June 18, 2024

DealBook: Warner Music Suitor’s Record of Deal-Making

Len BlavatnikRick Maiman/Bloomberg News Len Blavatnik

Len Blavatnik, the Russian-born billionaire who is nearing an acquisition of the Warner Music Group, is well known for his investing prowess.

He came to America as a penniless teenager. After building a fortune on oil and metal companies, his net worth is now estimated at $7.5 billion, according to Forbes, making him the 31st richest person in America.

But along the way to wealth, Mr. Blavatnik picked up one black mark on his otherwise rosy deal-making record. His last big deal – the 2007 buyout of the chemical company Lyondell – led to bankruptcy less than two years later.

Lyondell’s creditors are suing Mr. Blavatnik and his holding company, Access Industries, alleging that they loaded the company with mountains of debt that ultimately toppled the business, according to court documents.

The suit also claims that he and others “mismanaged the business,” causing the company to become “insolvent, undercapitalized and to incur debt beyond their ability to pay,” the documents say. When the financial crisis hit, many of the company’s manufacturing contracts disappeared, causing a liquidity crunch at the company.

The deal’s origins can be traced to 2005, when Access acquired Basell, a Dutch chemicals producer. Two years later, Basell bought Lyondell for roughly $12 billion in cash. Including the debt assumed by Basell, the deal was valued at about $20 billion.

The creditors are seeking to recoup several hundred million dollars that they say Mr. Blavatnik earned off the deal, including $125 million in management and transaction fees and 100 million euros in dividends he pulled out of Basell shortly before the deal closed.

Mr. Blavatnik has contested that the deal cost him a fortune – including his roughly $1 billion personal holding in Basell. Mr. Blavatnik also says he lost $5 billion to $10 billion, based on a estimate of his equity stake in Basell.

The creditors dispute the accuracy of that estimate. They cite in their suit an e-mail from an Access employee, who said that if Access “were asked to put in $4 billion to buy Basell today, we would roll over in laughter.”

Access declined to comment. The case is scheduled to go to trial in October.

Mr. Blavatnik’s other deals have fared far better.

Well known for his hard-nosed approach to business, Mr. Blavatnik first got rich off the privatization of the Russian economy after the fall of the Soviet Union.

An American citizen who fled Russia with his family in 1978, Mr. Blavatnik earned his master’s degree from Columbia University and his M.B.A. from Harvard Business School.

In 1986, he formed Access, which now holds large stakes in more than a dozen companies, including the Warner Music Group and TNK-BP, one of Russia’s largest oil companies.

He also sat on Warner’s board from 2004 to 2008 and is close friends with the company’s chairman and chief executive, Edgar Bronfman, Jr. In 2007, Mr. Blavatnik reportedly bought Mr. Bronfman’s Upper East Side townhouse overlooking Central Park for $50 million. (Mr. Blavatnik also owns a mansion in Kensington Palace Gardens in London.)

On the rare occasion that Mr. Blavatnik loses money, he quickly moves to make it back. Last year he sued JPMorgan over the loss of $100 million in Access funds the bank invested in mortgage-backed securities that ultimately soured.

Even the ill-fated Lyondell deal no longer seems so disastrous. The company emerged from bankruptcy last year and is now turning a steady profit. The company, which rang the bell at the New York Stock Exchange on Monday, reported earnings of $660 million for the first quarter of 2011.

Mr. Blavatnik is reaping the benefits of the rapid turnaround. He still holds a roughly 15 percent stake in the company.

Article source: http://feeds.nytimes.com/click.phdo?i=5d019d1b1cf2054d15aee6c8c9de3f94

Speak Your Mind