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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.

By publishing its results on the same day as Goldman Sachs and Morgan Stanley, the divergence in fortunes was hard to miss. Blackstone’s economic net income increased by 30 percent and the amount of cash available to pay out to shareholders surged by 24 percent. Assets under management also climbed by 25 percent to $272 billion. While the two big investment banks exceeded the expectations of analysts, neither hit new highs the way Blackstone did.

The constraints on big financial institutions keep taking their toll. Even JPMorgan boss Jamie Dimon, after years of putting up a fight against increased scrutiny, seemed resigned to the stricter new regime in his letter to shareholders this month. Losing a protégé and one of his top lieutenants, Mike Cavanagh, to Carlyle Group in March was another indication of how the less regulated world of private equity is stealing a march on its too-big-to-fail counterparts.

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

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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

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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.

from Breakingviews:

Lego clan beats Goldman in $1.5 bln ISS float

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By Quentin Webb

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

Lego has trumped Goldman Sachs in the $1.5 billion flotation of cleaning giant ISS. The Danish toymaker’s owners, the Kirk Kristiansen family, made a minority investment in the group in 2012 to help cut its debt. ISS’s successful stock-market debut has brought a sparkling return for the Lego latecomers, leaving owners EQT and Goldman in the dust.

from Breakingviews:

Blackstone bets Versace can go up a few sizes

By Quentin Webb

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

Blackstone is betting Versace can go up a few sizes. The U.S. private equity firm has bought 20 percent of the Italian fashion house at a 1 billion-euro valuation. This is a wager that Versace’s lightweight business can grow to fit its extra-large brand.

from Alison Frankel:

Will old M&A class settlements tank private equity collusion case?

In his latest update on class actions filed in the wake of deal announcements, Dealbook's Deal Professor Steven Davidoff (whose day job is teaching law at Ohio State) found that in 2013, shareholder suits followed almost all - 97.5 percent - deals of more $100 million. That's not quite as inevitable as night following day but it's getting there, especially when you consider that the rate of post-M&A class action filings is up from 91.7 percent in 2012 and 39.3 percent in 2005. Companies grumble all the time that these suits are nothing more than a "deal tax," a sort of legal extortion racket by plaintiffs lawyers whose true motive is not enhancing shareholder value but skimming millions in fees for holding up transactions with silly claims.

Regardless of the merits of that argument, I'm sure that when shareholders in seven companies acquired by private equity funds in the early 2000s settled M&A class actions, they never imagined that those settlements could come back and complicate a completely different case. Nor could the settling defendants have imagined that their deal-tax settlements could very well shield them from facing an antitrust collusion class action and its attendant treble damages.

from Breakingviews:

BlackRock may fancy revisiting Blackstone heritage

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

Is it time for BlackRock to revisit its Blackstone heritage? Larry Fink’s investment company manages $4.3 trillion while Steve Schwarzman’s, with only 6 percent of the assets, probably generated the same amount of profit last year. That has to make private equity tempting for BlackRock. It could one day buy a firm like, say, TPG.

from Ben Walsh:

How Blackstone made $8.5 billion from Hilton’s $6 billion increase in value

In July 2007, Blackstone took Hilton private for $26 billion. On Monday, Hilton IPO’d at $20 a share. Using the same measure to value the company as when Blackstone acquired it, Hilton’s enterprise value is now $32 billion. That’s $6 billion above Blackstone’s takeover price.So it’s a bit confusing to read that Blackstone has an made an $8.5 billion profit on its investment in Hilton.

Here’s how Blackstone, in Matt Levine’s words, “made more on Hilton, in dollar terms, than Hilton has made itself”.

from Breakingviews:

DSM’s pill deal oddly blends carve-out and LBO

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

DSM has come up with an odd formulation to solve its drug-production headache. The world’s biggest vitamin maker is merging its DSM Pharmaceutical Products (DPP) business with a private equity-backed rival. DPP was a subscale distraction. But the precise benefits of the $2.6 billion tie-up are hard to fathom. And DSM cedes control of the unit without reducing its economic exposure.

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