| Blackstone
Group LP's management sees investment opportunities in PIPEs and
minority stake rescue financing, Bank of America Corp said in a
note, adding it expected Blackstone's to raise around $15 billion
for its next buyout fund.
BofA analyst Michael Hecht said he
recently met with Blackstone President and COO Hamilton James and
Joan Solotar, head of public markets. Solotar left her job as BofA's
director of equity research in June to join Blackstone.
PIPEs -- private investments in
public equity -- are privately negotiated securities that provide
companies with quick capital, often in exchange for a discount on
their stock price.
That Blackstone is focusing on
smaller acquisitions in PIPEs and minority stakes shows how deep the
credit squeeze is impacting large private equity buyers, which for
that last year pursued takeovers of companies worth tens of billions
of dollars.
Blackstone can still get financing
for deals of up to $1 billion, Hecht said in the note, while the
appetite for deals above $10 billion is "gone."
The current environment is "likely to
be a little slower in terms of pace of investment spending and
realization over the course of '07, and could be until early '08
before things get better," Hecht said in the note.
Blackstone's management told Hecht
the M&A climate will be slow in the United States and strong in
Europe and Asia.
Blackstone's $21.7 billion private
equity fund is 70 percent invested, Hecht said, adding the next fund
is likely to be around $15 billion -- although Blackstone believes
it could be as big as its predecessor.
The firm also plans to raise specific
funds targeted at Europe, Asia Pacific and other specialty funds in
the $1 billion range.
Blackstone's management is looking at
distressed debt opportunities, although conditions are not cheap
enough yet, the note said. The firm is also looking for ways to
capitalize on the current mortgage market conditions.
Hedge fund returns are up nicely,
Hecht writes, while Blackstone's private equity business is on track
"for a very healthy year."
BofA recommends a "Buy" rating on the
stock with a price target of $38 per share. The note discloses that
Banc of America Securities is a financial adviser to Blackstone's
takeover of Hilton Hotels. |
