The force of Blackstone’s ‘new money’ focuses on Maine

By Christopher Cousins, BDN Staff
Posted Oct. 07, 2011, at 7:23 p.m.

BRUNSWICK, Maine — Though the Blackstone Group and its dealings might be unfamiliar to many Mainers, its name is revered throughout the corporate universe.

With holdings in the tens of billions of dollars and a worldwide presence, Blackstone’s far-reaching influence is difficult to overstate. With an announcement Friday that his company’s philanthropic arm, Blackstone Charitable Foundation, will invest $3 million in Maine with the goal of creating 10,000 new jobs within 10 years, Blackstone President and CEO Stephen Schwarzman obviously intends to wield his wealth and influence here, too.

Creating that many jobs in a state where economic development is a struggle and an economy where private investment is a rarity is a bold and lofty goal, but lofty goals are what Schwarzman has built his career upon.

That was true even as a child, according to an extensive profile of Schwarzman published in 2008 by the New Yorker magazine. At the young age of 15, Schwarzman was hounding his father to expand the family’s small, second-generation housewares store nationwide. But Schwarzman’s father resisted, citing the modest but comfortable life he had built for himself and his family.

“I admired him,” Schwarzman said to the New Yorker. “He knew what he wanted and he achieved it. But that’s not for me. I wanted a much bigger stage. I didn’t know what it was, but I knew something had to be out there.”

After studying at Yale and Harvard universities, Schwarzman started his career at the now-defunct equity firm Lehman Bros., where one of his first major deals was a merger between Tropicana and Beatrice Foods in the early 1970s. Over the next decade or so Schwarzman became a force in the world of mergers and acquisitions.

In 1985, he and a partner formed Blackstone, which today is one of the world’s largest private equity investment firms, specializing in what is known as alternative asset management, according to the corporation’s website. Alternative assets range widely in definition but in private equity terms generally refer to investments other than stocks and bonds such as hedge funds, real estate and venture capital.

To date, Blackstone has raised $44.4 billion in private equity, handled numerous corporate mergers and acquisitions with more than $1 trillion in combined liabilities and raised some $29 billion in its real estate funds. In 2007 the company went public with an initial offering of $7.6 billion. Blackstone today has offices all over the United States, Europe and Asia, including heavy involvement in China.

According to Paul Hodgson, a senior research associate with corporation ratings firm GMI, Blackstone is known as a relatively friendly entity when it comes to mergers and acquisitions that would prefer to help companies avoid hostile takeovers rather than take them over. However, Hodgson said there are some indications that the firm may not be well-positioned for the future. In fact, GMI gives Blackstone a D rating, which means the company is considered a high risk because of its governance structure. One of the main reasons for that rating is exorbitantly paid executives. Schwarzman, though he was paid a relatively modest salary of $350,000 in 2010, also earned $6.4 million in other compensation that year, which, according to Hodgson, is mostly something called carried interest in investment.

When President Barack Obama suggested increasing the tax rate on that type of income in 2010, Schwarzman was reported by Newsweek to have compared Obama’s proposal to “like when Hitler invaded Poland in 1939.”

Though he is said by some in the New Yorker article to be in the infancy of his philanthropic endeavors, Schwarzman’s donations range from a $10 million pledge to the Kennedy Center to a new football stadium for his former high school.

In 2010, Schwarzman repurposed the Blackstone Charitable Foundation by announcing the entrepreneurship initiative that Maine is now the third state to become part of and committing $50 million to the cause.

Though the results of Schwarzman’s investments will unfold in the coming years, his entrance into Maine’s economic development activities was greeted warmly by others engaged in similar efforts.

“When a company like Blackstone invests in Maine, it says something,” said Peter DelGreco, president and CEO of Maine and Co., a firm that works to attract businesses to Maine. “It says that they have confidence that we can perform in the markets just like in other places. This can only lead to good things.”

Roger Woolsey is director of Colby College’s Career Center in Waterville, which along with several other education institutions in Maine is running a training program similar to the one just launched by Blackstone on Friday.

“When you take a look at what Blackstone is doing here, they’re risk-takers,” said Woolsey. “That’s what we’re all trying to do. We’re taking a little bit of a gamble to improve things for all of us here in Maine.”

http://bangordailynews.com/2011/10/07/business/the-force-of-blackstone%e2%80%99s-%e2%80%98new-money%e2%80%99-focuses-on-maine/ printed on September 22, 2014