Word: buyouts
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...Connecticut's Gun Valley, the deal was a godsend. To preserve 1,000 local jobs, state treasurer Francisco Borges said last month that Connecticut would participate in the buyout of Colt Firearms by purchasing a 47% stake in the company for $25 million. But the state has bought into a moral dilemma. Next month Colt will begin producing the Sporter, a gun similar to the AR-15, an assault rifle the company quit producing because of its use by drug traffickers. Colt contends that the Sporter will not be fully automatic, and therefore is not an assault rifle...
Investcorp posted profits of $52 million last year from holdings that include a 50% stake in Gucci, the leather-goods empire, as well as control of Color Tile, the largest U.S. floor-coverings retailer, and Carvel, the ice- cream chain. After taking over Tiffany in a friendly buyout in 1984, Investcorp took the jewelry chain public again within three years and made a profit of $100 million...
Investcorp is a breed apart from most other leveraged-buyout firms. Rather than relying on debt to finance purchases, Investcorp usually pumps a large amount of its own equity capital into the companies it acquires. Moreover, the firm generally adopts a hands-off approach to managing its holdings. While the cost of the Saks buyout may tempt Investcorp to push for higher profits, the Bahrain firm contends that it will be true to its unmeddlesome philosophy. "We are owners, not managers," said Savio Tung, a top officer. "We bid for Saks because we thought it was a great company...
...addition, Harvard is a member of a limited partnership managed by the Wall Street firm of Kohlberg, Kravis and Roberts which in 1988 staged a $24.3 billion buyout of RJR-Nabisco, a major tobacco firm...
Experts on corporate history point out that over the years the buyout and the more democratic proxy fight have alternated as the favored means of shaking up management, depending largely on the availability of capital. "When you can't buy, you have to persuade and compromise," observes Harry DeAngelo, director of the J. Ira Harris Center at the University of Michigan. While the proxy fight is a less certain instrument than the buyout, notes Harvard finance professor John Pound, "it is much more consistent with the American political system, in which officials should be held accountable to their constituents...