Schwarzman: 'The worst is behind the industry'

The Blackstone Group may soon sell five portfolio companies – returning $2.8 billion to investors – and exit up to another eight via public floats, according to an investor letter seen by the Financial Times.

“We see the world changing once again. At least for private equity, the worst is behind the industry,” Schwarzman reportedly wrote in the letter, sent to limited partners Friday.

Such rising industry morale was the subject of PEO's most recent Friday Letter.

Schwarzman's comments represent an increasingly positive outlook by the publicly traded firm's leadership. During its second quarter earnings call in August, president Hamilton “Tony” James said he expected to see more portfolio companies sold or going public over the next 12 months. “I’m not promising a lot of exits,” he said, but noted interest from strategic buyers was increasing.

Among the exits currently in the works is the $4 billion sale of Kosmos Energy to ExxonMobil, which would return 400 percent of the cash invested in the oil and gas company by Blackstone and Warburg Pincus. That sale alone would return $1.2 billion to Blackstone investors, Schwarzman's letter noted.

It is also nearing a €2.6 billion sale of soft drink business Orangina Schweppes to Japanese brewer Suntory Holdings. The division was purchased in early 2006 by Blackstone and Lion Capital in a €2.2 billion carve-out from Cadbury Schweppes.

Meanwhile, Team Health Holdings, a hospital staffing company Blackstone bought from a Madison Dearborn Partners-led group in 2005, last week registered to raise up to $100 million in an initial public offering.

One of the other portfolio companies that has been linked to a potential public listing is Blackstone's Merlin Entertainment Group, the theme park operator that last week agreed a $2.7 billion deal for 10 US theme parks including Sea World and Busch Gardens. UK media reports have said a £2 billion listing on the London Stock Exchange is likely in the first quarter of 2010.

Merlin's agreement to buy Anheuser-InBev's theme park division, Busch Entertainment, is the largest private equity deal agreed to date this year.

Blackstone's two other US deals this year have been the $780 million launch of a building materials company alongside former BHP Billiton chief Chip Goodyear, and the $900 million rescue of failed Florida bank BankUnited along with The Carlyle Group, Centerbridge Partners, WL Ross and The Wellcome Trust.

In the second quarter of 2009, Blackstone turned its first quarterly profit in a year. Its corporate private equity revenues totaled $198.6 million, up from $92.4 million in the same period last year. According to a statement, revenues more than doubled over the year due to “stabilisation in the total fair value of the segment’s underlying portfolio investments”.