Messers Kravis & Schwartz get the PR memo on BCE
This is irresistable.
An excerpt from our post “KKR Founder Henry Kravis on PE climate“, May 29-07:
During the Q&A session, Mr. Kravis was asked if he was aware that the federal Liberal Party was advocating a more robust review process for foreign takeovers. His response will make the dead tree media tomorrow: After establishing that the BCE management and board were running an auction, he made it clear that “should we be fortunate to be picked as the party to acquire it, we are just a minority investor [in BCE], we will not be controlling it. We’re not the buyer. Two or three Canadian pension funds are.”
In the Globe and Mail interview with KKR’s new partner on the BCE transaction, Onex CEO Gerry Schwartz had this to say about the opportunity:
Perhaps the firm’s highest-profile target right now is BCE Inc. Onex is a minority player in a bid led by the Canada Pension Plan Investment Board and Kohlberg Kravis Roberts & Co., joining the group as a late entrant.
“Whoever buys it needs to have a substantial amount of Canadian ownership and by adding us into the group, it not only added to the Canadian equity but if we’re fortunate enough to be the winning bid we’ll add to the sense of Canadian control over the business,” says Mr. Schwartz, who started his career at a New York investment bank with Henry Kravis, who went on to found KKR.
If these buyout Kings would feel “fortunate” to get their hands on BCE, just how good a deal is it? Sounds awfully attractive to me. Ignore all of that research and the newspaper articles that talk about a 12-13% forecast return for whichever group winds up the winner of the BCE auction. No private equity specialist would feel “fortunate” to earn a 12 or 13% return. The number may well be double that in the end, and the BCE opportunity is also a safe way to put out a big chunk of your LBO fund, making the next one that much easier to raise.
(disclosure – I own BCE, and am happy to tender those shares for shares in a private BCE controlled by any of the PE firms that might win the day)