So much for a Cerberus/United Rentals settlement.

A day after United Rental’s shares popped on hopes of a kiss-and-make-up with Cerberus, the firm’s legendary founder and CEO pretty much quashed such speculation. (Though Day One is likely to end without much punch, the idea of the ’secretive,’ ‘reclusive’ Stephen Feinberg appearing in public offered some nice excitement).

First off, just by appearing in court at the allotted time, Feinberg signaled to the market that a press release with “settlement” in the headline was hardly imminent. The judge on Monday allowed the court proceedings to wait a day on the assumption that some sort of new agreement was getting hashed out. Not to be.

Second, Feinberg reiterated the firm’s stance that they’re on the hook for a $100 million big ones and that’s it. Underscoring the lack of understanding between the two sides, Feinberg had the following response when asked by URI attorney Richard Bernstein whether he knew RAM had to ’specifically perform.’

Feinberg replied: “I’m not sure of the legal definition of specific performance.”

That response is symbolic of how messy the agreement has become, and points to how much worse it could get. 
Specific performance is the part of the agreement that says:

“The parties have agreed that they shall be entitled to seek an injunction to prevent breaches of the merger agreement and to be able to enforce specifically the terms and provisions of the merger agreement, in addition to any other remedy to which such party is entitled at law or in equity, including the covenants of Parent or Merger Sub that require Parent or Merger Sub” to and so on and so on.

In short, specific performance is what URI sees as its ace in the hole, as far as getting Cerberus to go through with the deal is concerned. According to URI, the clause says that not only does Cerberus not have the right to terminate the deal, but that URI can force the firm to complete it.

On debt financing for the deal, the fair-haired, moustachioed Feinberg said on Tuesday: “The banks were giving us a hard time and they weren’t happy with funding it. There were a number of issues and conditions that were there. They were nervous in this tough financial environment.”

(Image credit. Alison Smith)

Greg White, a partner at private equity firm Thomas H. Lee Partners, travels to the Gulf region four or five times per year to visit with limited partners. In an interview with Reuters on Tuesday, White offered his thoughts on where sovereign wealth funds have come from in the context of Western private equity firms, and where he sees them going.

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Monte Brem, one of the founding partners of StepStone LLC, spoke to Reuters at the Super Return Middle East private equity event in Dubai on Tuesday.

Brem, whose firm helps institutional investors allocate capital across the alternative asset class, offered his insights on the Gulf region.

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Steven Rattner, founding principle of media and communications focused private equity firm, Quadrangle Group, offered his insights into the Gulf region’s booming growth and its deepening relationship with the U.S. private equity industry.

Rattner attended and spoke at the Super Return private equity conference held in Dubai this week. The clip here is a Reuters interview with him on Tuesday.

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TPG Capital co-founder David Bonderman ended his private equity speech in Dubai on Tuesday with a story. The point of the story was to remind everyone how imperfect financial models are, and how lousy they are at peering into the future. The data may be great, but then doesn’t mean much when the so-called cataclysmic event shows up, and you’re unprepared.So here was Bonderman’s story. The tall, lanky buyout legend with stringy hair and a penchant for colorful socks, told a tale about a turkey.

“Here’s a story about a turkey,” he said, who every morning had corn for breakfast. The farmer would wake up, go out to the turkey, and feed it corn. This went on every day.

“The turkey had perfect data,” Bonderman noted.
 
Then, on the 1,000th day, which happened to coincide with Thanksgiving, the farmer strangled the turkey and had it for dinner.
 
What’s the connection?

“Financial models are perfect predictors of the past.”

(Picture: Reuters file)

From the man who gave us the line that George W. Bush was the worst president since Millard Fillmore (and “that’s an insult to Millard”), TPG co-founder had some gems during his speech at the Super Return Middle East private equity conference in Dubai. (See below for the full Millard Fillmore-George Bush quote). One of Bonderman’s main points during his speech on Tuesday is that he doesn’t buy into all the doom and gloom. Bonderman’s thoughts counter that of Ripplewood’s Tim Collins and others who are most certainly worried about the markets. But hey — that’s what makes a market, they say.

In comparing the difference in psychology across the world, mentioning places like Shanghai and Jakarta, Bonderman then referred to TPG’s home in New York and San Francisco, “where clinical depression has set in and the world appears to be coming to an end.” He goes on.

“The data is not quite as bad as the psychology and there’s a need for both capital influx into our financials and Prozac into our investors. Things are not as bad as they’re cracked up to be.”

Of course, this is coming from a private equity player, who can profit in good times and bad. As for that Millard Fillmore, here’s what he told the Wall Street Journal, reprinted in a St. Petersburg Times article:

“George is a really good guy personally. But his policies are really terrible. And he had an opportunity to bring the country together (which was his style in Texas). But for reasons only his psychiatrist would know, he’s chosen to do just the opposite as president. He’s turning out to be the worst president since Millard Fillmore, and that’s probably an insult to Millard Fillmore.”

(Image: David Bonderman at the 10th Milken Institute Global Conference in Beverly Hills, California on April 24. Reuters file.)

During his appearance this morning at the Super Return private equity conference in Dubai, Carlyle Group co-founder David Rubenstein started his speech with his standard poll. How many of you are GPs (general partners)? Limited partners (LPs)? Service providers? Job seekers?

He also asked how many think there will be a recession in the U.S. this year? Most of the 400 plus people in the audience raised their hands. How many of you think the stock market is headed for a deeper slide? More hands.

On the question of whether or not the room would trust a certain roster of people to manage their money, various pictures of buyout big wigs and other significant names appeared on the screen. No hands and much laughter for Vladamir Putin, and even more laughter for Hugo Chavez. Yes, much laughter and no hands for George W. Bush as well.

But surprisingly, in a room full of private equity people, only a handful of people raised their hand for presidential candidate Mitt Romney, who used to run Bain Capital. The guy ran a private equity firm, for goodness sakes.

When Rubenstein mentioned New York Mayor Michael Bloomberg, however, the laughter stopped, and hands went up. Maybe hizzoner would be wise to consider a presidential bid? Sure, the buyout industry has thrown a good amount of dough to Romney’s White House bid. But it looks the deep-pocketed private equity honchos have a great deal of trust in hizzoner, not to mention a great deal of interest in his company, Bloomberg LP. 

(Image: Republican presidential candidate Romney while waiting to deliver an address in College Station. Reuters file.) 

What does Ripplewood’s Tim Collins think about Abu Dhabi’s deal to buy a stake in Citigroup? Why should you care?

Flashback. Collins was a major force behind the buyout of Long-Term Credit Bank of Japan, the troubled bank that was reborn as Shinsei after Ripplewood and J.C. Flowers took it private. Collins knows a thing or two about not just bank investing, but doing it overseas.

In February 2004, Shinsei celebrated the $2.35 billion initial public offering of Shinsei. Investors in that deal would ultimately make around 7 times their initial investment, in what is widely viewed across the globe as one of the most profitable leveraged buyouts ever.

So back to Abu Dhabi and Citigroup.

From Abu Dhabi’s stand point, Collins, without flinching, said the deal was “brilliant.” Plain and simple. He was talking at the Super Return Middle East private equity event here in Dubai.

“I think that was a brilliant investment, the structure was brilliant. I wish we were smart enough to do it.” Of course, it helps when Abu Dhabi’s investment fund has hundreds of billions of dollars to spend.

By structure, Collins later in the talk said he was referring to the coupon Abu Dhabi is paying. Citi is paying a high price for the capital injection by selling mandatory convertible securities to Abu Dhabi which pay a fixed coupon of 11 percent. That is above the average yield on U.S. junk bonds, which is 9.4 percent according to Merrill Lynch data.

When asked at the end of the talk by his interviewer how he’d like to be remembered, Collins replied: “Not at all.”

Sorry to disappoint you Tim, but folks on Wall Street will remember the whopping pay-out from the Shinsei deal for a long time to come.

In recent years, leveraged buyout executives scoured the Middle East mainly in search of investors. The hope was to find an oil-rich institution willing to commit capital to a buyout firm’s next fund.Now, private equity executives are headed to the region seeking a lot more: deal partners, shareholders, exit opportunities, lenders. The promise of a lucrative deal, plus red sand camel rides, Lebanese belly dancing and cigar sessions awaits a few LBO chiefs this week in Dubai.

The booming growth of sovereign wealth funds and their search for investments abroad has had a huge impact not just on private equity firms but on the investment banks and the entire mergers and acquisitions industry.

With the funds flush with cash, Western private equity chiefs are courting their business, as a credit crunch across the United States and Europe has dramatically cut off lending and deal-making within their borders.

Private equity executives have been particularly focused on sealing relationships in the Middle East, where the soaring price of oil has left countries loaded with cash to spend.

The global explosion in central bank reserves has led to the growth of state-owned investment vehicles with assets estimated at more than $2 trillion.

The vehicles, so-called sovereign wealth funds, are seeking higher investment returns by taking stakes in companies and investment firms abroad.

The budding, cross-border relationship will be on full display this week in Dubai, United Arab Emirates, where the Super Return Middle East conference will feature some of the biggest names in U.S. private equity. It is the first time the conference, which has been held annually in Frankfurt and Hong Kong, is taking place in Dubai.

David Rubenstein of The Carlyle Group, David Bonderman of TPG Capital, Jonathan Nelson of Providence Equity Partners and Tim Collins of Ripplewood Holdings and other members of large Western buyout firms will be among the featured speakers, along with major investors from Dubai, Abu Dhabi and Qatar.

The speakers will retire to the Bab Al Shams resort in the desert and be treated to camel rides on the red sand dunes, local food and Lebanese belly dancing, according to BusinessWeek, which adds that roof-top cigar smoking is popular among the Dubai’s deal-making crowd.

Stay tuned for stories and blog entries from the conference.

After a period of seemingly sensible, strategic acquisitions in which buyers bought companies that fit logically into their business, a deal arrives that’s left investors and M&A wonks scratching their heads — and selling shares.
    
Macrovision on Friday said it would buy Gemstar-TV Guide for $2.8 billion in cash and stock. Stocks of both companies plunged on news of the deal. 
    
When was the last time an acquirer’s stock tanked 25 percent — and its target fell 15 percent, as they have in this case? The drop in shares raises serious questions about whether shareholders will allow the deal, which JPMorgan and UBS advised on, to go through.
    
Let’s count the ways that this deal has frightened investors.

For one, it’s unclear just how Macrovision, a software maker, and Gemstar-TV Guide, which produces television programming guides, would meld together.

Macrovision said it would combine its anti-piracy technology with Gemstar’s interactive program guide, technology used by cable and satellite television companies, to allow protected TV shows, films, photos or music to be available on many devices beyond the television. 
    
So this appears to be a concept deal rather than a strategic one. Here’s a few other reasons why the market is turning its nose at the proposal.

News Corp, which owns 41 percent of Gemstar, has seen the investment drop in value. Gemstars market capitalization was $30 billion in Sept. 2000 when News Corp. said it was becoming the company’s largest shareholder. If News Corp. can’t make it work, can Macrovision?
    
Finally, Macrovision said it plans to raise $800 million in new debt to help finance the offer. Given the extent of the credit crunch, it’s a heck of a time to look to the debt markets for financing. 
    
It’s only Day One of the announcement, so who knows. Maybe the companies can make a deal work. But judging by the share reaction, they’ve got a lot of explaining to do.