PhillyDeals: Buyout industry's benefits to region?

Billionaire buyout (private-equity) artists are shuttering Showboat casino-hotel and ending 2,000 jobs.
Billionaire buyout (private-equity) artists are shuttering Showboat casino-hotel and ending 2,000 jobs. (MEL EVANS / AP)
Posted: July 01, 2014

The buyout industry (members prefer we call it "private equity") has an image problem.

Americans tend to admire wealth, success, and investor rescues like Carlyle Group's 2012 buyout of Sunoco's aging Philadelphia refinery, followed by a taxpayer-assisted makeover that kept hundreds working.

But it's less of a crowd-pleaser when billionaire buyout artists like NBA 76ers owner Joshua Harris and his partners, who control Caesars Entertainment Corp., do crushing things like telling workers last week that they will shutter Atlantic City's Showboat casino-hotel, ending 2,000 jobs.

So it's no surprise the P.E. people, who work hard to keep their low federal tax rates and high client fees, last week launched a P.R. campaign to balance their Grim Reaper image. See if you're convinced:

The Private Equity Growth Capital Council sent out a report ranking America's "top congressional districts by private equity investment." Our copy highlighted two local districts that ranked among America's Top 10 private-equity targets last year.

That's good, because? Private-equity funds give companies money "to expand their businesses, develop new innovations, and hire workers," council CEO Steve Judge wrote.

Let's check. Here are the local districts that made the top 10 for 2013, and the top deals in each:

The 10th-most-bought-out district in the country was the suburban Philadelphia turf held by Republican U.S. Rep. Jim Gerlach, which jumped the list based on Kohlberg, Kravis, Roberts' $3.74 billion buyout of King of Prussia-based industrial-pumps-maker Gardner Denver.

Number eight was the Delaware constituency represented by Democrat John Carney, thanks mostly to Carlyle's $4.9 billion investment in Wilmington-based DuPont spin-off Axalta Coating Systems.

And where is the early growth and hiring from those investments?

"Gardner Denver is no longer headquartered in Wayne, and the HQ has now officially moved to Milwaukee," company vice president Vikram Kini told me by e-mail.

Similarly, Carlyle's first act as owner of Axalta was to move its headquarters and 300-plus jobs out of Carney's state, to Pennsylvania.

The council says the number-two congressional district in all the U.S. for private-equity investments last year also was in

Pennsylvania, held by Pittsburgh Democrat Mike Doyle.

That's thanks to the Warren Buffett-led, $23 billion acquisition of H.J. Heinz - promptly followed by layoffs of more than 1,000 Pittsburgh-area Heinz employees.

I don't doubt these moves will make money for private equity. I'm just not clear what makes them think that record ought to make any member of Congress welcome them to town. Except for campaign fund-raisers.


JoeD@phillynews.com

215-854-5194

@PhillyJoeD

www.inquirer.com/

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