Thursday, August 30, 2007

PEU Schooling by Carlyle: Ports vs. Airports

For a lesson in private equity influence in America, one need look no further than The Carlyle Group's recent sale of two aviation service companies to Dubai Aerospace. The public foamed into a lather over the sale of six port operation to a different Dubai company. The two companies Carlyle sold have facilities at some fifty domestic airports, some even service aircraft engines. Wouldn't this seem a bigger risk than ports given 9-11? Might a rich citizen of the Emirates have any jihadist relatives, like the Saudi bin Laden family?

Very little of this story made the news during the time it took to "announce" and close the deal, from April to August. Carlyle didn't put out any press releases on this $1.9 billion transaction. They normally brag about flipping companies for huge profits, but not this time. I can understand the seller wanting to keep it "hush hush", but someone tried to tell the story, didn't they? Surely the media, regulators, elected officials (who jumped on their high horse over the ports deal) spoke out. Sorry.

How did Carlyle pull it off? A little Washington grease always helps. The politically connected private equity underwriter (PEU) hired Akin, Gump to lobby for the Landmark sale. Their services for the first half of 2007 cost The Carlyle Group $400,000. Might another bill be coming as the deal didn't close until August 1st?

What else happened to seal the deal? Dubai Aerospace agreed to sell off Landmark's fixed based operation which include charter services. It wouldn't behoove them to hold on to a division that flew rendition flights. Someone might find out and want revenge.

The deal got announced as a $1.8 billion transaction, but closed as a $1.9 billion deal. Did Carlyle raise the price to pass on their lobbying and hush money costs? If Carlyle cleared a $1 billion dollar profit on the deal, the Bush capital gains tax cut puts and extra $50 million in the PEU's.

Given the recent data on the rising number of uninsured children, Carlyle would be happy to pay a little more so kids could be covered, right? Even though the President is against it, surely the super wealthy making money hand over fist, want to help out? Sorry.