Wednesday, February 1, 2017

NBTY's $4 Billion Supplement for Carlyle Group

The Carlyle Group is ready to exit vitamin and supplement maker NBTY after six years of ownershipReuters reported Carlyle could make $4 billion from Nature's Bounty, $1.2 billion from dividends and $2.8 billion in profits from the sale of the company.

Carlyle's purchase of NBTY saddled it with $2.2 billion in debt.  Nature's Bounty debt ballooned to $3.2 billion after Carlyle deployed it's PEU debt for dividend scheme.

Reuters referred to deal as an LBO in the title of the article.  Private equity replaced LBO after Junk Bond King Michael Milken went to jail.  Apparently both the man and his greedy methods are rehabbed and proud to be spoken as our society walks back in time.  Oddly the 1989 NYT piece quotes America's newest President:

Nevertheless, many Wall Street professionals criticized the deal Drexel had with Mr. Milken. Once his salary began to exceed the budgets of many small countries, the firm should have altered the terms of the deal, they said.  

Executives have also begun to voice concern about what the payments say about the firm's management. ''You can be happy on a lot less money,'' said Donald J. Trump, the New York developer, whose net worth is estimated at $1 billion. ''I'm amazed that the firm would allow someone to benefit that greatly.''
Junk bonds sell at double digit interest rates  The junkier the debt the higher the interest rate.

In early January The reported:

Private equity firm Carlyle Group LP has hired investment bank Goldman Sachs Group Inc to help it explore the sale of one of the largest U.S. herbal supplement makers, Nature's Bounty Co. (NBTY)
It's an aside but Carlyle employs the son of Goldman Sachs CEO Lloyd Blankfein.  The "greed and leverage boy" world deals with big dollars but it's a relatively small family of billionaires.

The 1989 story concluded with:

"The financial world is characterized by explosions of wealth and then, for those involved, a very sad day of reckoning. This has only lifted the process of financial aberration to new heights.''
The sad day of reckoning nears yet again, which is why Carlyle is selling anything in sight.