According to todays news Deloitte will most likely sell Virgin Australia to Bain Capital. This is after yesterdays news which said that the Bondholders led by an ex-Goldman Sachs advisor were going to outbid Bain.
Private Equity are vultures. Not a single person in Australia that has ever had anything to do them will say otherwise. It outrages me that the politicians and media can have such a short memory over the history of private equity takeovers. This is one of many.
https://foragerfunds.com/news/dick-smith-is-the-greatest-private-equity-heist-of-all-time/
I have decided to publish some sections I have written about private equity here in the interest of public information. The first is an email sent yesterday to journalists.
Dear Journalists,
Just when I thought the Virgin sales process couldn't be any smellier, there is an article today that the Bondholders are stepping in at the 11th hour to takeover Virgin.
So let me get this straight, the Lead Advisor for the Bond Holders comes from Goldman Sachs and Bain Capital the other leading private equity company in the running to takeover Virgin is being advised by Goldman Sachs.
It all stinks of collusion on a grand scale.
We need to tell the Unions, We need to tell the politicians, we need to tell the people of Australia. WE WANT AN OPEN AND TRANSPARENT SALES PROCESS RUN BY AN ADMINISTRATION COMPANY THAT DOES NOT DO DEALS WITH FAVOURED PARTIES.
THIS IS AUSTRALIA AND WE ARE NOT RUN BY WALL STREET FIRMS
WE ARE NOT CONTROLLED BY GOLDMAN SACHS. THIS WALL STREET FIRM MIGHT PUT THEIR PEOPLE IN OUR HIGHEST POSITION (malcolm turnbull) BUT THEY WONT TAKE OUR SECOND AIRLINE.
THE VULTURES - Private Equity
Private equity firms work with one business motto - buy underperforming businesses as cheap as possible, turn around the business and sell it a few years later for as much as possible. As mentioned by Bridget Carter in the Australian on April 15 2020 “Private equity firm Kohlberg Kravis Roberts (KKR) is believed to have set up a special team to examine distressed acquisition opportunities in the Asia-Pacific, as some high-quality companies get brought to their knees over COVID-19 disruptions.”
The media make these deals look fiercely competitive but they are not. It’s more a case of “you guys can have this deal we’ll get the next one’”. There is no need to compete with each other when they can work with each other to acquire these companies that have been brought to their knees and transfer that wealth from shareholders to themselves. This is why staff exchanges between the so called ‘competing’ firms are so high. It is not uncommon at all for any of the private equity ‘guns’ to work for Credit Suisse, Macquarie, UBS, Goldman Sachs and JP Morgan over the duration of their career. In fact most of them work for multiple employers, the same ones that are doing all the private equity wheeling and dealing. We would go as far as to say the two Swiss giants UBS and Credit Suisse are one and the same.
Malcolm Turnbull's close friend Justin Milne was Chairman of MYOB. Milne Before Milne resigned at the ABC, KKR had taken a 17% stake in MYOB. Weeks after Milne resigned from the ABC, KKR asked for a meeting with Milne. KKR told Milne they wanted to buy MYOB at $3.70. KKR were being advised by Macquarie Capital. The MYOB Board were then advised by UBS.
But when you analyse it in greater depth, was the KKR takeover planned nine years before hand? Bain Capital a private equity firm well known for its association with 2012 Republican presidential candidate Mitt Romney outbid KKR and bought MYOB for $1.2 billion in 2011 then listed it on the ASX in 2015 and retained a 58 per cent stake. Bain sold most of it but kept a 6% stake. As they sold more and more the shorters started shorting it. UBS’s Aiden Allen ran the original auction where Bain outbid KKR for MYOB. UBS were MYOB’s bankers throughout and Aiden Allen became the advisor to MYOB in 2019 to recommend to the board the KKR takeover. Interesting he was involved in both.
Originally Aiden was a private equity ‘champ’ at UBS spending 10 years there, then he went to the investment banking team at Citibank and spent 4 years there. So much for the cut-throat ‘competition’ between investment banks. He then returned to UBS in 2017. While he was at the Citibank investment team Bain Capital was one of his main clients. But KKR is also one of Citi’s main clients. Aren’t Bain Capital and KKR supposed to be fierce competitors?
Another private equity firm TPG bought Myer off the Coles Myer Group and listed Myer as an IPO on the ASX, offloading their entire stake at the share price of $4.10 in 2009. The share price fell from day one all the way to where it is today (14c) and now private equity firms are already preparing to take it over again. Australia’s head of TPG at the time of the IPO, Ben Gray was originally at Credit Suisse. He was the son of a Tasmanian Premier. Ben’s friends from University days and still today are Robin Bishop Head of Investment banking at Macquarie Capital and Zac Fletcher a senior banker at Goldman Sachs. Myer netted TPG $1.3 billion dollars in profit in the three years they owned it before listing.
TPG also bought Inghams Group in 2013 for $880 million. Three years later they listed it on the ASX in an IPO valuing it at $1.3 billion. That was after selling many of the real estate assets for $500 million (double check). They used six lead joint managers to list it, Macquarie Capital, Credit Suisse, UBS, Morgan Stanley, Goldman Sachs and Citigroup. TPG retained 47% of Ingham’s. TPG offloaded most of those shares in 2018 using Citibank and more in 2019 using UBS in what are known as 'block trades' in other words a trade where there is a hell of a lot of insider trading to profit before and after the trade. After selling through UBS in 2019, UBS slapped on a sell rating on Inghams shares. After that Ingham’s became the most shorted stock in 2019. In 2020 TPG sold down another 5% in a block trade using Credit Suisse. By 2020 TPG owned less than 10%.
One person involved in the float of Ingham’s was Simon Cox while he was at Credit Suisse. Cox spent 20 years at UBS before moving to Credit Suisse and he was about to join Merrill Lynch just before he died. This time at UBS, Simon Cox’s team were the underwriters of the Arrium capital raising who tipped off other investment banks to short sell Arrium before the capital raising. They then short sold it themselves to hedge the losses they received when the share price fell through the capital raising. While Arrium was being destroyed by the shorters who were tipped off by UBS, Credit Suisse’s Simon Thackray was downramping Arrium, publicly saying they would fall further.
UBS/Credit Suisse’s Simon Cox also worked on Healthscope’s $3.6 billion Initial Public Offering. Up until 2010 Healthscope was an ASX listed company. Just as in the case of Myer, a takeover offer came from KKR. And just the same as Myer, that offer was trumped by TPG. And just as the case of Myer, KKR pulled away from the deal. Is that just a coincidence? Ben Gray was head of TPG. Before Ben Gray joined TPG he worked for Credit Suisse. TPG paid $1.73 billion for Healthscope. TPG along with the Carlyle group made $400 million when they listed it for $2.25 billion four years later. After listing they kept 37.5% which they gradually sold down until selling all their stake in 2015. At Healthscope in 2015, TPG used UBS to sell half their stake $810 million in a block trade. Goldman Sachs who invested in the IPO also sold their stake around here.
After TPG and Goldman Sachs sold out the share price crashed. The crash followed a bearish report by Credit Suisse. It was Credit Suisse that floated Healthscope for TPG along with Goldman Sachs and Merrill Lynch. Simon Cox who worked on the Healthscope IPO at Credit Suisse was about to start a new job at Merrill Lynch when he died. If you think this is too confusing, a point needs to be driven home here. Your head will be spinning trying to link all the connections but they are there. After TPG and Goldman Sachs sold out and after the bearish Credit Suisse report the short sellers started. By 2019 15% of Healthscopes shares were short sold.
There we have three companies which were destroyed in price, some would say by negative sentiment and a lot of that negative sentiment was from reports written by Credit Suisse. In the three cases there were direct links between Credit Suisse and the private equity companies that had listed the IPO companies. And the negative reports followed the exiting of positions of those private equity companies. Ben Gray from TPG was involved in all three, Myer, Healthscope and Inghams and he has worked for both TPG and Credit Suisse. Simon Cox at UBS was involved in many layers of the Ingham’s, Arrium and Healthscope deals and he has worked for both UBS and Credit Suisse.
The first of these corporate actions has already concluded. While we wait to see what happens at Myer and Inghams, Healthscope has already been taken over following a disappointing ride for shareholders. In 2019 BGH attempted to takeover Healthscope. BGH is Ben Gray’s new company. Remember now he led TPG’s listing of Healthscope. Healthscope’s Chairman was Paula Dwyer , and it was Ben Gray who had appointed her. BGH had superannuation behemoth and 10 per cent Healthscope investor AustralianSuper in its camp. And AusSuper wouldn't support another bid – even if it was a higher offer. And it was Australian Super that had lent all 10% of the shares they owned out to short sellers who had destroyed the Healthscope share price.
BGH WHO WERE ONE OF THE FINAL FOUR PRIVATE EQUITY FIRMS BIDDING FOR VIRGIN WERE BACKED BY AUSTRALIAN SUPER
AUSTRALIAN SUPER ARE ONE OF THE LARGEST LENDERS TO SHORT SELLERS IN AUSTRALIA
In the end BGH was trumped by Brookfield, another private equity. The takeover was at a price well below the Net Tangible Assets of the company. Months later, Brookfield took over Australia’s nursing home provider Aveo Group at a price 40% below net tangible assets. Aveo Directors accepted while mum and dad shareholders could do nothing to stop it despite another company being taken over below fair value.
Australian journalists Anthony Macdonald, Sarah Thompson, Joyce Moullakis and Bridget Carter refer to private equity guys as ‘champs’ , ‘stars’ and ‘guns’. We wonder why they portray them in that light? They write about them all the time, they know full well what they do. Is someone a 'gun' because they can trick people and governments out of money?
In each of the cases of Inghams, Healthscope, Spotless, Dick Smith and Myer that were launched on the ASX by private equity, the chickens eventually came home to roost. Up until they sold their shares, the boards were meeting targets, often by stripping costs and dressing up accounts to meet numbers. Things suddenly fall apart once the private equity firms sold out of their shares. Dressing up accounts is easy to do. Just ask Anchorage who dressed up the accounts of Dick Smith.
Virgin
Until today it was down to two private equity companies Bain and Cyrus to takeover Virgin and I have been shouting from the rooftops that we cannot let private equity in the door.
Earlier today in the ABC news, Cyrus said it had withdrawn its bid, complaining Virgin Australia’s administrators “have not returned calls, emails, or meaningfully engaged with Cyrus to progress its offer”.
Cyrus founder Stephen Freidheim said he was “disappointed that it has become necessary to withdraw our offer”.
“Cyrus firmly believes that the Australian aviation industry has a bright future and would be willing to reinstate our offer if the Administrators agree to re-engage in good faith, productive discussions with a view to concluding a transaction that will benefit all key stakeholders – employees, customers, Velocity members and bondholders,” he said.
Is anyone going to take notice of that? A company that was prepared to spend billions on an airline just pulled out because the administrator wouldn't return their calls?
Our view that there is collusion on a grand scale between administrators, short sellers, private equity, Super Funds, the media and ASIC has just been given some fuel in my view.
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