 Capture the salient features of the deal?

Salient Features of Blackstone and Celanese Deal:

 Blackstone analyzed publicly available data to further inform its perspective on the
value of Celanese in preparation for active negotiations.
 Blackstone also came to believe that Celanese’s value was sensitive to the current
state of the chemicals cycle and prospects for an early rebound in the cycle.
 Blackstone considered Celanese as not able to realize its full potential and
Blackstone found lot of opportunity to expand the market through globalization, and
also kept into consideration that market multiple for chemical industry is kept at 1.5-
2X higher.
 Deal was a strategic acquisition for Blackstone as they intend to sell off Celanese at
later date.
 Around 82% of the available shares were bought at price of €32.5 per share with
pension fund of around €462 million at 10% management stock option.
 Blackstone made 237% IRR with its investment into Celanese with a 6X multiple.
 Cyclical nature of the deal was given a lot of consideration resulting in the time it took
Blackstone to finalize the deal, as they do not want to raise too much debt resulting
in a negative cash flow.
 Blackstone took Celanese back to market after 9 months of acquisition.
 Blackstone expanded Celanese to China, maintained the number of employees,
reduced unnecessary costs of operation and created higher valuation for the
company.
 CEO, CFO and some other employees of Celanese were replaced with new
management to engage a closer fit with Blackstone future vision of Celanese.
 Productivity of Celanese was increase as better results were delivered YoY after the
deal was closed.

Our Simulation Data:

The deal between Blackstone and Celanese was set at a stock price of €35 with €150
millions of pension funds and 15% of management stock option.
Higher management stock option was kept to retain the key employees of Celanese.
IRR for Blackstone was calculated at a multiple of 6.5X and effective IRR resulted was
18.60%. Debt% for the deal was 37.5% and Equity% for the deal was 62.5%.

 Are PE firms good for the economy?

Yes, they are good for the economy for following reasons:
 It allows for productivity and higher returns with same asset base.
 Analysis predictions and future valuations turn out to be true.
 Government and Public banks gets an opportunity to better use the surplus cash.

No, they are not good for the economy for following reasons:
 Employee morale gets hampered as it results in lot of retrenchment.
 Timing of the deal, in case of recession and if deal turns south it can result in
impacting the overall economy of the country.
 It destroys jobs and creates a turmoil in the households.

Prepared By:
Rahul Dua
Prasant Kannoth