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American alternative investment company From Wikipedia, the free encyclopedia
Blackstone Inc. is an American alternative investment management company based in New York City. Blackstone's private equity business has been one of the largest investors in leveraged buyouts in the last three decades, while its real estate business has actively acquired commercial real estate across the globe. Blackstone is also active in credit, infrastructure, hedge funds, secondaries, growth equity, and insurance solutions. As of May 2024, Blackstone has more than US$1 trillion in total assets under management, making it the largest alternative investment firm globally.[2]
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Headquarters at 345 Park Avenue | |
| Company type | Public |
|---|---|
| Industry | Financial services |
| Founded | 1985 |
| Founders | |
| Headquarters | 345 Park Avenue (New York City, U.S.) |
Key people |
|
| Products | |
| Revenue |  US$8.02 billion (2023) |
| US$2.44 billion (2022) | |
| AUM |  US$1.04 trillion (2023) |
| Total assets | US$40.3 billion (2023) |
| Total equity | US$6.82 billion (2023) |
Number of employees | 4,735 (2023) |
| Subsidiaries | Blackstone Credit |
| Website | blackstone |
| Footnotes / references [1] | |
Blackstone was founded in 1985 as a mergers and acquisitions firm by Peter G. Peterson and Stephen A. Schwarzman, who had previously worked together at Lehman Brothers.
Blackstone was founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman with US$400,000 (equivalent to $1.1 million in 2023) in seed capital.[3]: 45–56 [4] The founders derived their firm's name from their names: "Schwarz" is German for "black"; "Peter", "Petros", or "Petra" (Πέτρος and πετρα, the masculine and feminine rendering of the word, respectively) means "stone" or "rock" in Greek.[5][6] The two founders had previously worked together at Lehman Brothers. There, Schwarzman served as head of global mergers and acquisitions business.[7] Prominent investment banker Roger C. Altman, another Lehman veteran, left his position as a managing director of Lehman Brothers to join Peterson and Schwarzman at Blackstone in 1987, but left in 1992 to join the Clinton Administration as Deputy Treasury Secretary and later founded advisory investment bank Evercore Partners in 1995.[8]
Blackstone was originally formed as a mergers and acquisitions advisory boutique. It advised on the 1987 merger of investment banks E. F. Hutton & Co. and Shearson Lehman Brothers, collecting a $3.5 million fee.[9][10]
From the outset in 1985, Schwarzman and Peterson planned to enter the private equity business but had difficulty in raising their first fund because neither had ever led a leveraged buyout.[3]: 45–56 Blackstone finalized fundraising for its first private equity fund in the aftermath of Black Monday, the October 1987 global stock market crash. After two years of providing strictly advisory services, Blackstone decided to pursue a merchant banking model after its founders determined that many situations required an investment partner rather than just an advisor. The largest investors in the first fund included Prudential Insurance Company, Nikko Securities and the General Motors pension fund.[11]
Blackstone also ventured into other businesses, most notably investment management. In 1987 Blackstone entered into a 50–50 partnership with the founders of BlackRock, Larry Fink (current CEO of BlackRock), and Ralph Schlosstein (CEO of Evercore). The two founders, who had previously run the mortgage-backed securities divisions at First Boston and Lehman Brothers, respectively, initially joined Blackstone to manage an investment fund and provide advice to financial institutions. They also planned to use a Blackstone fund to invest in financial institutions and help build an asset management business specializing in fixed income investments.[12][13]
As the business grew, Japanese bank Nikko Securities acquired a 20% interest in Blackstone for a $100 million investment in 1988 (valuing the firm at $500 million). Nikko's investment allowed for a major expansion of the firm and its investment activities.[14] The growth firm also recruited politician and investment banker David Stockman from Salomon Brothers in 1988. Stockman led many key deals in his time at the firm but had a mixed record with his investments.[3]: 144–147 He left Blackstone in 1999 to start his own private equity firm, Heartland Industrial Partners, based in Greenwich, Connecticut.[15]
The firm advised CBS Corporation on its 1988 sale of CBS Records to Sony to form what would become Sony Music Entertainment.[16] In June 1989, Blackstone acquired freight railroad operator CNW Corporation.[17] That same year, Blackstone partnered with Salomon Brothers to raise $600 million to acquire distressed thrifts in the midst of the savings and loan crisis.[18]
In 1990, Blackstone launched its hedge funds business, initially intended to manage investments for Blackstone senior management.[19] That same year, Blackstone formed a partnership with J. O. Hambro Magan in the UK and Indosuez in France.[20][21] Additionally, Blackstone and Silverman acquired a 65% interest in Prime Motor Inn's Ramada and Howard Johnson franchises for $140 million, creating Hospitality Franchise Systems as a holding company.[22]
In 1991, Blackstone created its Europe unit[23][24] and launched its real estate investment business with the acquisition of a series of hotel businesses under the leadership of Henry Silverman. In October 1991, Blackstone and Silverman added Days Inns of America for $250 million.[25] In 1993, Hospitality Franchise Systems acquired Super 8 Motels for $125 million.[26] Silverman would ultimately leave Blackstone to serve as CEO of HFS, which later became Cendant Corporation.[27]
Blackstone made a number of notable investments in the early and mid-1990s, including Great Lakes Dredge and Dock Company (1991), Six Flags (1991), US Radio (1994), Centerplate (1995), MEGA Brands (1996). Also, in 1996, Blackstone partnered with the Loewen Group, the second-largest funeral home and cemetery operator in North America, to acquire funeral home and cemetery businesses. The partnership's first acquisition was a $295 million buyout of Prime Succession from GTCR.[28][29][30]
In 1995, Blackstone sold its stake in BlackRock to PNC Financial Services for $250 million. Between 1995 and 2014, PNC reported $12 billion in pretax revenues and capital gains from BlackRock. Schwarzman later described the selling of BlackRock as his worst business decision ever.[31]
In 1997, Blackstone completed fundraising for its third private equity fund, with approximately $4 billion of investor commitments[32] and a $1.1 billion real estate investment fund.[33] Also in 1997, Blackstone made its first investment in Allied Waste.[34] In 1998, Blackstone sold a 7% interest in its management company to AIG, valuing Blackstone at $2.1 billion.[35] In 1999, Blackstone partnered with Apollo Management to provide capital for Allied Waste's acquisition of Browning-Ferris Industries. Blackstone's investment in Allied was one of its largest at that point in the firm's history.[36]
In 1999, Blackstone launched its mezzanine capital business. It brought in five professionals, led by Howard Gellis from Nomura Holding America's Leveraged Capital Group, to manage the business.[37]
Blackstone's investments in the late 1990s included AMF Group (1996), Haynes International (1997), American Axle (1997), Premcor (1997), CommNet Cellular (1998), Graham Packaging (1998), Centennial Communications (1999), Bresnan Communications (1999), and PAETEC Holding Corp. (1999). Haynes and Republic Technologies International both had problems and ultimately filed bankruptcy.[3]: 145–146
Blackstone's investments in telecommunications businesses—four cable TV systems in rural areas (TW Fanch 1 and 2, Bresnan Communications and Intermedia Partners IV) and a cell phone operator in the Rocky Mountain states (CommNet Cellular) were among the most successful of the era, generating $1.5 billion of profits for Blackstone's funds.[3]: 148–155
Blackstone Real Estate Advisers, its real estate affiliate, bought the Watergate complex in Washington D.C. in July 1998 for $39 million[38] and sold it to Monument Realty in August 2004.[39]
In October 2000, Blackstone acquired the mortgage for 7 World Trade Center from the Teachers Insurance and Annuity Association.[40][41]
In July 2002, Blackstone completed fundraising for a $6.45 billion private equity fund, Blackstone Capital Partners IV, the largest private equity fund at that time.[43]
With a significant amount of capital in its new fund, Blackstone was one of a handful of private equity investors capable of completing large transactions in the adverse conditions of the early 2000s recession. At the end of 2002, Blackstone, together with Thomas H. Lee Partners and Bain Capital, acquired Houghton Mifflin Company for $1.28 billion. The transaction represented one of the first large club deals completed since the collapse of the Dot-com bubble.[44]
In 2002, Hamilton E. James joined Blackstone, where he serves as president and chief operating officer. He also serves on the firm's executive and management committees, and its board of directors.[45] In late 2002, Blackstone acquired TRW Automotive in a $4.7 billion buyout, the largest private equity deal announced that year (the deal was completed in early 2003). TRW's parent was acquired by Northrop Grumman, while Blackstone purchased its automotive parts business, a major supplier of automotive systems.[3]: 176, 197, 206–207 [46] Blackstone also purchased a majority interest in Columbia House, a music-buying club, in mid-2002.[47]
Blackstone made a significant investment in Financial Guaranty Insurance Company (FGIC), a monoline bond insurer alongside PMI Group, The Cypress Group and CIVC Partners. FGIC incurred heavy losses, along with other bond insurers in the 2008 credit crisis.[48]
Two years later, in 2005, Blackstone was one of seven private equity firms involved in the buyout of SunGard in a transaction valued at $11.3 billion. Blackstone's partners in the acquisition were Silver Lake Partners, Bain Capital, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts, Providence Equity Partners, and TPG Capital. This represented the largest leveraged buyout completed since the takeover of RJR Nabisco at the end of the 1980s leveraged buyout boom. Also, at the time of its announcement, SunGard was the largest buyout of a technology company in history, a distinction it ceded to the buyout of Freescale Semiconductor. The SunGard transaction is also notable for the number of firms involved, the largest club deal completed to that point.[3]: 225 The involvement of seven firms in the consortium was criticized by investors in private equity who considered crossholdings among firms to be generally unattractive.[49][50]
In 2006, Blackstone launched its long/short equity hedge fund business, Kailix Advisors. According to Blackstone, as of September 30, 2008, Kailix Advisors had $1.9 billion of assets under management. In December 2008, Blackstone announced that Kailix would be spun off to its management team to form a new fund as an independent entity backed by Blackstone.[51]
While Blackstone was active on the corporate investment side, it was also busy pursuing real estate investments. Blackstone acquired Prime Hospitality[52] and Extended Stay America in 2004. Blackstone followed these investments with the acquisition of La Quinta Inns & Suites in 2005. Blackstone's largest transaction, the $26 billion buyout of Hilton Hotels Corporation, occurred in 2007 under the tenure of Hilton CFO Stephen Bollenbach.[53] Extended Stay Hotels was sold to The Lightstone Group in July 2007 and Prime Hospitality's Wellesley Inns were folded into La Quinta.[54] La Quinta Inns & Suites was spun out for IPO in 2014 and later acquired by Wyndham Hotels & Resorts.[55]
During the buyout boom of 2006 and 2007, Blackstone completed some of the largest leveraged buyouts. Its most notable transactions during this period included:
| Investment | Year Acquired | Description of Transaction | Ref. |
|---|---|---|---|
| TDC | 2005 | In December 2005, Blackstone together with a group of firms, including Kohlberg Kravis Roberts, Permira, Apax Partners and Providence Equity Partners, acquired Tele-Denmark Communications. The company was the former telecom monopoly in Denmark, under the banner Nordic Telephone Company (NTC). The acquisition was made for $11 billion. | [56] |
| EQ Office | 2006 | Blackstone completed the $37.7 billion acquisition of one of the largest owners of commercial office properties in the US. At the time of its announcement, the EQ Office buyout became the largest in history, surpassing the buyout of Hospital Corporation of America. It would later be surpassed by Kohlberg Kravis Roberts's buyout of TXU. Vornado Realty Trust bid against Blackstone, pushing up the final price. | [3]: 239–254 [57] |
| Freescale Semiconductor | A consortium led by Blackstone and including the Carlyle Group, Permira and the TPG Capital completed the $17.6 billion takeover of the semiconductor company. At the time of its announcement, Freescale would be the largest leveraged buyout of a technology company ever, surpassing the 2005 buyout of SunGard. The buyers were forced to pay an extra $800 million because KKR made a last minute bid as the original deal was about to be signed. Shortly after the deal closed in late 2006, cell phone sales at Motorola Corp., Freescale's former corporate parent and a major customer, began dropping sharply. In addition, in the recession of 2008–2009, Freescale's chip sales to automakers fell off, and the company came under great financial strain. | [3]: 231–235 [58] | |
| Michaels | Blackstone, together with Bain Capital, acquired Michaels, the largest arts and crafts retailer in North America in a $6.0 billion leveraged buyout in October 2006. Bain and Blackstone narrowly beat out Kohlberg Kravis Roberts and TPG Capital in an auction for the company. | [59] | |
| Nielsen Holdings | Blackstone together with AlpInvest Partners, Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts and Thomas H. Lee Partners acquired the global information and media company formerly known as VNU. | [60][61][62] | |
| Orangina | Blackstone, together with Lion Capital acquired Orangina, the bottler, distributor and franchisor of a number of carbonated and other soft drinks in Europe from Cadbury Schweppes for €1.85 billion | [63] | |
| Travelport | Travelport, the parent of the travel website Orbitz.com, was acquired from Cendant by Blackstone and Technology Crossover Ventures in a deal valued at $4.3 billion. The sale of Travelport followed the spin-offs of Cendant's real estate and hospitality businesses, Realogy Corporation and Wyndham Worldwide Corporation, respectively, in July 2006. (Later in the year, TPG and Silver Lake would acquire Travelport's chief competitor Sabre Holdings.) Soon after the Travelport buyout, Travelport spun off part of its subsidiary Orbitz Worldwide in an IPO and bought a Travelport competitor, Worldspan. | [64] | |
| United Biscuits | In October 2006 Blackstone, together with PAI Partners announced the acquisition of the British biscuit producer. The deal was completed in December 2006. | [65][66] | |
| RGIS Inventory Specialists | 2007 | In March 2007, RGIS announced that Blackstone Group purchased a controlling interest in the company, the terms of the transaction were not disclosed. | [67] |
| Biomet | Blackstone, Kohlberg Kravis Roberts, TPG Capital and Goldman Sachs Capital Partners acquired Biomet, a medical device manufacturer for $10.9 billion. | [68] | |
| Hilton Worldwide | Blackstone acquired the premium hotel operator for approximately $26 billion, representing a 25% premium to Hilton's all-time high stock price. The Hilton deal, announced on July 3, 2007, is often referred to as the deal that marked the "high water mark" and the beginning of the end of the multi-year boom in leveraged buyouts. The company restructured its debt in 2010. | [69][70][3]: 299–300 |
In 2004, Blackstone had explored the possibility of creating a business development company (BDC), Blackridge Investments, similar to vehicles pursued by Apollo Management.[71] Blackstone failed to raise capital through an initial public offering that summer and the project were shelved.[72] It also planned to raise a fund on the Amsterdam stock exchange in 2006, but its rival, Kohlberg Kravis Roberts & Co., launched a $5 billion fund there that soaked up all demand for such funds, and Blackstone abandoned its project.[3]: 221–223
In 2007, Blackstone acquired Alliant Insurance Services, an insurance brokerage firm. The company was sold to Kohlberg Kravis Roberts in 2012.[73]
On June 21, 2007, Blackstone became a public company via an initial public offering, selling a 12.3% stake in the company for $4.13 billion, in the largest U.S. IPO since 2002.[74][75]
During the 2007–2008 financial crisis, Blackstone closed only a few transactions. In January 2008, Blackstone made a small co-investment alongside TPG Capital and Apollo Management in their buyout of Harrah's Entertainment, although that transaction had been announced during the buyout boom period. Other notable investments that Blackstone completed in 2008 and 2009 included AlliedBarton, Performance Food Group,[76][77] Apria Healthcare, and CMS Computers.
In July 2008, Blackstone, NBC Universal, and Bain Capital acquired The Weather Channel from Landmark Communications for $3.5 billion. In 2015, the digital assets were sold to IBM for $2 billion. In 2018, the remainder of the company was sold to Byron Allen for $300 million.[78]
In December 2009, Blackstone acquired Busch Entertainment Corporation from Anheuser-Busch InBev for $2.9 billion.[79]
In November 2013, Merlin Entertainments, owned in part by Blackstone Group, became a public company via an initial public offering on the London Stock Exchange.[80][81]
In August 2010, Blackstone announced it would buy Dynegy, an energy firm, for nearly $5 billion, but the acquisition was terminated in November 2010.[82]
In May 2023, Blackstone entered into an agreement to divest its stake in IBS Software, a Kerala-based software-as-a-service (SaaS) provider. The transaction, valued at $450 million, involved the sale of Blackstone's stake to the global private equity firm Apax.[166][167]
In October 2023, Blackstone divested its stake in the Spanish hotel conglomerate Hotel Investment Partners (HIP) to the Singaporean sovereign wealth fund GIC. As part of the agreement, GIC secured a 35% stake in HIP, with the deal establishing a valuation exceeding €4 billion for the company.[168]
In December 2023, Blackstone announced its intention to divest its entire 23.59% stake, valued at $833 million, in Embassy Office Parks, India's largest real estate investment trust. The decision came four years after the initial listing of the REIT, as revealed in a term sheet disclosed by Reuters.[169]
Blackstone operates through four primary departments: private equity; real estate; hedge funds; and credit.[12]
As of 2019[update], Blackstone was the world's largest private equity firm by capital commitments as ranked by Private Equity International's PEI 300 ranking.[170] After dropping to second behind KKR in the 2022 ranking,[171] it regained the top spot in 2023,[172] and retained it in 2024.[173] The firm invests through minority investments, corporate partnerships, and industry consolidations, and occasionally start-up investments. The firm focuses on friendly investments in large capitalization companies.[12]
Blackstone has primarily relied on private equity funds, pools of committed capital from pension funds, insurance companies, endowments, fund of funds, high-net-worth individuals, sovereign wealth funds, and other institutional investors.[174] From 1987 to its IPO in 2007, Blackstone invested approximately $20 billion in 109 private equity transactions.[12]
Blackstone's most notable investments include Allied Waste,[36] AlliedBarton Security Services, Graham Packaging, Celanese, Nalco, HealthMarkets, Houghton Mifflin, American Axle, TRW Automotive, Catalent Pharma Solutions, Prime Hospitality, Legoland, Madame Tussauds,[175] Luxury Resorts (LXR), Pinnacle Foods, Hilton Hotels Corporation, Motel 6, Apria Healthcare, Travelport, The Weather Channel (United States) and The PortAventura Resort. In 2009, Blackstone purchased Busch Entertainment (comprising the Sea World Parks, Busch Garden Parks and the two water parks).[176] In 2020 it acquired Ancestry.com.
In 2012, Blackstone acquired a controlling interest in Utah-based Vivint, Inc., a home automation, security, and energy company.[177]
Blackstone's most notable real estate investments have included QTS,[178] EQ Office, Hilton Worldwide, Trizec Properties, Center Parcs UK, La Quinta Inns & Suites, Motel 6, Wyndham Worldwide, Southern Cross Healthcare and Vicinity Centres.[179]
The purchase and subsequent IPO of Southern Cross led to controversy in the UK. Part of the purchase involved splitting the business into a property company, NHP, and a nursing home business, which Blackstone claimed would become "the leading company in the elderly care market". In May 2011, Southern Cross, now independent, was almost bankrupt, jeopardizing 31,000 elderly residents in 750 care homes. It denied blame, although Blackstone was widely accused in the media for selling on the company with an unsustainable business model and crippled with an impossible sale and leaseback strategy.[180][181]
After the 2007–2010 subprime mortgage crisis in the United States, Blackstone Group LP bought more than $5.5 billion worth of single-family homes to rent, and then be sold when the prices rise.[182]
In 2014, Blackstone sold Northern California office buildings for $3.5 billion.[183] The buildings sold in San Francisco and Silicon Valley included 26 office buildings and two development parcels.[184]
In 2018, a critique was raised regarding a purchase agreement on several hundred apartments in Frederiksberg, Denmark, between Blackstone's Danish partner North 360 and Frederiksberg Boligfond, a nonprofit housing organization Frederiksberg Municipality established in 1930. After resistance by residents and questions about the purchase agreement's legality, Blackstone withdrew from it in October 2019.[185]
On December 1, 2022, Blackstone restricted withdrawals from its $125 billion real estate investment fund BREIT due to a surge in redemption requests from investors.[186] The move caused investor consternation and limited the ability to attract new capital for BREIT.[187]
In 1990, Blackstone created a fund of hedge funds business to manage internal assets for Blackstone and its senior managers. This business evolved into Blackstone's marketable alternative asset management segment, which was opened to institutional investors. Among the investments included in this segment are funds of hedge funds, mezzanine funds, senior debt vehicles, proprietary hedge funds and closed-end mutual funds.[12]
In March 2008, Blackstone acquired GSO Capital Partners, a credit-oriented alternative asset manager, for $620 million in cash and stock and up to $310 million through an earnout over the next five years based on earnings targets. The combined entity created one of the largest credit platforms in the alternative asset management business, with over $21 billion under management.[188] GSO was founded in 2005 by Bennett Goodman, Tripp Smith, and Doug Ostrover. The GSO team had previously managed the leveraged finance businesses at Donaldson, Lufkin & Jenrette and later Credit Suisse First Boston, after it acquired DLJ. Blackstone was an original investor in GSO's funds. After the acquisition, Blackstone merged GSO's operations with its existing debt investment operations.[189][51]
In separate cases in 2018 and 2019, the hotel chain Motel 6, owned by Blackstone, agreed to settle for a total of $19.6 million for giving guest lists to U.S. Immigration and Customs Enforcement (ICE) without a warrant.[190][191]
In 2020, Blackstone acquired a majority stake in Ancestry.com, which controls access to millions of people's genetic data, heightening concern about Blackstone's data privacy practices.[192] This data was disclosed to Blackstone, and it has aggressively defended itself against class action litigation relating to misuse of the data of people who did not consent to genetic testing but were affected through direct biological relations or other means of identification.[193]
An investigation by the U.S. Department of Labor showed that more than 100 children had been working illegally for Packers Sanitation Services Inc (PSSI), a slaughterhouse cleaning firm owned by Blackstone, across the United States. Under the Fair Labor Standards Act, PSSI was fined $15,138 by the Department of Labor for each minor-aged employee who was employed in breach of the law, totaling $1.5 million in civil money penalties.
The company has invested in companies with links to the commercialization and deforestation of the Amazon rainforest.[194][195][196][197]
In 2019, a United Nations report found that Blackstone's massive purchasing of single-family homes after the 2007–2008 financial crisis had "devastating consequences".[198] The report alleged that Blackstone had abused tenants with exorbitant fees, rent hikes, and aggressive eviction practices, and that Blackstone's real estate practices had a disproportionate impact on communities of color, in part because the company targeted foreclosures resulting from subprime loans.
The report also condemned Blackstone for "using its significant resources and political leverage to undermine domestic laws and policies that would in fact improve access to adequate housing". Blackstone spent at least $6.2 million to defeat California's Proposition 10, which would have allowed cities to enact rent control. Blackstone is a member of the Real Estate Roundtable, a special interest group that spends millions on lobbying and political donations every year.[199]
United Nations housing rapporteur Leilani Farha and UN Working Group on Business and Human Rights chair Surya Deva criticized Blackstone's business practices, including frequent rent increases and "aggressive" evictions, for contributing to the global housing crisis. Blackstone disputed these claims.[200]
Source:[201]
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