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Hilton, SeaWorld, Merlin IPOs Meant $375 Millon Pay Day for Blackstone CEO

Mar 02, 2014 9:00 am

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Blackstone’s biggest gain in 2013 — on paper, at least — was the Hilton Worldwide IPO, which netted a $10 billion profit. Not bad.

— Dennis Schaal

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Andrew Kelly  / Reuters

An exterior shot of the Hilton Midtown as seen in this file photo taken in New York June 7, 2013. Andrew Kelly / Reuters


Blackstone Group LP chief Steve Schwarzman received $374.5 million last year in pay and cash dividends, an increase of 76 percent from 2012, as the world’s biggest alternative-asset manager took advantage of rising equity markets to sell shares of companies.

Schwarzman, the billionaire chief executive officer of New York-based Blackstone, was paid a $350,000 salary and got $21.6 million in carried interest, or his slice of investment profits, the company said today in a filing with the U.S. Securities and Exchange Commission. The 67-year-old also received $352.5 million in cash distributions during the year from his ownership of partnership units in the company he co-founded in 1985 as a leveraged-buyout group.

“We’re in a really marvelous position and I don’t worry about growth — it’s just coming at us,” Schwarzman said in a television interview yesterday. “I worry about delivering great investment products for investors. And if you do that all the time and you do it at scale, good things will happen to you.”

Unloaded Shares

Blackstone, seizing on rallying stock markets to sell shares of companies and take others public, returned $38 billion to investors in its private-equity, real estate, credit and hedge funds in the year. Its private-equity unit unloaded shares of ratings company Nielsen Holdings NV, water theme-park operator SeaWorld Entertainment Inc., packaged-foods maker Pinnacle Foods Inc. and U.K. theme-park operator Merlin Entertainments Plc, among others.

Blackstone’s biggest gain was on paper. Hotel chain Hilton Worldwide Holdings Inc.’s initial public offering in December has yielded a more than $10 billion profit, which will be unrealized until Blackstone begins selling shares.

The firm’s heavy selling and IPO activity resulted in $3.5 billion in economic net income for the year, which is a combination of realized profits and paper profits reflected in fund holdings, a 76 percent increase from 2012. Its distributable earnings, which are available to pay out to shareholders, increased 66 percent.

Increased Dividends

That resulted in a full-year shareholder dividend of $1.34 a share, compared with 72 cents in 2012. Holders of Blackstone partnership units, such as Schwarzman and other senior executives, received $1.52 a share, the firm said in the filing.

Blackstone rose 1.2 percent to $33.35 today, its highest closing price since June 22, 2007, the day after its IPO. The stock more than doubled last year, exceeding its IPO price for the first time since 2007. That has lifted Schwarzman’s net worth to $10.9 billion, according to the Bloomberg Billionaires Index.

The top 10 dealmakers at publicly traded buyout firms took home at least $1.7 billion in dividends last year. Leon Black received about $369 million in distributions from his stock ownership in Apollo Global Management LLC, which he founded in 1990, more than double his 2012 payout. Apollo, which in the past has paid Black a $100,000 salary and no bonus or carried interest, hasn’t yet filed its annual report.

Bank Compensation

Earnings for the heads of the largest banks pale in comparison to the rewards available in private equity. Goldman Sachs Group Inc. gave its Chief Executive Officer Lloyd Blankfein $23 million for 2013, JPMorgan Chase & Co.’s Jamie Dimon earned $20 million and Citigroup Inc. paid Michael Corbat about $14.4 million.

Buyout executives, whose firms seek to buy companies using borrowed money, manage them and then sell them five to six years later at a profit, have acknowledged much of last year’s market rally was driven by accommodative monetary policy put in place by the Federal Reserve.

“Thank you, Ben Bernanke,” Schwarzman said at a December conference, referring to the former Fed chairman. “I saw him last Thursday and I thanked him. The opportunity for us to be able to attract funds is very, very high.”

–Editors: Pierre Paulden, Christian Baumgaertel

To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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