From Bloomberg:
Apollo Agrees to Buy Realogy for About $6.4 Billion
Apollo Management LP agreed to buy Realogy Corp., the owner of the Century 21 and Coldwell Banker real-estate brokers, for about $6.4 billion in a sign the U.S. housing slump may have touched bottom.
The New York-based buyout firm run by Leon Black will pay $30 per share, 18 percent more than the Dec. 15 closing price, for Realogy, the biggest U.S. residential broker, which only became publicly traded on Aug. 1. Including debt, Parsippany, New Jersey-based Realogy is valued at $9 billion, Apollo said.
“They’re betting that the market is going to come back,” said Karl Case, a real estate researcher at Wellesley College in Wellesley, Massachusetts. “It’s an interesting time to be buying a brokerage.”
…
Realogy Chairman and Chief Executive Officer Henry Silverman, 66, said the company’s purchase price “takes into account the substantial pressures and uncertainties facing the residential real estate markets that may well continue for some time.”Shares of Realogy rose to the equivalent of $29.86 at 11:57 a.m. in Frankfurt, 17 percent higher than Friday’s closing price in New York.
Realogy was one of four companies created this year in the breakup of Cendant Corp., the travel, leisure and real-estate business founded by Silverman in 1997. Realogy employs about 15,000 people and has 300,000 affiliated brokers. Its other brands include ERA, NRT Inc. and Sotheby’s International Realty.
Silverman will continue to serve as chairman and CEO until his employment agreement expires Dec. 31, 2007, Realogy and Apollo said. He will be succeeded by Vice Chairman and President Richard Smith. Silverman owns 2.9 million shares of Realogy and will be paid for those and his in-the-money options as other shareholders, Realogy said. He will not participate in the buyout with Apollo.
…
Apollo’s acquisition of Realogy is the second-largest leveraged buyout of a real estate company this year, after the purchase of Equity Office Properties Trust by Blackstone Group LP for $20 billion. That transaction, announced in November, is the largest takeover of a real estate investment trust. About $70 billion of buyouts of U.S. real estate companies have been announced this year, compared with just $8.7 billion in 2005, according to data compiled by Bloomberg.This year has been the most active ever for private equity buyouts. Buyout firms have raised record sums and announced more than $700 billion of acquisitions worldwide this year, more than double last year’s total, Bloomberg data show.
I will now attempt to snort a line of Drano.
So is this the proverbial “sign of the bottom”?
…or just another contrarian indicator pointing out that the worst is yet to come?
jb
Silverman, a very smart man.
takes his chips off the table, and gets to
stay on as CEO.
Blacks no dummy, see the market rebound.
Apollo Management also making a bid for Harrah’s.
Harrah’s Considers $16.7 Billion Offer, People Say
Harrah’s Entertainment Inc., the world’s largest casino company, received a buyout offer of as much as $16.7 billion from Apollo Management LP and Texas Pacific Group, two people familiar with the proposal said.
The bid, valued at as much as $90 a share, makes Texas Pacific and Apollo the most likely buyers, the people said. Harrah’s board considered the leveraged buyout proposal yesterday, said three people with knowledge of the meeting, who couldn’t be identified because the offer hasn’t been announced. It comes more than two months after the firms offered $15.1 billion for the Las Vegas-based owner of Caesars Palace and the Flamingo casino.
Thought this piece was interesting. From Bloomberg:
Stock Strategists Raise Alarms With Unanimous Call for Rally
Strategists at 12 of the biggest Wall Street firms agree that U.S. stocks will rally next year. The last year that happened was for 2001, when the Standard & Poor’s 500 Index dropped 13 percent.
Merrill Lynch & Co.’s Richard Bernstein and Bear Stearns & Co.’s Francois Trahan, two of the most bearish forecasters in the current four-year rally, both estimate the S&P 500 will surge to a record next year.
The unanimous view among the strategists tracked by Bloomberg that have made 2007 forecasts is just one signal of growing complacency about the market. An option-based index of investor concern dropped to a 13-year low last week, when the S&P 500 rose to its highest since November 2000. A survey of newsletter writers showed the least pessimism this year.
“Everybody lining up in the bull camp makes me more than a little nervous, and I was nervous anyway,” said Malcolm Polley, who helps manage $1.3 billion as president of Stewart Capital Advisors in Indiana, Pennsylvania. “There are enough potential pitfalls to take us to the downside.” Polley said he’s finding few stocks worth buying now.
the trend is your friend
pesche22 Says:
December 18th, 2006 at 8:07 am
Silverman, a very smart man.
takes his chips off the table, and gets to
stay on as CEO.
Blacks no dummy, see the market rebound.
——————-
Your comments have no substance!
When will the homebuilders be swept into the buyout mania?
jb
JB-
I think this isn’t a statement on RE as much as it is a story of LBO and private money scouring the world for equity. Any company that throws off enough cash to pay down assumed debt is a legit target for LBO these days…never mind the quality of earnings or execution.
Realogy is a POS spun off from a planet-sized POS (Cendant), run by a shyster (Silverman) who probably doesn’t even know the definition of cap rate. The purpose of Cendant’s getting into real estate franchising way back in the beginning wasn’t to try to make money in RE…the intent was to use RE to access personal consumer info in order to market other stuff- like hotel packages and rental cars- to the monied databases mined from RE transactions. That RE became the only profit center within Cendant was entirely a function of the red-hot market…there is no one, repeat NO ONE, within that organization that has even a rudimentary understanding of the business. Apollo will soon realize that you just can’t polish a turd. And another schmuck who should be in a Federal pen doing hard time walks away with a big payout. Urrrp…
I think because of the well-earned reputation most homebuilders have of hemorrhaging cash during down times, LBO will not dive in (except maybe TOL or LEN…two companies that are well-managed and have great cash flows). If the cash flow ain’t there, you can’t pay down the debt incurred to leverage and go private.
“shyster”
I guess we found something we agree on.
BOOOOOOOOOOOYAAAAAAAAAA
Bob
No thinking person could come to any other conclusion on Henry Silverman. It’s so easy to forget the Cendant debacle was the first of the major corporate blowups of the late 90’s-early 00’s.
I think Silverman was spared only because Cendant was the first in line. Public- and legal- sentiment had not soured to the point that it reached at the height of Enron/WorldCom. Silverman’s claim to have been duped and blindsided by the HFS crowd would never have flown a couple of years later.
Silverman is no one’s stooge, and I’ll never believe he didn’t know full well the character of the people with whom he partnered.
Just my $0.02. Cendant is a filthy organization from Silverman on down. They have been for years. I know people from their finance organization and I also almost took a job there. To quote a colleague: “…they are the kind of people that leave a ring around the bathtub…”
The Guy I know from cendant is as white bread as can be. Then again a guy used to work with also white bread convinced a guy to buy all new tires on his car with only 3k miles on it because of radial bulges. No conscience in these people and white bread sells.
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