Carlyle's $333,000 million Management Fee for Booz Allen Hamilton

Booz Allen Hamilton's S-1/A states on page 67:

Increase to management fees paid to Carlyle of $333,000 million (see Note 19 to our consolidated financial statements for additional information regarding the management fees)

Carlyle is known for bleeding affiliates via transaction fees and management fees.

Booz Allen Holding pays TC Group an aggregate annual (management) fee of $1.0 million for such services, plus expenses. In addition, Booz Allen Holding made a one-time payment to TC Group of $20.0 million for investment banking, financial advisory and other services provided to Booz Allen Holding in connection with the acquisition.

 Another method is special dividends.  The S-1 indicated:

Special dividends in the aggregate amount of $114.9 million and $497.5 million as of July 29, 2009 and December 8, 2009.

That's over $610 million.  Dividends alone sent Carlyle into the black.   Bloomberg reported Carlyle paid $5.28 per share.  The $497.5 million dividend equaled $4.642 per share, while $114.9 million represented a dividend of $1.087 per share.  That's $5.73 per share, or  45 cents profit per share, prior to any IPO.
 

This is courtesy of Uncle Sam, the source of 98% of Booz's revenue.  Carlyle loves the federal wallet.  Through Booz's vast swath of government advisory services, Carlyle has a ringside seat to future federal check writing.  They aren't ready to kill the goose laying the golden egg.

I found another oddity on page II-3.

On May 15, 2008, we sold 10,000 shares of common stock to Carlyle Partners V US, L.P. for aggregate consideration of $10.00. 

The IPO will pluck but a few feathers.

At the middle of the offer range, Booz Allen would be valued at about 37 times earnings 

Investors should read the prospectus to see how much Carlyle profited pre-IPO.


Disclosure:  A note on page 53 did not have the million after the $330,000 increase in Carlyle's $1 million management fee.

Bayh Related Medical Innovation Funds

Susan Bayh, wife of Senator Evan Bayh, saw three of her firms benefit from Uncle Sam's latest PPACA largess.  Recipients of medical innovation grants include:

Curis--$$490,000
Dyax--nearly $1.5 million
Esperion--$245,000

Virtually all the federal funding was for 2009, with less than $90,000 for current year expenses.  That's a sweet cash injection.  Senator Bayh wrote in a post election op-ed:

We also overreached by focusing on health care rather than job creation during a severe recession. It was a noble aspiration, but $1 trillion in new spending and a major entitlement expansion are best attempted when the Treasury is flush and the economy strong, hardly our situation today. 

 Will Evan encourage his wife to return the money. at least until the Treasury is flush?

Update 1-23-11:  The Obama administration will establish the National Center for Advancing Translational Sciences, a federal research center for drug discoveries.  This comes atop the $1 billion in medical innovation grants recently distributed.  President George W. Bush took on drug company liability.  The Obama team took on a portion of retiree health insurance via ERRP and now will help subsidize research costs.  

Uncle Sam's $1 billion Health Giveaway

Health & Human Services revealed recipients of PPACA's latest cash bonanza, medical discovery grants and tax credits.  Like the $5 billion early retiree reinsurance program (ERRP), thousands of companies were approved in a short time frame.

One recipient is Quest Diagnostics, with ties to Gail Wilensky, former Medicare Chief, and Nancy-Ann DeParle, White House Health Czar.  Quest got roughly $490,000 for two projects.  However, Quest has an equity investment in SomaLogic, which raked in $1.9 million.  Over 75% of the funding was for work done in 2009, i.e., already expended.  Nearly $2.5 million for Quest affiliated projects?  Not bad for a day's work.  Might Gail send Nancy a thank you card?

A flummoxed President Obama need not ponder why $6 billion in corporate healthcare juice didn't impact election returns.  Virtually no voters knew of the programs.  Instead, the public was bombarded with inflammatory nonsense.  Funny, I saw no ad citing 51 million Americans without health insurance.  No candidate framed health reform as a seismic shift of responsibility from employers to the individual. 

While individuals bear more, even going without, corporations line up for goodies.  Will Republicans call for repeal of these corporate giveaways?  My bet, Reds stay mum. The uninsured don't vote.  None of them.

Carlyle Group's Yashili: Hong Kong Gags on IPO

Yashili International Holdings' IPO performed below expectations, raising $348 million vs. $458 million.  The shortfall continued after the public offering, as shares dropped 12% on the Hong Kong exchange.

Yashili performed like the tainted milk it once sold.  The Carlyle Group invested in Yashili during the toxic ingredient scandal. 

Carlyle owned 853.6 million shares in Yashili as of Oct. 20, according to data compiled by Bloomberg.

The problem was systemic in China, given 22 dairies sold toxic milk, sickening 300,000 children and killing six infants. Is Yashili's Hong Kong rejection due to poisonous ingredients or its toxic PEU partner?

BankUnited's Multiple Milkings: $2.3 Billion in FDIC Cash

BankUnited (BU) filed for a $300 million IPO, less than the predicted $500 million amount.  BU's SEC filings show how the bank's private equity owners benefited.  When the original deal closed, with $4.9 billion in FDIC loss sharing, new owners imposed a transaction fee.  The Carlyle Group, Blackstone, Centerbridge and WL Ross charged BU $20 million.

In consideration of the Key Parties conducting the financial and structural analysis, due diligence investigations, and negotiations described above, the Company will pay to each Key Party the following transaction fee:

(a)       to Blackstone a fee of $5,284,360.19

(b)       to Carlyle a fee of $5,284,360.19

(c)       to Centerbridge a fee of $4,146,919.43

(d)       to WL Ross a fee of $5,284,360.19

Each of the above parties has the right to appoint a board member and have a non-voting representative in attendance.

The Carlyle Group's BU holdings are in two funds, DBD Cayman, Ltd. and TGC Holdings, LLC.  Carlyle's holdings in Hampton Roads Bankshares sit offshore in DBD Cayman.  This FDIC approved offshore corporate investments in failed or struggling U.S. banks.  Highlights from the S-1 include:

BankUnited made a $120 million profit in eight short months.

On September 17, 2010, BU declared a quarterly dividend of $14.0 million. In addition, on October 19, 2010, the bank declared a special one-time dividend of $6.0 million.

That's two $20 million bleedings by investors.  Not bad for a year and a half. But it pales relative to Uncle Sam's generosity.

Cash received from FDIC related to business combination, net--$2,274,206,000

At June 30, 2010, BankUnited was one of the most well-capitalized banks in the United States

It's no wonder, with $2.3 billion in FDIC cash.  Investors put up $945 million, roughly one third of initial capitalization.  What did the FDIC get?  Warrants for 10% of the company.  Sheila Bair should be embarrassed.

Update 1-26-11:  BankUnited is expected to go public this week.   PEU Investors are the primary sellers of 26 million shares of stock at an expected price of $23 to $25.  How will Uncle Sam get back $2.3 billion in FDIC cash? They won't.  Others got rich on the deal. 

ESPN aired the University of Miami-UNC basketball game.  Miami's home arena is the BankUnited Center.  Miami President is Donna Shalala, former Clinton official.  The facility opened in 2003.  No name change was necessary given Uncle Sam's generous aid to BankUnited.

Update 2-12-2011:  Who got rich on the BankUnited IPO?  Not Uncle Sam, who put up 2/3 of the initial recapitalization...

Update 3-9-12:  Palm Beach Post finally sniffed out Carlyle and company's sweetheart deal.

America's Powerazzi and Elections

In the week before the election, America's powerazzi do their best to impact elections.  Reds & Blues do their best to tamper with the electorate.  Inflammatory political ads run ad nauseum.  American CrossRoads, backed by professional inflammer Karl Rove, is the newest ditch witch, driving U.S. elections deeper into the gutter.

Blue Bill Clinton tried to broker a deal, where Kenrick Meek would drop out of the Florida Senate race to help independent Charlie Christ.  When citizen wishes aren't what power players want, insiders manipulate the choices.  Clinton's throwing Meeks under the bus is instructive, as Bill dragged Meeks all over the country to help Hillary's Presidential run.

Red Jeb Bush called Charlie Christ self-serving, saying "He's the most ambitious man, I've ever met in politics."  What would Jeb call an ex-Florida governor going on the board of a healthcare company he fined multiple times for improper billing?  When he comes up with a name, Jeb should look in the mirror and enunciate clearly.  Self-serving corporate Jeb earns over $300,000 a year on the board of ethically challenged Tenet Health.

Jeb's appointment came a year after the Bush White House omitted any mention of Tenet's Memorial Medical Center, where 35 patients died after Hurricane Katrina.  Tenet lobbied the White House on The Stafford Act (disaster response) and corporate governance changes in early 2006.  Was any self-serving deal making done on Jeb's behalf?

Jeb's other job, as private equity man for Lehman Brothers, may have impacted George W.'s response in September 2008.  What politician would save his brother's and cousin's firm from financial death in the midst of a closely contested election?  Karl Rove knew such a move would be political suicide for the Red team.

Big boys' money and power games have America at a crossroads.  Staying the poisonous course ensures America's crossbones.

Update 3-9-13:  Jeb will saturate the Sunday morning political talk shows.  Is this a prelude to the next Bush-Clinton Presidential run, Jeb vs, Hillary?

It's a Carlyle Siniverse

The Carlyle Group announced its second purchase of a telecommunications manufacturer.  The two deals include a $3.9 billion buyout of CommScope and a $2.6 billion takeover of Syniverse, totaling $5.5. billion.  Marketwatch reported:

Syniverse provides a full portfolio of mobile roaming, messaging and network solutions to more than 800 mobile operators, cable and Internet providers, and enterprises in over 160 countries.

The Carlyle Group had to do something with their mountains of cash, driven by mass monetizations in the last year.

Carlyle officials referred to Syniverse's role in the "mobile global ecosystem."   That's not your father's ecosystem, which actually involved nature.    Both CommScope and Syniverse have Chinese subsidiaries.  Welcome to Carlyle's siniverse, where words have no meaning, greed is mainstream, China is king and debt is back.

Only in Carlyle's siniverse can a private equity underwriter (PEU) go public and keep its distinctive, competitive advantage (being a private firm). As they did with ecosystem, the siniverse will rewrite "The Goose with the Golden Egg."  Hint:  Carlyle ends up with the gold and fois gras to boot.


Update 10-29-10:  Hawaiian Telecom, Carlyle's failed telecom investment, emerged from bankruptcy, as the PEU made new investments in the space.

Update 3-9-12:   Carlyle's buyout enriched the top two managers at Syniverse.  Higher interest expense, up over 320%, and management fees of $3.7 million helped turn Syniverse into unprofitable territory.

Update 11-30-14:  It's layoff time for Syniverse employees in Tampa, Florida.  I doubt their exit packages are near former CEO's Jeff Gordon.