Word: buyouts
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Dates: during 2000-2009
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...proposed buyout also has some investors scratching their heads. Wind, with 12 million subscribers, is Italy's third-largest mobile-phone service, but has never made a profit. While about ?7 billion of the total ?12.2 billion valuation is debt that's likely to be refinanced as part of the deal, the acquisition is expensive...
...largest and most ambitious buyouts yet was proposed last week by executives of R.H. Macy & Co. (fiscal 1985 sales: $4.4 billion), the eleventh-biggest U.S. retailer. Led by Chairman Edward Finkelstein, a group of top officers offered $70 a share, or $3.58 billion, for Macy's stock that had been selling for about $50 a share. The Macy's executives were working last week with the Wall Street firm of Goldman Sachs to line up virtually all that money. The high buyout price, apparently designed to repel rival offers and avoid a bidding war for the company, drove...
Consumer-product companies have been going private as well. Mary Kay Ash, chairman of Mary Kay Cosmetics, last May began a $300 million buyout of her company. In August, San Francisco-based Levi Strauss, the largest brand-name clothing maker in the U.S., was acquired for $1.48 billion by a group headed by corporate executives and descendants of the company's founder...
...Shaykin makes the rounds of banks and large investors like pension funds and insurance companies, which put up the loan money. Banks are leery of lending to foreign countries, oil drillers and other risky debtors, but they are happy to provide up to 70% of the cost of a buyout because of the large fees and lucrative interest rates that such business brings. The rest of the credit comes from selling so-called junk bonds--IOUs with relatively poor quality ratings--and other securities that offer high yields. Like the banks, investors count on getting their money back from earnings...
...When the buyout is completed, the company is owned by the participants in the deal. The management group, which invests its own money, often comes away with perhaps 20%. The big investors may get ownership rights for 45%. The remainder is usually held by the investment firm that brought the partners together. It also collects around 1% of the total value of a buyout, plus consulting and other fees. Buyouts invariably increase the value of the stock that executives had before the deal. Afterward the managers generally hold far more of the private company than they did of the public...