Blackstone set for IPO listing as Alliance deal gets antitrust nod

13 Jun 2007


Mumbai: US antitrust authorities have approved plans by Blackstone Group LP to buy Alliance Data Systems Corp.for $6.76 billion even as the equity firm is planning to go public with an IPO listing on the bourses.

Officials have completed their investigation of the deal without taking action, the US federal trade commission said in a notice.

Dallas-based Alliance Data is a business services company providing transaction, credit and marketing services, an industry that has attracted heavy interest from private equity buyers lately.

The Blackstone Group has, meanwhile, announced the appointment of Joan Solotar as senior managing director – public markets. Solotar will join Blackstone from Bank of America Securities where she has been a managing director and director of equity research.

Solotar will be responsible for managing Blackstone''s relationships with its public investors, industry analysts and the general investment community. She will also guide the firm on analysing strategic development opportunities and will advise Blackstone fund portfolio companies on their positioning in the public equity markets. Relations with investors in Blackstone''s investment funds will continue to be managed by Blackstone ''s senior managing director, Kenneth C. Whitney.

According to the plan, one of the two founders of Blackstone Group, Stephen A. Schwarzman, 60, will cash out a maximum of $677.2 million from the offering, and his remaining 24 per cent stake in Blackstone will be worth $7.7 billion if the shares are offered at $30, the midpoint of the range of $29 to $31 the company has cited (if they trade up, he and others will be worth even more).

Peter G. Peterson, 81, the other partner, will put his $1.9 billion payoff into a charitable trust, but will still control 4 per cent of the company, worth about $1.3 billion.

Schwarzman earned $398.3 million last year while Peterson earned $212.9 million.

The twop had started the Blackstone Group with $400,000 in 1985. On June 11, the firm updated its prospectus and included the information everyone on Wall Street has been waiting for: how much money the principals will make in the offering.

Blackstone plans to sell 133.3 million shares in the offering, which could come late next week. At the midpoint, the firm would raise $3.8 billion after underwriting costs. Underwriters are expected to sell the overallotment of 20 million shares because of the high demand. In addition, the Chinese State Investment Company will pay $3 billion for a nonvoting stake.

Other executives listed in the filing include Hamilton E. James, the firm''s president, who will get a maximum of $188.5 million and own 4.9 per cent; J. Tomilson Hill, who runs the hedge fund business and who will make $22.1 million and own 1.6 per cent; and Michael A. Puglisi, the chief financial officer, who will make $13.4 million and own 0.7 per cent. James made $97.3 million last year, Hill $22.1 million and Puglisi $17.4 million.

The Blackstone Group is a leading global alternative asset manager and provider of financial advisory services. The Blackstone Group is one of the largest independent alternative asset managers in the world. Its alternative asset management businesses include the management of corporate private equity funds, real estate opportunity funds, funds of hedge funds, mezzanine funds, senior debt funds, proprietary hedge funds and closed-end mutual funds. The Blackstone Group also provides various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services.

According to the filing, the Blackstone Group, which has 770 employees and manages $88.4 billion in private equity funds and hedge funds, will have a market capitalisation of about $32.4 billion. In contrast, the investment bank Lehman Brothers , which has more than 27,000 employees and a far more diversified business, is worth about $40 billion (Lehman is one of the underwriters).

Blackstone''s planned initial offering is seeking to capitalize on a tidal wave of demand from pension funds, foundations and endowments and wealthy individuals who are looking for alternative assets, specifically private equity, hedge funds and real estate funds.

Blackstone announced that it was going public in March and is one of the biggest players in private equity, along with Kohlberg Kravis Roberts and, which all raised $20 billion funds recently.

Blackstone''s decision to go public follows that of the Fortress Investment Group, a diversified alternative asset manager that went public in February at $18.50. The stock closed at $31 on its first day of trading and generated widespread interest among hedge fund and private equity firms contemplating a similar move. It closed at $25.73 on June11.

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