Someone thinks Steve Schwarzman’s plan to IPO the chip manufacturing company Freescale Semiconductor without writing down the value of his stake is greedy.Background: Schwarzman’s Blackstone and other PE firms took Freescale private in 2006. Now Blackstone marks its Freescale stake at 45 cents on the dollar. A few weeks ago, Freescale filed to raise $1.2 billion through an IPO.
Because Blackstone values its stake in the company at 45 cents on the dollar, it implies that Freescale will not sell equity for any less.
But that means the company has an enterprise value that works out to $9.8 billion, which is more than eight times Ebitda (earnings before interest, taxes, depreciation, and amortization).
From the Wall Street Journal:
Blackstone’s mark implies the company has equity value of about $3.2 billion… Freescale has net debt of $6.6 billion… [implying] a total enterprise value of $9.8 billion.
Rivals usually get five to seven times Ebitda, according to the WSJ.
So it looks like someone told the Wall Street Journal’s Overheard section that they think that’s too high, and Schwarzman’s just “getting greedy to make up losses,” and “could even scuttle the offering.”
In the book King of Capital, a banker recounts a tale about how he once asked a Blackstone partner, Is what I’ve heard true? Is Steve good at basketball? Like he can jump really high for a white guy?
The partner apparently responded: “Yeah, if he’s jumping for a bag of money!”