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Non-Tech : Private Equity

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From: Sam Citron	11/17/2006 3:03:28 AM
	of 24

Majority of top 10 buyout backed deals this year trading below IPO price 2006 buyout backed IPO returns (ex J Crew): +6% Non-buyout backed IPOs: +19.8% Source: Thomson Financial as reported on CNBC Today we saw a taste of this with the Hertz IPO which was brought out by a partnership consisting of Carlyle Group, CDR and Merrill Lynch. Cramer put it in his "wouldn't touch with a ten foot poll" category in Mad Money last night and said: Taken private last yr for $15B. Now spinning 27.5% of business public. They increased Hertz debt by $3.4B, which knocked down Hertz net income by 77% even as revenues grew by 7.8%. IPO should raise about $1.6B of which $999 million has been earmarked to repay a loan, which funded, of all things, a special dividend going almost entirely to our "three amigos". Another $427 million will go to CDR. in the form of another dividend. So they are using Hertz to borrow money and using the borrowings to pay themselves, and now selling you the much more debt-laden business when they take it public...Throw into the pot the fact that the three amigos control 7 of the 9 seats on the board of directors and you're just asking for a world of pain if you buy this one. Maybe this is why they reduced the price for HTZ to 15 from the expected price of 16-18 yesterday.

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