Posted on 05/20/2007 3:40:15 PM PDT by mr jakob
The Chinese government is to use $3bn of its vast foreign exchange reserves to buy a 9.9 per cent stake in Blackstone, the US buy-out fund, in an unprecedented move that underlines Beijing’s desire to tap into the private equity boom.
The investment will coincide with Blackstone’s landmark $40bn stock market listing, expected in the next few months, and will allow the private equity group to nearly double its original target of raising $4bn.
Stephen Schwarzman, Blackstone’s chief executive, hailed the deal – the first time Beijing has invested its foreign reserve in a commercial transaction – as an “historic event that changes the paradigm in global capital flows”.
Under the terms of the deal, which is believed to have been agreed in just a few weeks, the Chinese government has taken the unusual step of giving up its voting rights associated with the stake in Blackstone.
The move appears aimed at defusing any US political opposition to the deal at a time of tension between Washington and Beijing over the renminbi.
The investment – announced on Sunday – will come through a new Chinese agency charged with managing part of the country’s $1,200bn in foreign reserves.
The price of the stake to be sold to Beijing will be at a slight discount to the one paid by investors in the initial public offering. Beijing has also agreed to keep the stake for at least four years.
It is understood that China’s foreign reserve agency has agreed not to invest in rival private equity groups for 12 months. A number of Blackstone’s rivals, including Kohlberg Kravis Roberts, Texas Pacific Group and Apollo are exploring listings or private placings.
China’s decision to buy a stake in Blackstone’s IPO rather than in one of its buy-out funds, which are more volatile and risky, is a sign of Beijing’s cautious approach to private equity.
The Chinese government has been looking to diversify its foreign exchanges reserves away from low-yielding US Treasuries.
However, buying into Blackstone’s listed entity may deprive the Chinese government of some of the large returns earned by its buy-out funds.
In its prospectus, Blackstone warned that its priority was to return cash to the private investors in its funds, rather than to pay dividends to shareholders.
Over the past two years, private equity has been one of the best performing asset classes, as private equity funds have exploited favourable debt market conditions to buy ever-larger companies.
However, there are growing fears the private equity cycle may be nearing its peak, as takeover prices and debt levels reach record levels.
May 20 2007
Gosh, it’ hard to believe Blackstone is this giant monster. I worked in their corporate offices about ten years ago and it was a total dump. Obviously, they were not spending moolah on their environment or their employees, lol!
my impression of them from stock message boards is that they mostly pick the bones of corporations in BK or near it....
The Fulton County, Georgia resident said. "I believe they [the men who attacked him] were Chinese agents, or that Chinese agents hired local people to do it," in order to intimidate him and others involved with Epoch Times, said Li, a U.S. citizen born in China.
The newspaper's San Francisco branch was also hit, "Alex Ma, told CPJ that unknown individuals broke into his house on two separate occasions in 2005. Days after the first break-in, family members in China called to warn him to stop his 'activities.'"
Epoch Times is on the same level as the Weekly World News. I don’t trust any paper that is free and solicited; the Epoch Times would have zero circulation if they actually charged for it.
A Chinese immigrant buddie of mine ( Applied Math Ph.D.) told me he had a roommate at U.C. Davis who regularly had meetings with his comrades at their apartment where the comrades would report on the activities of Chinese students and Chinese immigrants. The information was assumptively relayed home.
Anybody who says it isn't happening is blind. Or worse.
Chinese threats, intimidation, bribery have all been documented (among other sources) by the "bi-partisan," Democrat-approved Cox Report, a multi-million dollar, months-long Congressional investigation of about ten years ago. Reports of actually violence are elsewhere though there may be reports in the Cox report, I don't remember.
I’ve been keeping a list of “Signs of The Top?”. So far I have:
- First private equity IPO
- FOX talking about making “Wall Street II”
- Chinese “retail investors” piling in
- Countrywide introducing the 50-year adjustable mortgage
- Canada introduces $1M gold coin
- Fine art prices out of control again
Now with China investing in the private equity company itself, it’s insanity squared. Be careful out there folks.
I had thought much the same when I saw that the financial novices in the Chinese Poliburo were investing in a private equity firm...
Actually, I don’t think the US stock market is out-of-whack on a valuations basis - it is probably undervalued compared to most equity markets. Why? Because of the greenback’s depreciation, which reduces US company costs relative to their foreign competitors. A lot of foreign companies are holding their prices to stay competitive worldwide. Their profits are plunging because US companies can beat them on price and still be more profitable than they were, in dollar terms. Case in point - Boeing, which is eating Airbus’s lunch. I see market share increases for a lot of US companies in the next few years. At least until the euro reverses course and starts losing value against the dollar.
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