Market Dispatches6/21/2007 7:00 PM ET

Blackstone prices at $31; Dow up 56

The buyout firm's IPO raises $4.1 billion and produces a $7.7 billion payday for CEO Steve Swarzman. Trading starts Friday. Stocks rise as chips rally and crude oil fails to break through $70. GE and Pearson won't bid for Dow Jones.

One of Wall Street's biggest initial public offerings yet sold easily tonight, when 133.33 million units of Blackstone Group were sold for $31 a share.

The offering valued Blackstone, which began life in the 1980s as a merger advisory firm, at some $33.6 billion and makes CEO Stephen Schwarzman's 23% stake in the company alone worth about $7.7 billion.

Blackstone's deal came at the end of a day that saw the Dow Jones industrials jump 56.4 points to nearly 13,546, a big recovery after the blue-chip index fell 80 points following the open. That initial decline was due to higher oil prices and higher interest rates. Rate worries and concern about the health of several Wall Street hedge funds caused the Dow to fall 146 points on Wednesday.

Along with the Dow's gain today, the Standard & Poor's 500 Index closed up nearly 9.4 points to 1,522.19, and the Nasdaq Composite jumped 17 points to nearly 2,617.

Blackstone will start trading tomorrow on the New York Stock Exchange under the symbol BX.

The success of the offering is likely to generate more IPOs. Blackstone's chief rival, Kohlberg Kravis Roberts & Co., has hired investment bankers for an offering perhaps in the fall.

The pricing of the widely anticipated IPO came after a day where there were calls to boost the tax rates on companies like Blackstone, which is organized as a master limited partnership, and an attempt by U.S. Rep. Henry Waxman, D-Calif., to delay the offering altogether.

The units of the partnership trade like common stock but give an investor fewer ownership rights. But they offer big tax breaks.

Waxman asked the Securities and Exchange Commission to delay the move, until Congress held hearings in the summer. The SEC declined to get involved.

The biggest threat to other private equity listings is a proposal by Sens. Max Baucus, D-Montana, and Chuck Grassley, R-Iowa, the senior members of the tax-writing Senate Finance Committee, to increase the corporation tax paid by publicly traded limited partnerships.

People close to the situation said some 40% of Blackstone’s units in the partnership were sold to non-U.S. investors, with strong demand from the Middle East, the Financial Times reported.

The offering was as closely watched at the August 2004 IPO for Internet search giant Google (GOOG, news, msgs). Google came public at $85 and closed at $100 at the end of the first day of trading. It closed today at $514.11.

The listing of Blackstone marks a milestone for the booming private equity industry, which has exploited favorable debt markets to buy ever-larger companies.

A rally set off when crude pulled back

Today's catalysts seemed to be crude oil's failure to power through $70 a barrel, a big rally in semiconductor stocks, and a better-than-expected report on manufacturing from the Philadelphia Federal Reserve Bank.

While oil prices actually finished lower on the day -- down 21 cents to $68.65 a barrel for crude for August delivery -- energy stocks finished higher. ExxonMobil (XOM, news, msgs), down more than 3.5% yesterday, led the Dow today with a 1.8% gain to $84.30. That was just ahead of auto giant General Motors (GM, news, msgs), up 1.8% to $35.96, and chip giant Intel (INTC, news, msgs), up 1.5% to $24.29.

Stock Charts (Year)

ExxonMobil
Graphical chart for XOM
Starbucks
Graphical chart for SBUX
Diamond Offshore Drilling (DO, news, msgs) was up 4.7% to $104.82. Royal Dutch Shell (RDS.A, news, msgs) was up 1.8% to $79.80.

Sixteen of the 30 Dow stocks were higher, along with more than 300 S&P 500 stocks and 75 stocks out of the 100 issues in the Nasdaq-100 Index ($NDX.X). The index itself was up 1% to 1,941.

But the rally wasn't without some pain. Starbucks (SBUX, news, msgs) fell 3.9% to $26.26, its lowest level since Oct. 13, 2005. The percentage loss was the worst among stocks in both the Nasdaq-100 and S&P 500.

Chief Financial Officer Michael Casey told analysts in New York that meeting the high of the company's 2007 earnings guidance would be "very challenging." The problem: rising dairy costs and flat sales at U.S. outlets. The stock has fallen 34% in the last 13 months.

Activist takes a big position in Kraft

Shares of Kraft Foods (KFT, news, msgs) jumped 6.6% to $36.74 today after news reports said activist investor Nelson Peltz has acquired a 3% stake in the food company. CNBC said Peltz plans to call on the food giant to sell its Post cereals and Maxwell House coffee businesses.

News of Peltz's interest comes only a few months after Kraft was spun off by Altria Group (MO, news, msgs), best known as the parent of the Philip Morris brand of cigarettes.

Peltz has invested in a number of companies and pushed for changes to boost profitability including Tiffany (TIF, news, msgs) and condiment maker H.J. Heinz (HNZ, news, msgs).

Chips show some nice gains

Semiconductor stocks gave the market a nice boost. And there was no news to explain the move.

The Philadelphia Semiconductor Index ($SOX.X) was up 3% to 512.50, its best level in a year. The index is up nearly 5% this month and 10% for the quarter. All 19 stocks in the index were higher, led by Advanced Micro Devices (AMD, news, msgs), up just about 8% to $14.73 thanks to an upgrade from Stifel Nikolaus.

Flash memory maker SanDisk (SNDK, news, msgs) was up 4.5% to $48.54.

General Electric, Pearson won't bid for Dow Jones

And then there was Rupert Murdoch and his News Corp. (NWS, news, msgs) ...
A possible bid for Dow Jones (DJ, news, msgs), the publisher of The Wall Street Journal, from General Electric (GE, news, msgs) and Pearson, the British publisher of the Financial Times, fell through today.
The companies said they preferred to work on cooperation agreements between GE's CNBC business channel and the Financial Times, The Journal reported this afternoon.

The two companies had been talking about forming a separate company that would own Dow Jones, CNBC and the Financial Times.

The departure of GE and Pearson pushed Dow Jones shares down 1.1% to $59.98. News Corp. was up 0.4% to $23.69. It also leaves the Dow Jones board looking only at the $5 billion bid from News Corp. Yesterday, the board took over negotiations with News Corp. from the Bancroft family, which owns the controlling shares in the company but couldn't decide about the bid.

"The fact the board is taking over means they will move forward and resolve the issue," Benchmark analyst Ed Atorino told Bloomberg News. "It says to me they will sell the company and negotiate the best outcome and not let the family bicker about things like editorial control."

Meanwhile, there may be yet another bidder for Dow Jones.

Brad Greenspan, the founder of social-networking Web site MySpace -- which News Corp. bought in 2005 for $580 million -- is seeking a noncontrolling stake in Dow Jones through a Dutch auction for $60 per share.

A Dutch auction uses a bidding process to find an optimal market price for the stock.

Greenspan is offering $60 per share for about 25%, or $1.25 billion, of Dow Jones shares, but his bid is seen as a long shot.

Ray-Ban parent will buy Oakley

Italy's Luxottica Group (LUX, news, msgs) said it will acquire U.S. eyewear company Oakley (OO, news, msgs) for $2.1 billion in cash. The deal values Oakley at $29.30 per share, a 16% premium to Wednesday's closing price.

Luxottica, which owns Ray-Ban, also runs LensCrafters and Pearle Vision stores, and makes eyewear for brands such as Chanel, Dolce & Gabbana and Prada.

Shares of Oakley rose 13%, to $28.47. Luxottica shares were up 9.1% to $38.02.

Yahoo to buy college sports site

Yahoo (YHOO, news, msgs) said late Wednesday that it will acquire Rivals.com, a high school and college sports Web site. Terms of the deal were not disclosed.

Rivals.com will function as an independent unit within Yahoo Sports, which has a monthly audience of 15 million visitors, according to audience measurement firm comScore. Yahoo Sports recently topped the audience of Walt Disney's (DIS, news, msgs) ESPN.com, its biggest rival, with 12.7 million users.

Earlier this week, Yahoo CEO Terry Semel stepped down and was replaced by co-founder Jerry Yang.

Yahoo was up slightly at $27.67.

A hint at Harry Potter's ending?

With one month to go before J.K. Rowling's final Harry Potter book, rumors are circulating like mad as to what is going to happen to the crew at Hogwarts.

Now there's one person who claims to have the answer: a computer hacker who goes by the name "Gabriel."

The hacker claims to have stolen a digital copy of the manuscript from Bloomsbury Publishing in London, Reuters reported, and is planning to post the book online.

Scholastic (SCHL, news, msgs) spokeswoman Kyle Good said that readers should be skeptical about any such claims but didn't say whether the posting was accurate, Reuters reported.

More than 320 million books in the Harry Potter series have been sold around the world.

By Charley Blaine and Elizabeth Strott

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