Blackstone CEO sees brighter future for dealmaking

DUBAI, United Arab Emirates — The head of private equity giant Blackstone Group said Wednesday the industry’s worst days have passed as he confirmed plans to cash in on up to eight of the firm’s companies “in the near future.”

And although concerns remain about the strength of economic growth, especially in the U.S. and parts of Europe, new investment opportunities are beginning to emerge, Blackstone Chairman and CEO Stephen Schwarzman said.

“It looks as if a bottom has been reached,” he said, adding that the world’s financial system is in “a radically different place” from its precarious state a year ago.

Renewed optimism from Blackstone and other big private equity firms reflects growing confidence on Wall Street that a lasting economic rebound is on its way.

In a sign of the new outlook, Blackstone is preparing to list shares for as many as eight of the companies it now owns.

Plans for the expected initial public offerings were earlier revealed in media reports citing unnamed sources and a confidential letter to investors, but had not been publicly confirmed by Blackstone.

The planned listings include Blackstone’s Team Health hospital staffing business.

Blackstone ranks among the world’s largest buyout firms, with $93.5 billion assets under management. Its portfolio includes stakes in German telephone giant Deutsche Telekom, newspaper publisher Freedom Communications, casino operator Harrah’s Entertainment and the Hilton hotel chain.

Speaking to reporters after his Dubai speech, Schwarzman said the companies being prepared for possible listings are “spread across a variety of sectors” and geographic areas. He declined to identify the companies, citing legal advice.

Plunging stock markets all but killed the market for new stock offerings last year as nervous investors flocked to safer assets like cash and government bonds.

Now the mood is shifting. Discount-store chain Dollar General Corp. laid out plans in August to go public. It was bought in 2007 by private equity firm Kohlberg Kravis Roberts & Co. and other investors.

IPOScoop.com founder John Fitzgibbon said it was not surprising private equity firms — which typically take over companies using large amounts of debt with the aim of reselling them at a profit — would look to roll out stock offerings now, given the recent sharp gains in the stock market.

“They’re like olives in a bottle,” Fitzgibbon said of the IPOs. “It’s always difficult to get the first one out but then the rest come easily.”

Besides the expected stock offerings, Schwarzman said Blackstone in recent months has agreed to sell four additional companies in its portfolio, and is finalizing the sale of a fifth.

Unloading all five companies would pump $2.8 billion into Blackstone’s investment funds, he said.

Blackstone is also scouring new investment opportunities after the dry spell wrought by the credit crisis. Schwarzman said lenders are again starting to provide loans for new deals — if not at the levels they did before the market soured.

“I think there are signs of life in the bank market,” he said. “We can certainly do transactions in the $3 to $4 billion range.”

Last week, Blackstone bought Budweiser brewer Anheuser-Busch InBev’s 10 theme parks across the U.S., including the three SeaWorlds and two Busch Gardens, for at least $2.3 billion.

Schwarzman spoke one day after David Rubenstein, co-founder of the Carlyle Group, another big private equity firm, predicted the industry could grow larger than it was before the bust and said “the Great Recession is probably near its end.”

A brightening market for the dealmakers does not necessarily mean improving conditions will immediately be felt throughout the rest of the economy, however.

Economic stimulus efforts and the restocking of company inventories should help the U.S. economy grow by up to 3.5 percent in the second half of this year, Schwarzman predicted.

But he cautioned that that growth could be difficult to sustain and unemployment will remain high.

“We’re concerned about the magnitude of growth prospects as we progress through 2010,” he said. “We do not expect the U.S. economy to slip back into recession, but we do believe weak consumer spending and continued constraints on bank lending … will dampen the U.S. economic recovery in 2010 and 2011.”

The economic picture is mixed in Europe, he said, with some countries such as France and Germany likely to perform better than others, while “real pockets of strength” are developing in the emerging economies of Asia and Latin America.

Globally, though, it could be some time before the world feels the effects of any lasting rebound.

“It’ll take several years more before we’ll have what most people regard as a more normal situation with the re-establishment of freely-flowing but responsible credit, and unemployment levels back to what we would consider more typical in the developed world,” Schwarzman said.