Archive

Reuters blog archive

from Breakingviews:

Supercharged IPO tax spoils need splitting

By Robert Cyran

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Initial public offerings that generate extra tax spoils are in the spotlight. KKR and Silver Lake are listing web hosting company GoDaddy, three years after buying it for $2.25 billion. The use of what’s called an “Up-C” structure means the company will float with big potential tax deductions on its books. In GoDaddy’s case, investors and sponsors will both benefit. But other IPOs with Up-Cs have seen more dubious arrangements.

The basic idea of Up-C structures, which bankers say are slowly proliferating, is that a partnership like the one used to control GoDaddy sells assets to a new company which the partner-sponsors and IPO investors own – call it PubCo. Because the assets are sold at a higher price than their cost, the difference becomes a combination of goodwill and intangible assets on PubCo’s books. These items can be amortized over time, a deduction from profit that reduces taxable income.

When the assets are sold to PubCo, the partners take a tax hit on their capital gains. Partly to cover that, GoDaddy is using one typical split of the benefits, 85 percent for sponsors and 15 percent for new investors, achieved through contractual payments as the tax deductions happen. Theoretically, everyone ends up better off because companies mostly pay higher rates of tax on income than pre-IPO partners do on the gains they make.

from Breakingviews:

Doubling down on First Data may be KKR’s best bet

By Jeffrey Goldfarb and Richard Beales

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Doubling down on First Data may have been KKR’s best bet. The extra cash just injected into the payment processor means the $29 billion acquisition has now absorbed over $10 billion of equity, one of the highest sums ever for a leveraged buyout. A Breakingviews analysis, however, suggests that a return finally beckons.

from Breakingviews:

Henry Kravis cultivates private equity perennials

By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Henry Kravis is sowing the seeds of private equity perennials. U.S. buyout shops like his are selling companies to each other at a breakneck pace. It’s easy to be skeptical about these so-called secondaries. But KKR’s $1.6 billion acquisition of landscaper Brickman Group may turn out to be an example of how such deals can flourish.

from Breakingviews:

Take hedge fund exuberance with grain of SALT

By Jeff Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A wave of hedge fund exuberance should be taken with a grain of SALT. At SkyBridge Capital’s so-named Las Vegas confab this week, a near-unanimous confidence emerged amid moans about conference fatigue. Long-anticipated opportunities in M&A, bargains in Europe and collapsing correlations have finally arrived all at once, if some of the world’s richest investors are to be believed. The consensus itself may, however, give reason for pause.

from Breakingviews:

Hedge fund customers’ yachts washing further away

By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Hedge fund customers’ yachts are washing further away. The flood of money – now $2.7 trillion – in hedge funds has squashed returns below public stock markets. Private equity doesn’t seem to be doing much better. Investors beware.

from Breakingviews:

WH Group’s pulled pork IPO is least bad outcome

By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

This little piggy isn’t going to the market after all. WH Group has scrapped its Hong Kong listing after investors turned their noses up at its valuation. The Chinese pork producer had already more than halved the size of the fundraising to as little as $1.3 billion. A delay which gives the company formerly known as Shuanghui more time to integrate its U.S. subsidiary Smithfield is probably the least bad outcome.

from Breakingviews:

Blackstone leaves a trail of money to follow

By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Blackstone is leaving quite the trail of money to follow. The buyout firm led by Steve Schwarzman generated record earnings in the first quarter, in stark contrast to the slog happening on Wall Street. It’s the latest sign of a power shift from banks to shadow banks, broadly defined. Having confined big lenders, watchdogs could pick up the scent on Blackstone and its ilk.

from Felix Salmon:

Private equity math, Nuveen edition

The WSJ has the details of today’s big asset-management news: TIAA-CREF is buying Nuveen Investments for $6.25 billion.

The sale marks the end of an ill-fated acquisition by private equity shop Madison Dearborn in 2007, just before everything fell apart. Madison Dearborn paid a total of $5.75 billion for Nuveen — a premium of 20% to its market value. As the WSJ says, the buyers used $2.7 billion of their own money to pay for Nuveen, and then borrowed the other $3.05 billion. But then things got tough:

from Breakingviews:

Dimon deputy epitomizes succession of all sorts

By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Jamie Dimon’s loss of a top deputy on Tuesday epitomizes succession issues of all sorts. Key lieutenant Mike Cavanagh has given up a shot at following his mentor atop JPMorgan for one helping run private equity firm Carlyle Group. The move shakes up leadership plans for both companies and also underscores a bigger shift in finance.

from Breakingviews:

Pricey Nets LBO gives banks big payment to process

By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Private equity has prospered investing in essential modern infrastructure like cable networks. The $3 billion-plus sale of Nets in Denmark shows buyout firms are just as keen to buy into the world’s financial plumbing. Advent International and Bain Capital already own WorldPay, a big payments processor which Royal Bank of Scotland sold as penance for receiving state aid. Now the duo have partnered with Danish pension giant ATP to buy Nets, WorldPay’s Nordic equivalent.

  •