Video Analysis From Hoover's Editors
Telecom
Clearwire
Here's the Clearwire recipe: Take one part nifty wireless broadband technology (theirs uses radio frequencies broadcast from cellular towers). Add a legendary founder (cellular pioneer Craig McCaw). Combine with serious industry backing (including more than half a billion dollars from Intel Capital). Set the mixture to boil in a market overflowing with cash. The results? A $600 million IPO, and the top spot in The Hoover's Index for both February and March. The money will go toward expanding Clearwire's network operations to new markets in the US and abroad.
Finance
Blackstone Group
Let's see, what in the world could have propelled Blackstone Group up The Hoover's Index list -- even higher than when it won the bidding war for Equity Office Properties earlier this year? Hmm . . . maybe it has something to do with this wee little $4 billion IPO the company has planned? The private equity giant has long been propelled by the outsized acumen -- and ambition -- of its founders Peter G. Peterson and Stephen A. Schwarzman. Now it plans to pull off an outsized IPO that will break new ground for the private equity industry, which typically revels in its ability to operate beyond the view of the public markets (and attendant public company regulations).
Lest you think the famously competitive firm has gone soft, it should be noted that Blackstone has structured the deal so that public investors will be investing only in the private equity management company, not in its portfolio of operating companies -- which includes part or all of Freescale Semiconductor, Michaels Stores, SunGard Data Systems, Universal Studios Florida, and Vanguard Health Systems. The offering is also structured to ensure that Schwarzman and his lieutenants (especially #2 man Hamilton James) retain full control over its dealings.
Now, why would Blackstone go public if it has benefited so much, during the twenty-plus years since its founding, from keeping its business private -- and indeed, for maximizing the value of its portfolio businesses specifically by taking them private? The answer would seem to be money. World financial markets are swimming in cash; Blackstone seems to be riding as high as it ever has, both on a financial basis and in terms of its stature in the eyes of Wall Street. As they've done so many times before, the moneymakers at Blackstone are taking a calculated risk that this deal will leave them even richer than before. At the head of the line is the multibillionaire Schwarzman, a titan of both finance and New York's high society; according to The Wall Street Journal, the Blackstone IPO could double Schwarzman's fortune -- which is saying something, considering that he may already be worth $10 billion.
Energy
TXU
Since Hoover's is headquartered in Austin, it's easy to get a close-up view of the Texas Legislature (i.e. "the Lege") when it's in session. Given the quirks of the Texas Constitution, the Lege sits for only a few months every other year, but that just increases the drama surrounding it. A good rule of thumb is that when the Lege is in session, everything's up for debate.
What does all this have to do with TXU? Earlier this year, the company agreed to a $45 billion leveraged buyout -- potentially the biggest of all time -- by an investor group led by Goldman Sachs, Kohlberg Kravis Roberts, and Texas Pacific Group. The deal included a twist that was music to the ears of Texas environmentalists and ratepayers alike: the buyout firms said they would call off TXU's controversial plans to build 11 new coal-fired power plants around the state. The whole deal, in fact, was announced with the blessing of Environmental Defense and the Natural Resources Defense Council, since the private equity bidders promised to build only three new coal plants, plus take other steps to limit TXU's impacts on global warming.
And then the Lege got involved. Texas lawmakers on both sides of the aisle are unhappy with the rate hikes that TXU imposed on its customers during periods of high natural gas prices during the past few years, especially since rates weren't lowered again when gas prices declined. Plus the legislators want to extend the authority of the Texas Public Utilities Commission to regulate -- or even forbid -- the buyout deal. The firms bidding for TXU seem perplexed by this turn of events, and have made noises that they might call the whole thing off if the Lege pushes them too hard.
Finance
New Century Financial
No doubt New Century Financial wishes it were one of the lucky lenders who have avoided the nasty effects of the meltdown in subprime lending. The troubled lender enjoyed go-go sales and profits during the past few years, when interest rates were low and the market was booming for mortgages to customers with less-than-perfect credit. But now -- with the threat of bankruptcy looming -- New Century has been forced to hand over billions of dollars' worth of its mortgages to creditors. The chaos in the world of subprime lending seems certain to claim at least a few more companies before it subsides.