The Investment Blog from Advantage 'zyaada'

Three sales canceled, carried over, increased stakes and quick QIPs instead of IPOs, no one’s playing to the basement anymore..Wanted to sell, couldn’t get my price so bought some more. Whacky, emulating personal shopping habits of people more than corporate board tussles of the 1990s.

KKR now owns 80% of Aricent (79), WNS will still have Warburg and Axis bank is happy with $720 million where it could have easily absorbed another tranche of the same amount. And this is in the faster growing market of India that we have these white elephants.

In fact the 2007 majority view of these all private equity investments and tinny tiny private sector banks being as unproductive as the public sector white elephants may still be true. However, all these three companies should have spiffy new management in place soon.

KKR, CPP Investment Buy Flextronics’ Pie In Aricent For $255M

- TEAM VCC

Global private equity biggie Kohlberg Kravis Roberts & Co. has increased its investment in Aricent, following the completion of an agreement between KKR and CPP Investment Board with Flextronics to purchase certain securities. The transaction, valued at $255 million, closed on September 16, 2009.

WNS Halts Talks On Majority Stake Sale

- MADHAV A CHANCHANI

Outsourcing firm WNS (Holdings) Ltd has said that it will not pursue any further talks regarding the sale of majoity stake in the firm. Private equity major Warburg Pincus, which holds over 50% stake in the NYSE-listed firm, had put its stake on the block and was in discussion with other PE players and outsourcing firms.

Axis Bank Raises $720 Mn Via QIP, GDR

- MADHAV A CHANCHANI

The Indian QIP party, which kicked off with the real estate sector, has now assumed a diverse flavour. Private sector lender Axis Bank has raised $720 million throught its QIP (qualified institutional placement) and GDR (global depository reciepts) issue. via

via VC Circle

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We’ve all heard of the original RJR Nabisco KKR nexus, but it is still useful to remind people like us about runaway greed and when premiums on price become untenable. However in the fresh bid for Kraft from Cadbury’s, the opinion that the bid premium should only be dependent on cost savings is a little behind the times.  We all know Kraft and Irene Rosenfeld wouldn’t want to pay extra, but the Nabisco acquirer has one addl piece of knowledge, which they are going to find to be costly in the negotiated / hostile bid for Carr’s Cadbury empire.   Of the $2.7 billion sales in HY2009 (details here) over 40% is from growth markets and there sales growth would be easily in excess of 30%, with double digit margins, that have kept CBY’s 2008 net margins at 13% Thus the premium from the cost savings would just be GBP 736 million ($1.2 billion) , while the sales premium would be the additional 12% annual sales ( even if you assume the same for only 3-4 years, it amounts to another $2.4 billion from my estimates and so the price premium can easily cross 700 pence taking the price to well above 1260 pence.

This is of course rough estimates, but it is definitely worth someone like KKR to come in and keep the right management on top.

The Cadbury Balance sheet is entirely made of cash retained earnings making 99% of the Equity of $3 billion and it’s sales of $5.5 billion each year. There is no operating interest cost in its income statements.

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The US Coffee Chocolate Giant Kraft bid for the global leader Cadbury’s over the weekend with a $16.7 billion bid over the Labor Day weekend

Bournville, where Cadbury’s originated and Cadbury’s rejected the bid which sent traders hankering for chocolate and made the stock rise 40% in anticipation. This is the first Billion dollar deal tabled in 2009 with Toblerone maker Kraft bidding for Cadbury’s across the pond. Hershey’s and Nestle can’t be white knights because of Anti trust regulations while others seem small fry. Kraft offers only 300p ($4 and 80c) in cash and 0.26 shares of Kraft per Cadbury share, leaving the UK based giant short changed.

It also recommends that the integration of distribution etc will save the combined company a further $1 billion. However, i would seem intelligent on Cadbury’s behalf to ignore the deal and walk away if they can as synergies from the deal look unwieldy, and such easy peasy pipe dreams’ to get market share in Europe and Asia overnight have not fructified earlier, niether has someone like Deutsche Bank been able to make a dent in the US

Factors like Outsourcing and Geographical sensitivities anathema to Cultural and Social integration at large need a new integrative mechanism that may make such Global M&A still infeasible. In this case one however simply feels that Cadbury’s seems to have the more successful Corporate culture and organization and if there can be other private investors to back Cadbury’s and Nestle in the domain, the likes of Kraft and Hershey’s will be faster to learn subsidiary to these far superior expressions of Organization.

Analysts of course, are also hoping for a possible joint bid by Nestlé and Hershey, allowing Nestlé to take Cadbury’s gum business to compete with Mars with Hershey taking over the chocolate operation. (NYTimes.com) Even that wouldn’t be the best as we have seen in the aftermath of the BCS, RBS, ABN saga, but AOL has split its business lines recently and that may be fair. Also, Nestle at least would well leave acquiree ops alone to be without posting unnecessary hurdles in terms of rush hour integration

Will anything save this disaster for Cadbury? Can KKR Europe please step forward?

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zyakaira notes: With more than 400 funds already operating in China, the government is taking steps to formalize regulation as this may be the big ticket boost need for the Chinese economy to grow. Understandably, the first few funds are mostly equity focussed domestic funds.

Goldman Sachs Group Inc.(GS), also is planning to raise a domestic private-equity fund for his Beijing-based Hopu Investment Management Co., after raising $2.5 billion from overseas investors. Tax rate differences between Hongkong and China may not be addressed in one go in upcoming regulation

(Bloomberg) Blackstone Group LP’s(BX) joint venture with Shanghai’s government may be a first step in China’s effort to build its own private equity industry as the government seeks to foster corporate governance and strengthen capital markets.

Blackstone, the world’s biggest private equity firm, will set up a 5 billion yuan ($732 million fund), marking the first partnership between a global buyout firm and the Chinese government.

The Blackstone Zhonghua Development Investment Fund will be created with the newly formed government of Pudong New Area, Blackstone said in a statement Aug. 14.“The long-term goal is Chinese private equity,” said Adam Segal, a senior fellow of China studies at the Council on Foreign Relations.

“The Chinese don’t want their industry to be dominated by Blackstone and Carlyle.”The venture is part of China’s plans to establish itself as a major player in the global economy, said Doug Guthrie, a professor of management at New York University’s Stern School of Business. During the 1980s, China was aiming to be the world’s biggest manufacturer. In the 1990s, the country was seeking partnerships with multinational companies, including financial firms.

Now they want to develop their capital markets, he said.“This has nothing to do with needing capital and everything to do with gaining the institutional know-how to do it on their own,” Guthrie said.Targeting ShanghaiThe fund will target investments in Shanghai and neighboring areas. China and Blackstone didn’t disclose the structure of the fund. Blackstone spokesman Peter Rose declined to comment beyond the statement.

Blackstone will be the first global private-equity firm to secure investment from a tier-one city government in China.The agreement signifies China’s endorsement of private equity to bolster corporate governance and profit, said Vincent Chan, co-founder of China-focused fund Spring Capital Asia Ltd. TPG, Carlyle Group and KKR & Co. haven’t established domestic funds.

via Blackstone’s Shanghai Venture May Boost Chinese Private Equity – Bloomberg.com.

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Countries worldwide are dedicating vast amounts of  money to infrastructure spending over the next five years  and there are easy  avenues to prosper from this spending  with ETFs. A recent  white paper by Eric J. Gerritsen on  The Journal of Commerce Online provides a brilliant snap  shot of the infrastructure boom that awaits.

Eye Popping Numbers

According to Gerristen’s White Paper, the U.S. will spend $150 billion of the government’s stimulus funds on infrastructure. Other developed nations like Germany, Australia, Great Britain and Canada are all planning large amounts of infrastructure spending as well. In addition, emerging market nations such as China and India are planning to spend obscene amounts to get their countries into the 21st century. India alone is planning to double the number of its major international airports in the next decade. China also is planning very aggressive airport development. This is not to mention countries like Chile rolling out new roads, schools and stadiums with their $4 billion infrastructure plans and Brazil’s $212 billion spending on railways, roads and airports.

ETF Opportunities

On June 19, 2009 iShares rolled out an Emerging Market Infrastructure (ticker EMIF) fund to join Powershares Emerging Markets Infrastructure Fund (ticker (PXR) in the same space. Additionally, for those not willing to go the emerging markets route take a look at iShares Global Infrastructure (ticker IGF) or SPDR/FTSE Macquarie Global Infrastructure Fund (ticker GII).  Obviously, the need for infrastructure in the developing world is much greater than the developed world and hence provides an extraordinary opportunity.  Keep in mind though that the U.S. has done very little infrastructure spending in the last 40 years and also presents some great opportunities.

No chart for iShares Emerging Market Infrastructure (ticker EMIF) as it is one day old

Powershares Emerging Markets Infrastructure Fund (ticker PXR) is well above its 200 day EMA

via Railroads, bridges, airports and ETFs.

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So far, it’s shaping up to be a dreadful year for the retail industry. American shoppers generally soldier on through thick and thin. “But sales are down 2.5 percent in the first four months of 2009,” says Michael Niemira, chief economist at the International Council of Shopping Centers. The fancier the store, the uglier the results. Sales at Tiffany’s Fifth Avenue flagship were off 42 percent in the most recent quarter.

It’s also been an ugly period for the private-equity honchos who toil in offices a gemstone’s throw from Tiffany’s. The executives at the Blackstone Group and Kohlberg Kravis & Roberts (KKR), it turned out, were no smarter than the rest of us. In 2006 and 2007 they used loads of debt to purchase huge, cyclical companies at absurd valuations. Many of those firms are now struggling. Things are getting so bad that some private-equity barons may be forced to sell their seventh homes.

In late May, KKR reported that it lost $1.2 billion in 2008. As of March 31, 2009, the value of the five large companies on which it closed in 2007 was off 20 to 50 percent. Only one of KKR’s 2007 mega-deals was in the black. And it couldn’t be farther away—geographically, socioeconomically, culturally—from KKR’s Manhattan headquarters at 9 West 57th Street. It’s Dollar General, the largest of the thriving chains of 99-cent stores. At Dollar Tree, Inc. (3,667 stores), earnings were up nearly 38 percent in the most recent quarter. In its most recent quarter, Family Dollar Stores (6,654 stores) said same-store sales were up 6.2 percent. Both companies’ stocks are higher than they were when the market peaked in October 2007. But Dollar General (8,400 stores, $10.5 billion in 2008 sales) is performing even better. KKR says the value of its stake in the company is up 30.8 percent since July 2007, when KKR and several other partners completed the $7.3 billion acquisition, just as the fat lady was singing her final leveraged aria.

via Gross: How KKR is getting rich, one penny at a time

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BOSTON Reuters – Boston mutual fund giant Fidelity Investments and New York private equity firm Kohlberg Kravis Roberts & Co KFN.N have struck a deal to sell shares of KKR initial public offerings to retail customers, hoping for a comeback in the frozen market.

KKR has investments in 50 companies with a combined $200 billion of revenue. But KKR has not had an IPO since it took Sealy Mattress Co public in 2006.

There have been only seven traditional IPOs on U.S. exchanges this year, according to Thomson Reuters data. But that string of deals came after a six-month period that had seen only one U.S. IPO.

The market “may be picking up momentum,” said Mark Haggerty, president of Fidelitys capital markets unit, referring to the deals so far. “Overall its moving in the direction we hope,” he added.

IPOs tend to be riskier investments, their image strongly tied to the dot-com era, and the recession has all but eliminated them this year.

Under the terms of the deal, Fidelity will get the right to sell retail securities to its customers. Traditionally, retail customers had trouble getting IPO shares to buy through their brokers, since underwriters first look to wealthier customers and institutional investors to buy large numbers of the securities. Also, many financial advisers caution that these shares can be too risky for the average investor saving for retirement or similar goals.

Craig Farr, head of KKRs Capital Markets group, said he hopes the deal with Fidelity will increase demand for shares, or what he called greater “pricing tension.” If retail customers typically buy around 25 percent of an IPO, he said the new arrangement might increase that to 30 percent.

The deal between KKR and Fidelity would also give the mutual fund giants customers access to an IPO by the private equity firm itself if KKR were to do one, a source familiar with KKR said.

via
Fidelity to sell shares of KKR IPOs
| Deals
| Reuters

.

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I feel the potential is such that at least the Daredevils will start earning closer to 300 crores from edition 3 http://tr.im/ipldeccan

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ROYAL CHALLENGERS BANGALORE
Owners: United Spirits Ltd
Team captain: Kevin Pietersen (first six matches), Anil Kumble (for the remaining)
Franchisee fee: $111.6 mn
Brand value: $14 mn
Brand score: 50%
Sponsorships/brand associations: Wrigley’s and mostly in-house brands such as Kingfisher
Income from central pool: 2008: Rs35 crore
2009: approx. Rs76.5 crore
Income from team sponsorships: 2008: Not applicable, as all were in-house brands
2009: Rs10 crore
Total: 2008: Rs35 crore
2009: Rs86.5 crore
Restructuring shows results
From being a laggard in the first season to runner-up this year, Royal Challengers Bangalore was a spectacular success story in IPL 2. And if there was one star the team owed its success to, it was its flamboyant owner, liquor baron Vijay Mallya. After the team’s poor show in the first season, Mallya restructured his team and redefined its key result areas. His personal charisma added to the team’s brand appeal, says the MTI study.
“RCB had a lot of glamour associated with it as it had cheerleaders from the Washington Redskins as its own cheerleaders, and the glamour quotient was furthered by the presence of (actor) Katrina Kaif as the brand ambassador,” it says. The study pegged the brand value of Mallya’s team at $14 million (around Rs66.08 crore), but this is sure to pick up after this year’s comeback.
The team has not had too many sponsors but the owners say that was a conscious strategy.
**********************
RAJASTHAN ROYALS
Owners: Jaipur IPL Cricket Pvt. Ltd
Team captain: Shane Warne
Franchisee fee: $67 mn
Brand value: $10 mn
Brand score: 47%
Sponsorships/brand associations: At least nine; UltraTech Cement, Kingfisher, Royal Challenge, HDFC Standard Life, Puma, 7Up, TCS, Boost, Wrigley’s, fashion designer Kunal Rawal
Income from central pool:
2008:Rs35 crore
2009: approx. Rs76.5 crore
Income from sponsorships:
2008: Rs15 crore
2009: Rs100-110 crore
Total*:
2008: Rs50 crore
2009: Rs176.5-186.5 crore
Defending champions lose steam, gain ground in getting sponsorships
Rajasthan Royals surprised everyone when it stole the show in 2008. It was the least expensive team and its owners Jaipur IPL Cricket Pvt. Ltd did little to change the frugal image, with no marketing buzz and no celebrity endorser.
Winning the tournament in 2008 helped Rajasthan Royals attract bigger sponsors this year. The absence of star players, lesser-known owners and no brand ambassador last year combined to prevent it from creating a differentiated brand identity, but all that changed after the win. This year, the team’s glamour quotient went up when Bollywood actor Shilpa Shetty, with partner Raj Kundra, bought a 12% stake for $16.8 million, pushing the team’s total valuation to $140 million, against the $67 million the team owners had spent to buy it.
All this helped the team attract new sponsors, nine against four last year. The MTI study pegged Rajasthan Royals’ brand value at $10 million (around Rs47.2 crore), the lowest among all teams. Things may be worse next year given the team’s lacklustre performance this time.
**********************
MUMBAI INDIANS
Owners: Reliance Industries Ltd
Team captain: Sachin Tendulkar
Franchisee fee: $111.9 mn
Brand value: $17 mn
Brand score: 51%
Sponsorships/brand associations: At least 13, including MasterCard, Idea Cellular, Royal Stag, Kingfisher, Pepsi, Adidas, Zandu Balm, Red FM, Wrigley’s and Luminous Technology
Income from central pool:
2008: Rs35 crore
2009: approx. Rs76.5 crore
Income from team sponsorships:
2008: Rs15 crore
2009: Rs80-90 crore
Total*:
2008: Rs50 crore
2009: Rs156.5-166.5 crore
An average showing, loyalty factor driven by icon Tendulkar
The most expensive team, Mumbai Indians, bought by Reliance Industries Ltd, had an average run in IPL, both in terms of performance and valuation. Stuck in the middle of the grid, Mumbai Indians was eliminated at the quarter-final stage in both seasons.
The team, however, managed to attract an impressive number of sponsors this year. The MTI study put its brand value at $17 million (around Rs80.24 crore), the fourth highest in the league.
Although Bollywood actor Hrithik Roshan did lend himself to marketing initiatives through music videos and advertisements in 2008, it was icon player Sachin Tendulkar who really drove the loyalty factor for the team and brought in brands such as MasterCard, Pepsi and Adidas, among others.
The team’s biggest strength, according to the MTI study, was its huge fan following among cricket lovers.
**********************
KINGS XI PUNJAB
Owners: Preity Zinta, Ness Wadia and Mohit Burman
Team captain: Yuvraj Singh
Franchisee fee: $76 mn
Brand value: $15 mn
Brand score: 54%
Sponsorships/brand associations: At least nine; Emirates, Gulf Oil, Reebok, Springbok International, Nimbooz, Netlinkblue, Royal Challenge, Dabur Glucose-D, Orbit
Income from central pool:
2008: Rs35 crore
2009: approx. Rs76.5 crore
Income from team sponsorships:
2008: Rs15-18 crore
2009: Rs50-55 crore
Total*:
2008: Rs50-53 crore
2009: Rs126.5-129.5 crore
Zinta brought in advertisers; consistency won loyalty
More than its performance on the pitch, Mohali’s Kings XI Punjab is known for its perky co-owner, Bollywood actor Preity Zinta. The team’s performance in both seasons was average. Although the team made it to the semi-finals in 2008, this year it was eliminated at an earlier stage. The MTI report valued the team at $15 million (around Rs70.8 crore), fifth from the top in the list of franchisees.
“With consistent performance throughout the season, the team was able to attract consistent audience numbers and developed a loyal viewership,” the report says.
Zinta’s association with several brands as their ambassador helped the team get several sponsors and it is likely to have earned about Rs55 crore in sponsorships this year. Popular cricketers such as Brett Lee and Yuvraj Singh also upped the ante of the team.
**********************
KOLKATA KNIGHT RIDERS
Owners: Red Chillies Entertainment Pvt. Ltd
Team captain: Brendon McCullum
Franchisee fee: $75.09 mn
Brand value: $22 mn
Brand score: 52%
Sponsorships/brand associations: At least 12; Nokia, Belmonte, Star Plus, Gitanjali Jewellers, Sprite, Boomer, Reebok, Bilt, Tag Heuer, PlanetM, Next
Income from central pool:
2008: Rs35 crore
2009: approx. Rs76.5 crore
Income from sponsorships:
2008: Rs30 crore
2009: Rs90-100 crore
Total:
2008: Rs65 crore
2009: Rs166.5-176.5 crore
Brand value upped by Khan, likely to be most profitable this time too
It did not have a good run on the field last year and this year, Kolkata Knight Riders, or KKR, was the first team to be ousted from the IPL. Yet the team with Bollywood superstar Shah Rukh Khan, or SRK, as its owner topped the league in terms of brand value.
The MTI study pegged the team’s brand value at $22 million (Rs103.84 crore), 16% more than the second highest team with a brand value of $19 million. “The Shah Rukh Khan brand and the in-stadium marketing strategies of the teams have influenced the team’s brand value, resulting in higher income from gate receipts, merchandising revenues and attracting new team sponsors,” says the study.
The team’s below-average performance on the ground notwithstanding, KKR had the maximum buzz mainly because of SRK’s personal charisma and partly because of team member Saurav Ganguly. This year, an anonymous blogger, Fakeiplplayer, who wrote about KKR’s “inside story”, also kept the brand name bustling. The result: It was reported to be the most profitable team last year, and is likely to have repeated the feat this time as well.
**********************
CHENNAI SUPER KINGS
Owners: India Cements Ltd
Team captain: M.S. Dhoni
Franchisee fee: $91 mn
Brand value: $18 mn
Brand score: 53%
Sponsorships/brand associations: At least 15; Aircel, Cloud 9, Nivaran 90, Reebok, 7Up, Band-Aid, Peter England, Nivea, Lays, Orbit, Boomer, Star Vijay, Hello, Big Bazaar, Coromandel King
Income from central pool:
2008: Rs35 crore
2009: approx. Rs76.5 crore
Income from team sponsorships:
2008: Rs20 crore
2009: Rs100-110 crore
Total*:
2008: Rs55 crore
2009: Rs176.5-186.5 crore
Dhoni key in creating a strong brand
Last year’s runner-up and this year’s semi-finalist, Chennai Super Kings successfully delivered what its owners, India Cements Ltd, expected it to—creating brand awareness for the holding company. “IPL has given us a pan-India presence and strengthened our brand name in southern India,” Rakesh Singh, chief marketing officer of the team, had said earlier.
The brand, according to the MTI study, enjoyed a strong valuation at $18 million (around Rs85 crore), the third highest among the eight teams. With Mahendra Singh Dhoni as the captain and icon player, the brand benefited from his associations with brands such as Aircel, Reebok, Big Bazaar and 7Up.
“The purchase of M.S. Dhoni, under whose captaincy India won the world T20 championship, was the key factor in creating a large awareness, a stronger perception and gave great mileage for creating a strong brand for Chennai Super Kings,” says the study.
**********************
DELHI DAREDEVILS
Owners: GMR Holdings Pvt. Ltd
Team captain: Virender Sehwag
Franchisee fee: $84 mn
Brand value: $19 mn
Brand score: 55%
Sponsorships/brand associations: At least 13; Hero Honda, Kingfisher, Royal Challenge, Coca-Cola, Adidas, Fever 104 FM, Orbit, IBN7, CNN IBN, Cricketnext.com, designer Karan Nasir, Buzzintown.com
Income from central pool:
2008: Rs35 crore
2009: approx. Rs76.5 crore
Income from sponsorships:
2008: Rs15 crore
2009: Rs60 crore
Total*:
2008: Rs50 crore
2009: Rs136.5 crore
A balanced team, Sehwag’s popularity generated advertiser interest
The MTI study valued the Delhi Daredevils brand at $19 million (around Rs89.68 crore), the second highest among the eight teams. The reason: A strong squad, a popular brand ambassador (in 2008) and a well-known owner helped Delhi Daredevils create a good awareness and perception about the team, it says.
Even cricket experts hailed Delhi Daredevils as one of the most balanced teams on the field.
Owned by Bangalore-based infrastructure and construction group GMR Holdings Pvt. Ltd, the team established itself as a serious player with strong performances in both the first and second seasons of IPL.
The popularity of captain Virender Sehwag, along with Bollywood actor Akshay Kumar as the face of the team in 2008, helped it build a loyal fan base and generated interest among advertisers.
According to industry estimates, the team generated Rs15 crore in sponsorships in 2008, and this was likely to have increased to Rs60 crore this year, thanks to the deals signed with brands such as Coca-Cola, Fever 104 FM and Kingfisher Airlines.
**********************
DECCAN CHARGERS
Owners: Deccan Chronicle Holdings Ltd
Team captain: Adam Gilchrist
Franchisee fee: $107.01 mn
Current brand value: $11 mn
Current brand score: 44%
Sponsorships/brand associations: At least nine, including Odyssey, Puma, Kingfisher, McDowell’s, Big 92.7 FM, Boomer, Pepsi, Serendipity Tours
Income from central pool:
2008: Rs35 crore
2009: approx. Rs76.5 crore
Income from team sponsorships:
2008: Rs20 crore
2009: Rs50 crore
Total*:
2008: Rs55 crore
2009: Rs126.5 crore

DC lifted the cup, whither the brand?

Valuations remained low but win may change things
The team was, indeed, all charged up this year. Beating Royal Challengers by six runs in the final, the Deccan Chargers team not only scored in terms of popularity, but also made its team owners, Hyderabad-based media company, Deccan Chronicle Holdings Ltd richer by the Rs4.8 crore that it won in prize money.
The team’s valuation at $11 million (around Rs52 crore) was, however, not too impressive. The absence of a popular brand ambassador, lower awareness about its owners and fewer marketing and branding efforts prevented Deccan Chargers from building a popular brand, says the MTI study.
However, there was enough advertiser interest in the team this year, with the number of brand associations jumping from five to nine.
The team owners have been keen to sell a strategic stake in the team, but had not found any takers at the price they were quoting. This may now change.
* The total income does not include gate receipts, revenue from merchandising and prize money.

Cricket wins because it pays in India

zyakaira notes: this being an official study, we will be using this to work on all things IPL here and at http://twitterone.mobi

All IPL brands have earned 150-200 crores in 2009 edition with 110 million viewers ratifying the IPL’s tag of 8200 crores ($1.3 bllion) for media rights. Now apart from their going public, i feel the potential is such that at least a couple of these franchises like the Daredevils will start earning closer to 300 crores from edition 3

via Brand valuation | How the teams fared

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Private equity firm Carlyle Group CYL.UL is valuing an investment it made in chip maker Freescale Semiconductor FSLSM.UL at 85 percent below its cost, a document obtained by Reuters shows.

Formerly Motorola’s semiconductor unit, Freescale was bought by Carlyle, Blackstone Group (BX.N), Permira Funds PERM.UL and Texas Pacific Group TPG.UL in 2006 in a $17.6 billion deal.

The chip maker is struggling with a high debt load and declining sales, and in February said it was seeking up to $1 billion in new loans from existing lenders. On March 25, it said it received commitments of $956.8 million.

Carlyle Partners IV, a $7.9 billion fund raised in 2005, marked its Freescale investment as having fair value of $113 million at the end of 2008, according to part of a document Carlyle sent to its investors and obtained by Reuters.

That compares with a cost of $754 million at the time of the investment, according to the document.

Carlyle also invested in Freescale in three of its other funds — Carlyle Europe Partners II, Carlyle Japan Partners and Carlyle Asia Partners II, according to its website.

Carlyle declined comment on the document.

Private equity firms are obliged for the first time this year to value their companies as if they were to sell them today.

zyakaira notes: This news item also heralds the entry of a new blogger to our portals at http://advantages.us who was incidentally at Freescale this year.

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