CVC Capital Partners Ltd's attempt to acquire J Sainsbury Plc in Europe's largest leveraged buyout has put the private equity industry under greater scrutiny from politicians and trade unions.
The purchase would give closely held CVC and its partners, which aren't required to disclose their investors or returns, control of a company in the FTSE-100 Index for the first time, according to Bloomberg News. As buyout firms target larger companies, United Kingdom law makers and unions are criticizing them for asset stripping and secrecy.
"It's an unaccountable process," Labour party law maker Barry Sheerman said via telephone yesterday. "It's not going to go away. We've now got private equity companies that employ three million people."
Led by Chairman Michael Smith, London-based CVC is teaming up with United States firms Blackstone Group LP and Kohlberg Kravis Roberts & Co to bid for Sainsbury. The LBO group hasn't made an offer yet for the UK's third-biggest supermarket chain, which employs 153,000 people and has 769 stores that are used by 15 million customers a week.
Short-term view
CVC, which has raised more than US$18 billion of private equity funds since it started in 1981, doesn't list its investors or its returns on its Website. It does list investments in companies from Formula One motor racing to the UK's Automobile Association Ltd.
Firms like CVC typically aim to increase a company's profit by changing managers or strategy before selling their holdings within five years to a new buyer or to investors in an initial stock sale. The firms raise cash from institutional investors and use a combination of cash and loans to make purchases. The acquired company's cash flow is then used to pay down debt.
CVC has reaped some of the biggest profits in the industry. The firm has more than doubled a US$200 million commitment to its 2001 fund by the California Public Employees' Retirement System, the US pension plan's Website shows. Claire Ellis, a spokeswoman for CVC in London, declined to comment.
Source: 09/02/07, Shanghai Daily. |
