DAILY TRIFECTA: Billionaires of the world unite! You have nothing to lose. Literally.
Your losses will be bailed out by taxpayers via what's left of the Federal government.
THE SET-UP: If you’ve heard it once you’ve heard it a thousand times … Trump’s GOP is now the "party of the working class." And, electorally speaking, it’s true. Working class voters showed up for Trump. So, how is Trump delivering for his loyal voters?
Well, he’s allowed the world’s richest man to function as an unelected co-President or, at least, as his de facto Chief of Staffing. And he’s allowing him (Musk) and another super-rich man (Ramaswamy) to pore over the Federal Government in a search of programs to cut and people to put out of work.
In a similar vein, the Washington Post reported yesterday that Trump’s team is working with Republicans in Congress on a plan to cut Medicaid and SNAP benefits for the poor (which is often the working poor) so they can fund tax cuts for the incredibly rich "Men of the People" who teem around Trump at his exclusive Mar-a-Lago resort.
One of them—billionaire financier Howard Lutnick—has just been nominated for Secretary of Commerce. Another one—billionaire financier Mark Rowan—is now rumored to be in the running for Treasury Secretary. Per Fortune, his appointment could “mean a boon for $24 trillion private equity market.” As you’ll see below, the private equity market is already in the middle of a feeding frenzy. Does it really need Uncle Sam to turn the economy into an all-they-can-eat buffet?
If Trump ultimately hands the Treasury Department over to the CEO of a giant private equity firm (Apollo Global Management), it’ll only epitomize the dichotomy of the GOP as it is marketed to the masses vs. the reality of the oligarchs who’ve transformed it into the ultimate investment vehicle. They will all benefit from the tax cuts and the regulatory rollbacks (see Elon Musk) and the open season for Monopoly-game mergers and acquisitions … while the the working class gets to revel in legal Haitian migrants fleeing for their lives and punitive measures against a tiny minority of Trans Americans.
Oh yeah, they *may* get to keep the tips they earn bussing the tables after private equity is done feasting on what’s left of the economy. - jp
TITLE: Lies, greed and exploding crockpots: How PE firm Cornell Capital’s purchase of Instant Brands went very wrong
https://fortune.com/2024/11/19/crock-pot-explosion-cornell-capital-goldman-sachs-private-equity-mergers-personal-injury-lawsuit/
EXCERPT: Crock pots are typically associated with cozy domestic scenes. But in the case of cookware maker Instant Brands and the private equity firm Cornell Capital, the devices gave rise to a bitter bankruptcy case featuring accusations of greed, deceit and self-dealing. Other litigation puts forward troubling claims of children scalded by the pressure cookers.
The ugly saga began in 2019 amid a crock-pot craze when millions of home cooks turned to them as an easy way to make hearty, comforting meals. That’s when Cornell Capital, the PE vehicle of former Goldman Sachs senior executive, Henry Cornell, bought Instant Brands for $615 million.
The deal soon went sour, though, as Cornell experienced a bad case of buyer’s remorse and concluded it had overpaid by $273 million. Then, according to a November 13 filing in Texas bankruptcy court, the firm allegedly lied to lenders and loaded up Instant Brands with $450 million of debt—ultimately pushing the cookware maker into insolvency and bankruptcy in 2023.
Cornell’s plan to recoup its money came partly in the form of a $450 million term loan, which the firm forced Instant Brands to take out in April 2021. Instant Brands used the loan, along with $100 million from its balance sheet, to pay a $345 million dividend to Cornell Capital, its co-investors, the sellers of Instant Brand, and the management team, according to the lawsuit
Reeling from this huge debt load and loss of capital, Instant Brands defaulted on its loans and filed for bankruptcy two years later.
The upshot is that Cornell “plundered their portfolio company Instant Brands, leaving it insolvent and unable to repay its creditors,” according to the lawsuit filed by Alan Halperin, the trustee, who is seeking to recover at least $400 million for creditors. The lawsuit lists about 20 defendants, including Cornell Capital founder Henry Cornell and Robert Wang, inventor of the Instant Pot.
“We are aware of the complaint, which is baseless and without merit. We intend to vigorously defend ourselves,” Cornell said in a statement.
Wang, a former Nortel employee, invented the beloved Instant Pot pressure cookers that soared in popularity in 2016 and 2017. Instant Brands, a company cofounded by Wang and two partners, owned Instant Pot. (Pressure cookers like Instant Pots have faced several personal injury lawsuits, including a 2022 class action, due to reports that the appliances were defective.)
The lawsuit against Cornell claims the purpose of the dividend was to enrich Instant Brand’s investors and its management even as the company’s financial situation worsened.
It is not uncommon for PE firms to oblige their portfolio companies to make such payouts—known as dividend recaps—in order to return capital to investors without selling their stake in a business. In these situations, a company owned by a private equity firm typically issues new debt to pay for the distribution, which usually goes to the PE firm. Portfolio companies often must increase their total debt to pay for the dividends.
TITLE: Private equity giant Blackstone takes majority ownership of Jersey Mike’s Subs sandwich chain
https://www.fastcompany.com/91231588/blackstone-buying-jersey-mikes-subs-private-equity-deal-restaurant-chains
EXCERPT: Blackstone is a private equity group that has its fingers in numerous parts of the economy—everything from housing to entertainment—and it seems partial to taking stakes in franchise operations, like Hilton Hotels.
It’s no surprise, then, that a popular and successful sandwich chain would be on its radar. According to the Wall Street Journal, Jersey Mike’s Subs is the second-largest sub-style sandwich chain by sales in the U.S. and that Blackstone’s deal values Jersey Mike’s Subs at around $8 billion.
But Blackstone, like any private equity firm, wants growth, and it says Jersey Mike’s Subs has high prospects to deliver that.
“The partnership with Blackstone is intended to help enable Jersey Mike’s to accelerate its expansion across and beyond the U.S. market, as well as its continued investment in technology and digital transformation,” the firm said in a statement.
CEO Peter Cancro has said he believes the chain can expand to 4,000 locations and $6.5 billion in sales by 2027, according to WSJ, which first reported the news yesterday.
Cancro is one of the rare CEOs who has nearly a lifelong history with the company he helms. The 65-year-old began working at the chain’s first location in Point Pleasant, New Jersey, in 1971 when he was just 14 years old. At the age of 17, in 1975, he acquired the location.
He also changed the name from Mike’s Giant Size Submarines, which it had held since its opening in 1956, to Jersey Mike’s Subs. In 1987, Cancro began franchising locations, which have grown to more than 3,000 today.
As part of the deal, Cancro will retain “a significant equity stake” in the chain while also remaining its CEO. Blackstone says the deal is expected to close in early 2025, subject to regulatory approvals and other conditions.
For those keeping track, this isn’t the first time that a major sub sandwich chain has been scooped up by private equity. In 2023, Subway was sold to Roark Capital Group in a deal said to be worth $9 billion. Roark Capital is the owner of other chains, including Arby’s, Auntie Anne’s, Baskin-Robbins, Buffalo Wild Wings, Cinnabon, Dunkin’, Jamba, Jimmy John’s, and Sonic.
TITLE: Private equity company acquires meat processor
https://www.foodbusinessnews.net/articles/27197-private-equity-company-acquires-meat-processor
EXCERPT: Kingswood Capitol Management LLP, Los Angeles, has acquired Branding Iron Holdings, a processor of branded and private label value-added meats. Terms of the acquisition were not disclosed.
The acquisition includes three manufacturing plants in Sauget; Rochester, Minn.; and Sauk Rapids, Minn. Once the transaction is closed, Andy Touchette will be promoted from chief operating officer of Branding Iron to chief executive officer.
“We are honored to be a part of the long and storied history of Branding Iron and its associated brands,” said Andrew Kovach, managing director of Kingswood. “We firmly believe in the company’s quality, customer relationships and strong manufacturing capabilities.”
Kingswood is a middle market private equity investor. The market sectors it focuses on are consumer, distribution, industrials and services. G Fuel is another food and beverage-related company in the firm’s current portfolio as well as Patco Products, a developer and manufacturer of emulsifiers.
BUT WAIT, THERE’S MORE…
PE indulges in food and beverage deals, setting a quarterly high
https://pitchbook.com/news/articles/pe-indulges-in-food-beverage-deals-setting-a-quarterly-high
Private Equity is Picking Up Accounting Firms By the Handful Now
https://www.goingconcern.com/private-equity-is-picking-up-accounting-firms-by-the-handful-now/
Private equity buyers snap up two more US accounting firms
https://www.ft.com/content/c30585d8-40d1-4b1a-b62b-32511214fa30
Report: Group of executives, private equity firm set to buy minority stakes in Bills
https://www.si.com/nfl/bills/news/buffalo-bills-arctos-partners-group-of-executives-sales
NFL to green light PE deals in Buffalo, Miami; New details on Buffalo LPs emerge
https://www.sportsbusinessjournal.com/Articles/2024/11/18/nfl-private-equity-miami-dolphins-buffalo-bills
State regulators approve sale of Consolidated Communications to private equity firm
https://www.vermontpublic.org/local-news/2024-11-18/state-regulators-approve-sale-consolidated-communications-private-equity-firm-searchlight-capital-partners
Cargo Handling Specialist MacGregor Sold to Private Equity Firm
https://maritime-executive.com/article/cargo-handling-specialist-macgregor-sold-to-private-equity-firm
Clayton private equity firm makes solar buy from new fund
https://www.bizjournals.com/stlouis/news/2024/11/15/compass-group-equity-partners-makes-solar-buy.html