Blackstone to Buy GSO for US$930 Million
By: MEGAN DAVIES
Financial Post
January 11, 2008

Private-equity firm Blackstone Group LP said yesterday it would buy hedge fund GSO Capital PartnersLP for up to US$930-million in cash and stock, scooping up a mid-sized lender at a time when Wall Street banks' loan operations remain pressured by the credit crunch.

Blackstone, which has total assets under management of US$98-billion, according to its Web site, said the deal would create one of the largest credit platforms in the alternative asset-management business, giving it more than US$21-billion of assets under management. GSO, which runs a hedge fund, mezzanine fund and senior debt fund, has about US$10-billion under management.

"I think that the hedge fund/private equity fund and other asset management businesses are the most profitable part of Wall Street right now," said Marshall Sonenshine, chairman of New York-based investment bank Sonenshine Partners. "As long as Blackstone feels that they can make substantial returns at it, I think that they will continue to seek to build that ... capital base."

The deal comes after turmoil in the credit markets in the summer closed the door for large leveraged buyout deals. Buyout volume as a whole dropped 62% in the second half of 2007 compared with the first half, data from M&A research firm Dealogic show.
Stephen Schwarzman, Blackstone chief executive, said dislocation in the credit markets made it an "ideal time to create a more powerful, diversified platform" to grow Blackstone's business.

Blackstone said it would pay US$620-million in cash and stock initially, plus up to US$310-million over the next five years if GSO hits specified earnings targets.