPO."
Analysts and institutional investors also badgered Celanese about whether the sale was the result of a competitive bidding process. Celanese executives said they had been in discussions with another potential buyer before Blackstone.
The German chemicals company, the world's largest producer of acetyl products used in paints, coatings and lubricants, was spun off by parent Hoechst AG (now Sanofi-Aventis) in 1999. Despite 2001 sales of about $4 billion and $509 million of Ebitda, its stock was perennially undervalued, and every private equity firm that approached it was rebuffed by management or discouraged by its unique circumstance of having dual listings in the U.S. and Germany.
Still, with 84%, Blackstone could get access to Celanese's cash flow on which to issue all the debt, equity and IPO, creating a complicated, superholding structure on top of the Germany entity. "I've never seen anything which involved this much financial engineering in the chemicals sector, and I've been in the business since the early '90s," Bradley recalls.
Nonetheless, investors, already worried about Blackstone's quick flip on its $650 million LBO investment, criticized Celanese's IPO pricing, claiming it was overvalued.
But even with a price cut, Blackstone took out $800 million from the IPO. That's after recouping a $500 million dividend from a refinancing in August. Its remaining stake is valued at roughly $1.45 billion.
Chu, a native of Vietnam, helped run not only a large portion of the Fukutaki deal, camping out in a hotel in Tokyo for about a year, but also in many of Blackstone's subsequent forays into the region. He lived in Hong Kong in the mid-'90s until the Asian financial crisis unfolded in 1997.
Now 38, he is one of Blackstone's younger senior managing directors. Chu attributes his rapid ascent in the organization in part to the firm's entrepreneurial environment. Going straight to investment banking with Salomon Brothers after graduating from the University of Buffalo with a B.S. in Finance, Chu joined Blackstone in 1990 because he thought he would have a better chance at learning directly from the more experienced senior partners in a boutique.
The holdout shareholders were hedge funds playing a high-risk game. None wanted the deal to fall through -- that would have caused Celanese shares to plunge. But the hedge fund managers hoped to be among the 25% who withheld their approval. Then, as minority stockholders, they could exploit Germany's arcane takeover law to demand a higher price for their shares.
In February, 2002, Blackstone approached Celanese on behalf of a third party -- General Electric Co. (GE ), according to industry sources -- that was interested in Celanese's plastics unit. Later, GE backed out, and Blackstone decided to pursue the purchase on its own.
U.S. hedge fund Paulson & Co. Paulson contends Blackstone got Celanese on the cheap because of a cozy relationship with Celanese's advisers at Goldman Sachs.
The annual meeting in Frankfurt lasted 24 hours over two days. A Paulson rep spoke for 90 minutes, calling Goldman "biased" and getting interrupted half a dozen times by German shareholders yelling at the directors--"Crooks!" "Thieves!" One speechmaker dubbed Blackstone and Goldman "Locusts!"
Contrast that with another recent chemical IPO: Celanese (nyse: CE - news - people ), a maker of industrial chemicals, which had a much rougher time getting off the ground in January. Celanese had been taken private in December 2003 for $3 billion by the Blackstone Group, which put up $650 million in equity. As a result of the Blackstone buyout, Celanese was loaded down with $3.2 billion in debt.
Eleven months later, Blackstone decided to take advantage of an opening in the IPO window. Its bankers announced that it would be offering 50 million shares to the public at $19 to $21 per share, in order to raise $1 billion. They stated that virtually all of the $1.08 billion raised would be paid to Blackstone. That was in addition to a $500 million Celanese junk bond offering, the proceeds of which also went to Blackstone and paid back most of the Blackstone Group's initial equity investment. A spokesman for the company says, "We are still in our quiet period and can't comment on the IPO."
