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Illinois is selling its lottery, as Charles Duhigg and Jenny Anderson report in the New York Times.
The state of Illinois yesterday took the first steps in selling its state lottery system, hoping to attract as much as $10 billion from investors who, in return, would own a monopoly that could turn out to be the biggest jackpot yet.
That's not how I would have written the lede. I would have written: the State of Illinois plans to sell, at a bargain price, an enormously profitable business that its taxpayers have built, and to which the state government has granted an enormously powerful monopoly on a type of legalized gambling.
Posted by dan at 08:45 AM
Does this make sense? Andrew Ross Sorkin and Peter Edmonston report in the New York Times on a possible IPO of Oribtz.com.
Less than six months after leaving the public markets, the travel Web site Orbitz.com may be contemplating a return trip.Orbitz’s parent company, Travelport, has hired the investment bank UBS to explore an initial public offering for the subsidiary, according to a person briefed on the plan.
Travelport hopes to hold an offering for Orbitz in the second quarter and is considering listing the shares on the New York or London stock exchanges, this person said, adding that it expected to sell about a third of Orbitz’s equity at a price that could value the entire business at $2.5 billion to $3 billion.
Orbitz, which allows customers to find and book airline and hotel reservations online, was part of the publicly traded Cendant until August, when a private buyout firm, the Blackstone Group, took Travelport private for $4.3 billion in cash. The sale was part of Cendant’s split into four companies, which resulted in Cendant’s being renamed the Avis Budget Group.
In addition to Orbitz, Travelport owns Galileo, a reservation-booking service for travel agents and corporations, and Gullivers Travel Associates, a wholesaler. Travelport recently agreed to buy Worldspan, a service that competes with Galileo, in a $1.4 billion deal.
So Blackstone paid $4.3 billion in cash for Travelport, which letter paid $1.4 billion for Worldspan. That represents a $5.7 billion investment. And yet the IPO may go off at a "price that could value the entire business at $2.5 billion to $3 billion." Either there's an error in the figures being reported, or Travelport should hire a different financial adviser.
Posted by dan at 08:40 AM
My latest in Slate, on Madeleine Albright's hedge fund.
Posted by dan at 08:05 AM
Curt Thacker reports in the Wall Street Journal on the latesy twist in the competition for corn between etehanol producers and protein producers:
KANSAS CITY, Mo. -- A tug of war could develop between meat packers for available hog supplies before the end of the decade if processing capacity increases as currently planned and production cutbacks occur because of skyrocketing corn prices.U.S. hog-slaughter capacity is expected to expand within the next two to three years while swine production is expected to eventually decline. As a result, one or more existing older and less efficient plants could close.
The growing ethanol industry's corn demand has boosted feed prices since the autumn. Hog prices through December were high enough to keep producers in the black, but the combination of lower prices and high feed costs likely will result in negative returns for at least some producers during the first quarter.
The demand-driven rise in corn prices, unlike past surges caused mainly by periodic drought problems, is expected to last for the foreseeable future because of ethanol.
On Jan. 12, the U.S. Department of Agriculture estimated that nearly 23% of the 2006-07 corn harvest went to ethanol. Friday, most-active March corn prices at the Chicago Board of Trade settled at $4.0675 per bushel. February Chicago Mercantile Exchange lean hog prices settled at 61.57 cents a pound.
Corn is the main feedstock in the U.S. The prospect of corn prices at a new higher plateau of $3.50 per bushel or more could cause some hog producers to exit the business while others may reduce their herd size amid tightened margins. While ethanol has been a factor in corn prices for some time, corn prices zoomed in the fall, and CBOT corn prices rose about 70% in 2006.
There also could be changes in the processing side of the business by 2009 or 2010, according to market analysts and people in the industry.
Increased competition for hogs and a smaller supply could "bring on the pressure to close at least one plant sometime down the road," said Glenn Grimes, agricultural economist at the University of Missouri.
Wouldn't a plateau of higher corn prices stimulate more farmers in the U.S. and elsewhere to plant more corn?
Posted by dan at 12:19 PM
This new McKinsey report issued by New York City Mayor Michael Bloomberg and Sen. Charles Schumer warns that New York (and American) may be losing its financial edge. Predictably, it argues that Sarbanes-Oxley and securities litigation conribute to high costs that make New York uncompetitive on a global basis. (No mention is made, however, of high relative costs for investment bankers.)
Meanwhile, reports of the demise of American capital formation may be exaggerated. Brian Gormley reports in the Wall Street Journal:
Driven by soaring interest in sectors such as medical technology and alternative energy, venture-capital investment in U.S. companies surged to a five-year high of $25.7 billion in 2006, according to industry data to be released today.Venture investors hope to find the next YouTube Inc., a company that raised money from Sequoia Capital and others before being acquired by Google Inc. for $1.6 billion in November.
Amid the enthusiasm, some caution that too much money may be flowing into closely held companies, and that many venture capitalists will post losses as a result. "I'd characterize 2006 as a pretty intense year of new investment," says Matt Newton, a partner of Columbia Capital, a technology-focused venture-capital firm in Alexandria, Va. But, "there was probably a substantial amount of capital that was invested in the wrong opportunities."
The $25.7 billion venture capitalists invested last year was up 8% from 2005, according to Ernst & Young LLC and VentureOne, a market tracker owned by Dow Jones & Co., publisher of The Wall Street Journal.
Posted by dan at 12:14 PM
Michael Santoli of Barron's has an excellent cover story ($ required) that advances the Two Americas shopping theme.
Posted by dan at 11:04 AM
How do NFL football players resemble pre-union era coal miners and stevedores? I count the ways, in the New York Times Week in Review.
Posted by dan at 08:35 AM
My latest in Slate, on billionaries who fret about income inequality.
Posted by dan at 08:34 AM