Buyout specialist has eye on the sky
TED Forstmann, a principal with New York-based leverage buyout boutique Forstmann Little and Co, jokingly rejected suggestions recently that he surrendered his role as a high-flying deal-maker to sell corporate jets.
But while Mr Forstmann's four-day visit to Hong Kong involved discussions with a number of local investment firms, high on his agenda was making the rounds for Gulfstream Aerospace, the aircraft maker acquired by Forstmann Little from Chrysler in 1990 for US$850 million.
Mr Forstmann, whose firm made an unsuccessful takeover attempt for RJR Nabisco in the mid-1980s, attended the Asian Aerospace Show in Singapore earlier this month to promote Gulfstream.
With a highly competitive market for corporate aircraft in North America and Europe, Gulfstream views Asia as a potentially lucrative area for its products, which can cost up to $35 million.
Mr Forstmann said Gulfstream had already made strong inroads into Asia, including the sale of seven Gulfstream V aircraft, which can fly from Tokyo to New York without refuelling.
Mr Forstmann took an unusual step last November by becoming chairman of Gulfstream - the first executive title he claims to have held.
''At Gulfstream, a title is important because the sale of a $25 million piece of equipment starts at the flight department level and the user level - chief executives and heads of state. That's where I come in.'' The biggest buyers of corporate jets in Asia are governments - the Malaysian Government bought six last year. In Hong Kong, corporate jets are not even allowed to be based at busy Kai Tak airport.
An attempt was made to take Gulfstream public in 1992 to take advantage of the growing success of reversed leverage buyouts, but the $100 million offering arranged by Morgan Stanley failed to take off.
''It was Morgan Stanley's idea and they didn't get the job done,'' said Mr Forstmann, who had seen rival Kohlberg Kravis Roberts reap huge profits from reversed leverage buyouts of Duracell International, RJR Nabisco and Safeway.
Mr Forstmann said he was looking at the possibility of opening a Gulfstream office in Hong Kong.
This would give the company a base to pursue sales in China, a market where corporate sales could be strong given the country's growing reputation as the world's most dangerous place to fly.
With $2 billion of cash available to make investments, and major institutional shareholders prepared to inject capital, Mr Forstmann said the last thing the firm needed was more money.
He said, however, that Forstmann Little was prepared to move into Asia if it could find the same kind of risk reward matrix it had successfully used over the past 16 years.
Since Forstmann Little was founded in 1978, it has invested about $11 billion in 18 acquisitions.