Efforts Grow To Waylay Blackstone Stock Sale
Thursday, June 21, 2007
Several U.S. lawmakers yesterday stepped up efforts that could delay the initial public offering of private-equity giant Blackstone Group on the eve of its highly anticipated launch.
Sen. James Webb (D-Va.) sent a letter last night to the Securities and Exchange Commission asking it to delay the IPO until a national security review is completed. He cited concerns over a $3 billion investment Blackstone is to get from China. The IPO is set to price today, and shares would begin trading tomorrow.
Rep. Peter Welch (D-Vt.) introduced a bill earlier in the day similar to one announced last week in the Senate that would force Blackstone to pay taxes at the 35 percent corporate rate. Blackstone has organized itself as a limited partnership, taking advantage of a rarely used tax provision to pay the lower capital gains tax rate of 15 percent.
The Senate bill, introduced by Finance Committee Chairman Max Baucus (D-Mont.) and Charles E. Grassley of Iowa, the panel's ranking Republican, would give Blackstone a five-year grace period on the higher tax rate. Welch's bill would eliminate that grace period, and Baucus said yesterday he was willing to consider shortening that time.
The moves by Webb, Welch and Baucus are part of the growing chorus of concerns in Congress over Blackstone's unusual IPO, expected to be the largest of the past few years. Blackstone's chief executive, Stephen A. Schwarzman, was set to reap as much as $677 million in cash from the deal and another $7.5 billion worth of stock.
Blackstone declined to comment, as did the SEC.
SEC Chairman Christopher Cox said yesterday afternoon that the IPO was in a "normal process" of review. The SEC can delay IPOs if there is a regulatory reason to do so.
Perhaps the most immediate threat to the IPO is the request from Webb, who is asking the Committee on Foreign Investment in the United States to examine whether China could get access to information or sensitive technology being developed by companies owned by Blackstone's private-equity funds.
The committee can stop foreign companies from acquiring or buying interests in U.S. companies if it would be harmful to national security. China is buying $3 billion worth of nonvoting shares in the Blackstone IPO, which would value the firm at $33 billion.
Sen. Jim DeMint (R-S.C.) expressed concern yesterday over the tax bills. "Rather than raising taxes, we should reform our tax code to lower rates and make all American companies more competitive," he said.