ALL EYES ON CHRYSLER

Cerberus' $7.4 billion (€5.5 billion) deal to buy DaimlerChrysler's Chrysler division has won the support of the United Auto Workers amid growing union hostility toward the industry. The support came just as America's largest and most powerful trade union confederation, the AFL-CIO, sent a letter to the SEC in an apparent attempt to block The Blackstone Group's initial public offering. At the same time, the country's largest labour union, Service Employees International Union, has launched a campaign it says is designed to “raise questions” about how workers are affected by private equity.

The Cerberus/Chrysler deal was consistently referred to at last month's US House Financial Services Committee hearing regarding private equity's impacts on workers.

“The Chrysler deal serves as an example that private equity can go anywhere, even buying the most symbolic of American brands,” said Deborah Pryce, an Ohio Republican generally supportive of private equity.

It also may serve as a future model for buyout negotiations, as private equity is held increasingly accountable for helping solve socioeconomic problems like the US' growing income disparity. The UAW's leadership gave its blessing to the Cerberus deal after a series of meetings with DaimlerChrysler executives and assurances the private equity firm would shoulder billions in pension and healthcare costs for Chrysler employees.

“Cerberus has pledged to work with the UAW,” said Stephen Lynch, a Democrat from Massachusetts. “They've assured the UAW that the $18 billion in benefits owed to autoworkers in benefits will still be honored, and [The Wall Street Journal] referred to this deal as a watershed moment for the private equity industry and global finance dealings. I'd like to have confidence in that.”

Douglas Lowenstein, president of lobbying group the Private Equity Council, said: “I'm certainly not aware of any pattern or consistent effort on the part of private equity firms to raid pension funds and do things that are anti-pension, anti-worker, or anti-benefit.” Private equity firms' long-term business strategy revolves around growth, which necessitates a viable, motivated workforce, he said.

Committee Chairman Barney Frank, a Democrat from Massachusetts, noted that increased unionisation among workers, coupled with a trend toward collective bargaining between buyout firms and unions might soften calls for greater regulation of private equity.

“Wouldn't that be a way of dealing with income situations in a reasonable way?” Frank asked. “I must say, if we saw there was some willingness to enter into some of those agreements, it would be a relief for many of us.”

The Private Equity Council and its members, including 10 major private equity firms, are receptive to meeting and talking with various stakeholder groups, including organised labour, Lowenstein said.

“When you see a purchase like [Chrysler], you're glad the union is at the table because you wonder what would happen if they weren't,” said SEIU president Andy Stern, who also testified at the congressional hearing. The SEIU is concerned that workers aren't reaping their fair share of rewards from buyouts, and is lobbying for workers to have a voice in future deals.

Congressman Castle raised additional concerns pertaining to the Cerberus/Chrysler deal: Are private equity firms equipped to try and save the struggling automotive industry? And are they in it for the long haul?

While unable to comment on Cerberus' particular investment strategy with regard to Chrysler, Lowenstein said all private equity firms intend to grow and add value to their portfolio companies.

“Chrysler's a difficult case study because obviously it's been operated as a public company and it's hard to argue that it's been operated terribly successfully as a public company in recent years – it announced 16,000 layoffs recently as you know,” Lowenstein told the committee. “So I think exactly how that transaction plays out, we'll have to wait and see.”

BLACKSTONE TO BUY ALLIANCE DATA FOR $7.8BN
Alliance Data Systems will be taken private by The Blackstone Group in a transaction valued at $7.8 billion (€5.8 billion), including the assumption of debt. Based in Dallas, Texas, Alliance Data has more than 9,000 employees at 60-plus locations worldwide. It provides transaction, credit and marketing services to the retail, petroleum, utility, financial services and hospitality markets. Blackstone senior managing director Chip Schorr led the deal, which is expected to close by the end of 2007. Electronic payment-related companies have been snapped up recently by private equity firms. In April, Kohlberg Kravis Roberts agreed to buy First Data for $29 billion in one of the largest ever buyouts, while Warburg Pincus announced the acquisition of Megavante for $625 million, and General Atlantic bought a minority stake in the Global Electronic Trading Company for an undisclosed amount.

WARBURG PINCUS TO BUY BAUSCH & LOMB
The global private equity firm has offered $4.5 billion for the eye health specialist. The total includes approximately $830 million in debt. The Bausch & Lomb deal is being led by managing director Elizabeth Weatherman, who oversees the firm's medical device investment activities. Rochester, New York-based Bausch & Lomb has a strong global brand name though the 150-year-old healthcare company has faced significant challenges over the past twelve months, initiating voluntary recalls of some of its flagship ReNu contact lens solution products. Its lens solution market share has dropped 10 percent as a result and lens care sales for 2006 were down 21 percent on the previous year's volume.

APAX, OMERS TO BUY THOMSON DIVISION FOR $8BN
Global private equity firm Apax Partners has teamed with OMERS Capital Partners, the investment and management division of Canadian pension fund Ontario Municipal Employees Retirement System, to purchase Thomson Learning's higher education assets for $7.75 billion (€5.7 billion) in cash. Brands to be acquired include Wadsworth, Delmar Learning, Gale, and Heinle. Both Apax and OMERS have been investing in the media and publishing industries: In December, OMERS agreed to purchase newswire CCN Matthews for an undisclosed amount, while Apax's most recent acquisition in the sector took place in March, when it agreed to buy a 49.9 stake in Trader Media Group from the Guardian Media Group for £1.35 billion.

NAUTIC TO BUY CANADIAN TRUST FOR C$140M
Nautic Partners is the latest US private equity firm to take a Canadian income trust private, with its C$140 million ($126.5 million; €93 million) acquisition of the trust related to trucking company Canada Cartage. The price is a 27.6 percent premium over Canada Cartage's closing unit price on 30 April, the day prior to an announcement that the firms were in negotiations. The deal is part of a growing trend triggered by a change in Canadian tax policy, which will subject Canadian investment trusts to an additional 34 percent tax starting in 2011. Since the policy change was announced last October, nearly 20 publicly traded trusts have been sold and more than a dozen have announced “strategic reviews”. In April, New York-based Caxton-Iseman Capital purchased KCP Income Fund, parent of consumer products firm KIK Custom Products, for C$804 million.

LITTLEJOHN IN C$600M COFFEE ROASTING DEAL
Greenwich, Connecticut-based Littlejohn & Co. has agreed to buy Van Houtte, a North American gourmet coffee roasting company and franchise operator, for C$600 million ($542 million; €400 million), including debt assumption. Van Houtte was founded in 1919 and employs more than 1,900 people in Canada and the US. Its coffee is distributed via coffee services, retail stores, café-bistros and online shopping. Littlejohn agreed to buy another Montreal-based business last month: packaging manufacturer Intertape Polymer Group. That deal was valued at $500 million. The recent investments are being made from Littlejohn's third fund, which it increased in March to $850 million. The fund originally closed in May 2005 on $650 million. Littlejohn was founded in 1996 by Angus Littlejohn after his split from the New York-based firm he co-founded in 1988, Joseph Littlejohn & Levy (now JLL Partners).

CD&R EXITS DEAL, TEAMS WITH KKR
Buyout firm Clayton, Dubilier & Rice last month sold portfolio company VWR International to rival buyout firm Madison Dearborn Partners for around $4 billion (€2.9 billion). The company supplies chemicals, glassware and plasticware, safety equipment and instruments to companies. CD&R acquired VWR from pharmaceutical company Merck in April 2004 for $1.65 billion with an equity investment of $420 million. The firm also revealed it was entering into its first ever deal partnership with Kohlberg Kravis Roberts with the proposed purchase of US Foodservice for $7.1 billion.

CITI, JC FLOWERS TO DIVVY UP BISYS
Banking giant Citi has agreed to acquire BISYS in a deal valued at $1.45 billion (€1.1 billion). It will sell BISYS' Insurance Services Group and Retirement Services to private equity firm JC Flowers, which will combine the divisions with its existing commercial insurance business, Crump. JC Flowers recently closed its second private equity fund, rounding up a total of more than $7 billion. The firm is led by J. Christopher Flowers, a former Goldman Sachs investment banker.

KKR, GOLDMAN IN $8BN AUDIO DEAL
Private equity firms Kohlberg Kravis Roberts and Goldman Sachs Capital Partners have teamed up to buy Washington, DC-headquartered Harman International Industries in a transaction valued at roughly $8 billion (€6 billion). KKR initiated discussions with the high-end audio and electronics maker, and has structured the deal “so that current Harman stockholders have the opportunity to participate in the future upside potential of the enterprise”, the company said. Harman makes audio products and electronic systems for the automotive, consumer and professional markets. Its brands include Harman Kardon, JBL, Mark Levinson and Infinity. It employs more than 10,500 people in 16 countries.

CRESTVIEW TO ACQUIRE SURGICAL FACILITIES FOR $637M
Crestview Partners has agreed to acquire Nashville, Tennessee-based surgical facility operator Symbion in a transaction valued at $637 million (€468 million), including roughly $149 million of assumed debt. Merrill Lynch and Bank of America will provide the associated debt financing. “The surgery center industry is in a period of unprecedented growth and transition. Surgical facilities provide quality medical care at lower costs, greater convenience and enhanced efficiency,” Tom Murphy, managing director of Crestview Partners, said in a statement. Crestview was formed in 2004 by a group of former Goldman Sachs partners including Robert Hurst, Tom Murphy and Barry Volpert. The private equity firm currently manages $1.5 billion in capital.