Blackstone Group CEO Steve Schwarzman spoke with Bloomberg Television’s Erik Schatzker today from the World Economic Forum in Davos, Switzerland and said that Blackstone “did not look at Dell.”
Schwarzman said the buyout doesn’t herald the return of mega-LBOs: “this isn’t your run-of-the-mill situation…This is a pretty unique set of circumstances with a fundamentally unleveraged company with an owner and founder that can put up a lot of the equity to make the deal happen…” Excerpts from the interview can be found below, courtesy of Bloomberg Television.
Schwarzman on whether he’s surprised to see Dell in buyout talks:
“I thought that was a pretty clever thing of Michael to do. His stock was way down. They have a lot of cash. He is an owner/founder and so the form that your company takes is not as important as how well the company is doing. If he has optimism about his company and if the market is not appreciating it, he is actually in a pretty unique position to be able to take his stock, contribute it into the deal to provide a lot of the equity, and just deal with his company as a private company where he could make certain changes that would be perhaps more difficult in a public setting.”
On whether Blackstone ever considered buying Dell Inc. (DELL):
“We did not look at that company. Part of that is in the PC business where it is a tough road. The financial elements of the deal are very clever. I think the issue will be how the business actually performs.”
On whether we’re witnessing the return of the megadeal:
“I think that may be a little overblown. This is a pretty unique set of circumstances with a fundamentally unleveraged company with an owner and founder that can put up a lot of the equity to make the deal happen with a lot of cost cuts probably, from what I’ve heard. So this is not your run-of-the- mill situation. The private equity business, you know, has actually had a reasonable level of activity. We invested in that part of our business about $4 billion last year against a $16 billion fund, so the deals are not as big, but there are plenty of interesting opportunities.”
On what role Microsoft (MSFT) might play in financing the deal and whether this is a new model for the buyout industry:
“Companies are cash rich because they lost confidence in the banking system in 2008 and 2009, so they each became their own banks. Their boards encouraged them to do it. They have lots of money without anything particular to do with it because the capital expenditure hasn’t changed. You will see different ways where companies deal with the problem of very low interest rates, lot of cash on the balance sheets and this is one mechanism.”
On whether we’ve turned a corner on the financial crisis:
We are starting to turn a corner. It also depends on what geography or looking at. You have had the emerging markets slowed down, so that is not a wonderful thing. some of them are bottoming and starting to turn up. We have had U.S. growth suppressed in the 2% area, which is significantly less than one would have expected with the kind of stimulus and deficits we’re running. Europe is pretty much in a no-growth situation…We do have stability. Europe has grown out of its crisis-of-the-moment mode. We have not completely lost a decade, but we’re not exactly maximizing a decade.
On whether he agrees with CEOs who say that America is the best place to invest for the foreseeable future:
“America is a really good place to invest. Asia is also an interesting place with high-growth rates. And depending on what type of investing you do, there are certain areas in Europe that are also still good.”
On what happens if the U.K. leaves the EU:
I think that is a little unpredictable. The U.K. has always had an approach of avoidance towards the EU…On balance, probably a net bad thing.
On whether the debt ceiling will turn out to be a non-event, like the fiscal cliff:
“The debt ceiling has been pushed back because there are other mechanisms that can be used by the Republicans to in effect get the attention of the Democrats. i think the debt ceiling was an astonishingly lost opportunity. What fundamentally happened is we managed to raise $50 billion a year to lower deficits, which at that point were over a trillion dollars. So if you look at it, it was very, very minor payment done by only one-half of 1% of the people and the opportunity to make a grander bargain to bring our deficits under control and our entitlement spending was a potential opportunity there that was lost.”
On whether President Obama has done or said anything that makes him feel better about the country’s future:
“I like President Obama as a person and he is well intentioned. I do not know that we have clarity on our future situation. I am a great believer in including a large number of people in a solution. I think everyone has to have skin in the game. A tax solution that hits one half of 1% of the people is almost announcing that 99.5% of the people do not have a role to help fix our society. Regardless of the amount of money involved, in this case a huge amount of money that is needed, to basically not have an inclusive type solution is just philosophically something I do not think works well.”
On whether he has any regrets about endorsing Mitt Romney and speaking out strongly against Obama’s administration:
“I have never spoken against the president himself. Do I have any regrets? One regret is that the team I was involved with lost. That is a regret. We have to move on in our society.”
On whether he’ll he write off the next four years and look ahead to 2016:
“I do not think anyone can write off the next four years. That is a ridiculous way of approaching life. You have to engage and do the best thing that you can. I think it was unfortunate on the Republican side. There were some position taken on issues which drove away Hispanics and other minorities and a variety of other social issues that took an election that may have gone the other way and ended up as a 1.9% loss.”