Breakingviews

How does a $31 bln mega-LBO become an $18 mln IPO?

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

How does a $31 billion mega-buyout dwindle to an $18 million initial public offering? What sounds like a gambling tragedy is the perplexing, yet true, story of the leveraged buyout of Caesars Entertainment – formerly Harrah’s Entertainment – by TPG and Apollo. Co-investors are in such a hurry to get out, they’re actually paying to exit.

The 2006 LBO, combined with a boom in Las Vegas casino construction, left Caesars too heavily indebted when tourism turned down. Swapping some debt for equity helped, but the company still has $18.5 billion in net debt. It had $1.8 billion in EBITDA over the past 12 months, only roughly equal to its interest expense. That makes it hard to spruce up casinos or build new ones.

April Fool’s comes early to comical M&A market

By Robert Cyran

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

It’s hard not to smirk at the latest transaction to shoot out of the M&A pipeline. America’s largest title insurer, the $4 billion Fidelity National Financial, is buying O’Charley’s, an owner of U.S. steak joints. Not only is it a deal ripe for bad jokes about a combination plate of mortgage deeds and French fries. It also defies all convention.

Expect Mark Zuckerberg to morph into Murdoch

By Rob Cox

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

How long before Mark Zuckerberg morphs into Rupert Murdoch? It may take decades or, given the accelerated lifecycles of Internet companies, just a few years. At some point, though, the overwhelming control investors are ceding to the 27-year old Facebook wunderkind is bound to stop being in their best interest.

Facebook needn’t envy life inside China firewall

By Wei Gu

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

Befriending China’s 500 million Internet users sounds like a must if Facebook is to justify its hefty valuation. The world’s largest social network is seeking up to 27 times its 2011 revenue in an initial public offering in New York. But the China-shaped hole in its business model might not be worth filling. Google and Groupon have shown it’s hard to succeed inside the Great Firewall.

Super Bowl may settle buy-side/sell-side rivalry

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

Sunday’s Super Bowl XLVI clash will reflect another great rivalry – between Wall Street’s sell-side banks and the buy-side investors of Boston’s mutual fund industry. The New England Patriots will be seeking retribution for a loss to the New York Giants in the same season finale just four years ago. The bragging rights this year could help the two groups of financiers decide, Gordon Gekko style, whose form of greed prevails.

Facebook’s biggest risk lies in palm of your hand

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

What’s the biggest risk facing Facebook? Hint: it may be in the palm of your hand. Half of the social network’s 845 million users now access the site through their cellphones, and that number is surging. Problem is Facebook currently receives virtually no display advertising revenue from small screens. The rapid shift to mobile Internet usage could be Mark Zuckerberg’s biggest threat – and he knows it.

Glencore-Xstrata would be big, and perhaps better

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

A merger of Glencore and Xstrata might sound like a natural. The two companies are about the same size, are in roughly the same businesses and have an equity tie – the Swiss-headquartered trader-miner Glencore owns 34 percent of the Swiss-headquartered miner Xstrata. They both have outspoken and ambitious South African chief executives, Ivan Glasenberg at Glencore and Mick Davis at Xstrata.

Goldman shooting its messenger may bring good news

By Antony Currie

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

Wall Street has lost one of its most entertaining characters. Goldman Sachs is dispensing with Lucas van Praag, its silver-tongued PR boss after 12 years. His colorful ripostes to the press often turned a tin ear to public sentiment. But they also reflected Goldman’s culture. Hiring a new mouthpiece could signal more changes are on the way.

Too much success is priced into Facebook’s IPO

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

Investors will have to like Facebook a lot to justify a potential $100 billion valuation. Essentially, growth and margins would both need to track Google’s trajectory to justify a price tag so high.

Facebook IPO lays bare Wall Street’s laggards

By Antony Currie

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

Morgan Stanley can now officially lord Facebook over its Wall Street rivals. The potentially $100 billion social network’s initial public offering prospectus confirms that arch-rival Goldman Sachs lost the top spot in one of the most widely anticipated stock offerings in a generation. That’s a comedown after it botched an investment round for Facebook, but Goldman still remains on the roster of underwriters, along with JPMorgan, Bank of America Merrill Lynch, Barclays and Allen & Co. The bigger embarrassment is for those who didn’t make the cut.