As private equity has grown in assets under management, all parties to the corporate world, including labor unions, have taken notice. An acrimonious t^te-à-t^te between distressed specialist Matlin Patterson Global Advisors and the United Steelworkers is yet another chapter in what is becoming an important liability trend in many aspects of private equity.
In an effort to gain leverage in ongoing labor negotiations between aluminum producer Ormet Corporation and its new owners, MatlinPatterson, the steelworkers union has promised to organize protests at the private equity firm's office and at the homes of its principals, according to a union press release.
The union's New York chapters will ?raise public awareness about their unfair labor practice strike at two OrmetAluminum plants in Hannibal, Ohio,?according to the statement.
Union director David McCall is quoted as saying:? When our families are attacked, there is no comfortable distance for those responsible to hide and try to conduct business as usual. We'll follow MatlinPatterson's principals wherever they go and spread the word about MatlinPatterson's treatment of Ormet employees.? MatlinPatterson declined to comment.
MatlinPatterson, which last year raised $1. 6 billion (€1. 3 billion) for its second distressed fund, agreed to acquire Ormet out of bankruptcy last September. The company had declared insolvency amid rising medical benefit costs, low aluminum prices and weak demand, according to reports. MatlinPatterson, a major creditor, agreed to invest a further $30 million in the company. Ormet is based in Wheeling, West Virginia and employs 2, 200 people across five states.
The union statement continues:? Union members have already made several sojourns to New York for informational demonstrations that featured giant rats at MatlinPatterson's Madison Avenue corporate headquarters which where followed by side trips to the neighborhoods of the firm's co-founders.?
According to the statement, the union has also ?initiated dialogs with four separate pension funds that have invested in MatlinPatterson and is coordinating solidarity actions with USW-represented employees of Huntsman Chemical, which is also owned by MatlinPatterson.?
Unusually, the steelworkers also claim to have distributed leaflets at Formula One racing events, at which Mark Patterson has competed as part of the Star Mazda Pro Series.
John Puskar, a union representative, said in an interview that this was the first time the United Steelworkers had made a private equity firm the target of protest activities. He said his members were particularly aggrieved that MatlinPatterson, as the dominant creditor, ?got exclusivity? on becoming the new owners of Ormet, thus blocking other potential acquirers who may have been more willing to negotiate labor agreements more favorable to the union.
?We had several companies out there willing to sit down and negotiate an agreement with us, but MatlinPattersonand Ormetwouldn't allow it, and they wouldn't sit down with us and try to negotiate a fair and equitable contract,?said Puskar, who confirmed that, at press time, the Ormet steelworkers were on strike.
Labor unions have emerged as an issue in another aspect of private equity ? they are now frequent requesters of private data through public-disclosure laws. For example, a FOIA (Freedom of Information Act) request in Florida in 2003 was part of the local teachers union's efforts to battle a state pension investment in a private charter school.
The investment in question was made by Liberty Partners, a private equity firm that manages roughly one third of the private equity portfolio of the Florida State Board of Administration. In 2003, Liberty Partners made a $112 million investment in Edison Schools, an operator of charter schools, which take over the operations of public schools for a fee. Charter schools are chiefly opposed by public school teachers unions.
According to a source familiar with the situation, a teachers union made a public records request of any documents held by the pension related to Liberty Partners, and received, in addition to details of the Edison investment, a private report prepared by Austin, Texas-based consultant Alignment Capital regarding Liberty Partners. The report, commissioned by the pension board, concluded, among other things, that Liberty Partners was subject to conflicts of interest and had charged the pension ?irregular? fees, according to a Miami Herald report. Opponents of Edison's activities in the state broadcast this information as part of the campaign against charter schools.
If the pressure exerted by the steelworkers on MatlinPatterson proves effective, more private equity sponsors may be targeted by union protesters. Puskar notes: ?We're pretty experienced at bankruptcy?negotiations. Not coincidentally, so is MatlinPatterson.
EQT appoints new German head
Marcus Brennecke, partner in Nordic-headquartered private equity firm EQT, has been appointed to head up the firm's German operations. Brennecke, who joined EQT's Stockholm office in January 2005, will be based in the firm's Munich office and will take over from current German country head Björn Höi Jensen. Jensen, who has headed up the German operation for the last two years, will remain in Munich to ensure a smooth transition. Jensen will continue to do deals in Germany and sit on portfolio company boards. Brennecke will manage the 11-strong German team. Hans Moock, a former EQT partner, left the firm's Munich office at the end of June. EQT also has an office in Frankfurt and offices in Copenhagen, Helsinki and Stockholm. The firm is currently investing its €2. 5 billion ($3 billion) EQT IV buyout fund, which closed in August 2004. EQTmanages approximately €6 billion in seven funds.
American Capital poaches in London
After 13 years with London?headquartered international debt and equity investment specialist Mezzanine Management, Nathalie Faure Beaulieu has joined European Capital, the newly established subsidiary of American Capital, a publicly traded US buyout and mezzanine fund. At Mezzanine Management, Faure Beaulieu was one of six managing directors and a member of the investment committee specialising in large, syndicated transactions. Based in London, she is expected to be joined by former Mezzanine Management colleagues Jerry Tebbutt and Matthew Gordon Clark, who have also left the firm according to market sources. Meanwhile Mezzanine Management, which is in the process of raising a new fund, has promoted Valerie Lebreton to managing director. For American Capital, opening a presence in London is another step in growing a franchise in Europe. The company, which is listed on Nasdaq, has capital resources of approximately $5. 2 billion. In April, it opened an office in Paris led by Jean Eichenlaub, managing director, and Jacques Pancrazi, director.
Roark swallows Peachtree co-founder
Atlanta private equity firm Roark Capital, which recently closed a debut $560 million third-party fund, has hired Lawrence DeAngelo as a partner. DeAngelo was a partner and co-founder of Atlanta private equity firm Peachtree Equity Partners, which managed more than $100 million. Prior to Peachtree, DeAngelo was a managing director of Wachovia Capital Associates, the private equity arm of Wachovia Bank. Roark is led by Neal Aronson, who prior to raising his fund did deal-by-deal investing with the backing of many veteran buyout professionals. Roark specializes in franchise businesses.
Austin Ventures names venture partner
Austin, Texas?based venture capital firm Austin Ventures has added Thomas Ball as a venture partner. Ball was most recently CEO and co-founder of Open-field Technologies, which merged with Razorgator. At Austin Ventures, Ball will focus on early stage information technology companies, in particular infrastructure software and consumer services. Austin Ventures currently has $3 billion under management across nine funds.