Luisa Beltran
BP Stock is now a buy: Shares of BP, now subject to takeover and bankruptcy rumors, are up. And only a few companies, Shell, Exxon Mobil or Chevron, could take it on. So it's a buy now. Who wants Wendy's: Shares of the fast food chain pop Friday on rumors that it could be taken over. Sophisticated Investors not so smart: Investors of Merrill Lynch-issued CDOs claims they were bright enough to read the fine print.
Reaction to the Gulf oil spill has been intense. Pictures of oil-covered seagulls and dead fish have made BP the most hated company in the U.S. But little attention has been paid to the higher energy costs that will likely be the disaster's broadest economic consequence. The Gulf spill will make energy production, particularly off-shore drilling, more regulated. This will make it more expensive for investment firms to look for energy and to produce it. “Consumers will bear the costs of the regulations,” said Dan Revers, managing partner of ArcLight Capital, which invests in oil, gas and coal power. Kenneth Hersh, CEO of NGP Energy Capital Management, believes it’s naïve to think there will be no investor ramification. “Both the amount of capital available for investment as well as returns will suffer in the short to medium term,” he said, adding that the recent moratorium on off-shore drilling has put off-shore investments in “total jeopardy.”
Not many M&A deals make me sad, but the Newsweek sale brings tears. I grew up on Newsweek and its jealous sister Time magazine (yes, my family got both, plus U.S. News & World Report). I remember Newsweek’s coverage of Princess Diana’s death in 1997, and comparing O.J. Simpson's mugshots on Newsweek (normal) and Time (darker) And O.J. Simpson’s famous 1994 mugshot on Newsweek that appeared darker on Time? Priceless. And then there was Sarah Palin in her running gear... Memories... But the magazine, which seems to lose heft with each passing issue, has suffered. Advertising revenue plunged 38% in first quarter. When the Washington Post announced in early May that they would be exploring a sale of Newsweek, no one was shocked.
In the deal world, perception is everything. Last year, several banks became sellers as they looked to auction off asset management units to raise cash. But in certain cases, private equity firms weren’t invited. For example, consider Bank of America’s sale of Columbia Management Group. BofA launched the auction of Columbia in the first quarter of 2009, but froze out private equity bidders due to concerns that LBO firms wouldn't be able to find enough "L."
Sun Capital Partners, a distressed buyer with roughly $8 billion of equity capital under management, suffered setbacks during 2008 to 2009 when several of its portfolio companies filed for bankruptcy. One year later, Sun Capital is apparently back. Marc Leder, Sun Capital’s co-CEO, recently spoke by phone with peHUB. How have things changed for Sun this year compared to 2009?
I don’t think we’ve ever been doing better. In terms of portfolio performance, our deal pipeline and exits, I don’t think everything has been as good as it is today. We’ve completed 15 to 20 deals so far this year and we’re expecting to complete 30 by the end of 2010. How many your portfolio companies have filed for bankruptcy?
I don’t think we’ve had a single one in the last year. Don’t know about last year [in 2009]. Three we put into bankruptcy ourselves. We already owned them and used the bankruptcy process to eliminate certain problems. We have no companies still in bankruptcy. We haven’t had a bankruptcy or a problem for over a year. We own over 80 companies right now. That’s more than a typical private equity firm. If you look at other firms, they have more bankruptcies as a percentage of their portfolio than we do. We had a few during a short period of time and we got a bunch of press on it.
The Sound of Wall Street Weeping: Banker pay plunged more in 2009 than in any other year for the past eight decades. Raymond James: Don't work for them if you get sick. BP's Gulf Disaster gets worse: As if those pictures of dead and oil-drenched seagulls isn't bad enough, the oil disaster could put a damper on dealmaking. Banks for sale: Moelis Capital and Angelo Gordon looking for deals in Georgia, Texas Neuberger's IPO plans: Just two years after buying off Lehman, Neuberger Berman is heading toward an IPO.
Hold onto your mutual funds. The asset management sector might soon play host to another M&A deal, as sources say that Lovell Minnick Partners is thinking about selling ALPS Holdings. For the unfamiliar, ALPS Holdings is a third-party administrator that provides back office services like distribution and accounting to exchange-traded funds and mutual funds. Lovell MInnick bought a majority stake via a recap in 2005, and has since helped ALPS make a pair of bolt-on acquisitions: Hedge fund administrator Price Meadows in 2008, and the the Liberty All-Star closed-end fund business from Bank of America in 2006. Five years is the typical hold time for Lovell Minnick, and sources say that the firm is open to overtures (although it hasn't yet hired a banker). “ALPS will certainly sell but only when the price is right,” one private equity executive tells peHUB.
RadioShack, the electronics retailer that sells tape recorders and phone extensions, is apparently getting lots of interest from the private equity community. At first blush, I was surprised that RadioShack still exists, let alone that it's up for sale. But it seems that more than a few folks still visit “The Shack,” given its 4,000+ retail locations and 555 kiosks. Goldman Sachs is running the auction, with suitors reported to include The Blackstone Group Bain Capital and TPG Capital. A sale could be valued at more than $3 billion. So why such interest in RadioShack? It’s the cash, stupid. RadioShack has is sitting on $872 million in net cash, says Anthony Chukumba, senior research analyst for BB&T Capital Markets.