Toshiba picks Bain Capital as preferred memory unit buyer | Hacker News Reader

Toshiba picks Bain Capital as preferred memory unit buyer

asia.nikkei.com

69 pointsytch38 comments

I don't understand how the LBO companies like Bain still get away with it. I would have thought that the lenders would have gotten wise to it and stopped lending. After all they lose their principal in the almost inevitable bankruptcy.

Normally I would agree but in this case Dell and Apple appear to be the ultimate backers. I assume Bain was brought in to lead the financing aspects.

(Disclosure: I have zero inside knowledge of this deal)

Bain has been in the bidding process pretty much from the very start, while Apple and Dell only started getting mentioned as part of the consortium recently.

If something about an large, established industry you don't know all that well seems bizarre and counter intuitive and you think you know better, a good first step is to reexamine your assumptions and seek real data.

In this case, you should look into aggregate losses in first and second lien lending to PE-sponsored LBOs over the past couple cycles. It's almost certainly a lot lower than you think.

This seemed in the pocket for Western Digital and Foxconn, I sure didn't expect them to choose Apple and Dell.

Strip & Flip Bain loads their acquisitions up with debt to pay themselves off, and then runs for the hills. Like with Toys-R-Us now going bankrupt. Recall Mitt Romney was CEO of Bain. This is the GOP business modus operandi.

Great news for all the other chip makers.

"Think of it like The Toys-R-Us of DRAM"

I would have loved to be in that board meeting

Considering Toys-R-Us has gone bankrupt, perhaps not the most prosperous analogy either!

Pretty sure Bain Capital owns a controlling stake in Toys-R-Us

Loading down one of their companies with debt and then having it file for bankruptcy is a strategy they've used in the past. I wonder if that's what happened here.

That's pretty much Bain's modus operandi for all their holdings.

> Loading down one of their companies with debt and then having it file for bankruptcy is a strategy they've used in the past

Bain will lose almost all its money in Toys ‘R’ Us. It has written its equity down to zero, didn’t really take any dividends along the way, and itself holds the most junior tranches of debt.

Then other holdings of Bain sold "Toys R Us" goods and services and were perhaps sold after a good quarter?

> "Think of it like The Toys-R-Us of DRAM"

except you're completely wrong. DRAM business is booming and is/was the most profitable BU of Toshiba; Their reason to selling it is because of the debt and losses incurred as a result of their westinghouse acquisition.

they also had a huge accounting scandal very recently. westinghouse was icing on the cake.

the company has admitted to inflating its net profits by $1.3bn over seven years. then, former top management played a role in the padding of profits by an additional ¥40bn ($339m) over a three-year period.

Management gets huge bonuses when stuff like this happens so im sure the general mood was pretty positive

I don't yet understand.

Their MO: Buy it with debt. Charge the company for the debt and huge management fees which will be paid with more debt. Take it public after milking it to the max, so you can make even more money in the IPO.

Chapter 11 is next http://www.businessinsider.com/brick-and-mortar-retail-priva...

I’ve heard that before,but why would banks/people keep loaning them money? And I’d expect the market to learn to avoid their IPOs and stocks.

Because if they win the debt gets paid, and if the market crashes the taxpayer pays. Win:win.

Unlikely, since consortium includes Hynix. Hynix is #4 flash memory producer, Toshiba is #2. Hynix certainly has interest in actual business.

That's the thing. Bain will be in conflict with those two.

Bain here is for eighties style LBO game, as if it not went out of style.

Why do public markets invest in such crap ?

Why Americans invest in public stock markets full of crap?

Why do you characterize investors in public stock markets as "Americans"? I don't think American capital is the majority of the world any more, if it ever was.

Regular Americans certainly lead the world for the amount of money of ordinary people poured into the stock market

But yet, >20% of US stocks are owned by foreigners.. and I would wager these are majority institutional investors..

http://money.cnn.com/2015/10/01/investing/foreign-investors-...

besides, most average people who invest - US and foreign alike - buy mutual funds and have no idea what is in their portfolio..

but go ahead with your logical fallacy self - you are certainly making a stronger case for the americans being the dumb ones..

>but go ahead with your logical fallacy self - you are certainly making a stronger case for the americans being the dumb ones..

Hmmm

>most average people who invest - US and foreign alike - buy mutual funds and have no idea what is in their portfolio..

I put this to doubt. People who invest in US and in the remaining world do come from rather different socioeconomic classes.

US is probably one of the few countries where an average Joe ever knows what mutual funds are.

Because indexing ensures that if the company exists with very minor standards, people will automatically buy into it via their mutual funds and ETFs.

Out of all the businesses Bain Capital's private equity arm has listed in the link below, how many of them follow the template you've described?

http://www.baincapitalprivateequity.com/investments

To be fair, I think there would be some survivor bias. They aren't going to list all their failures

The original poster seems to be able to forecast how these companies are going to do. It's arguably harder to do that when a deal is just announced so I'd imagine it's easier with this list of businesses that they've already closed on.

Arguably, Toy R Us... it looks like Bain and its partners put down about 20% of their own money towards the purchase. However, there has been no IPO since that purchase, and they will likely lose most if not all of that investment, so I don't think even that fits the pattern.

I don't think so. This seems like one of the very few deals that Bain does that doesn't fit that mold.

Sounds like hiring a javascript ui developer to write real time embedded assembly. I mean, smart people can accomplish a lot, but why would you do that?

One of the reasons I hate being introduced as Dr. KGIII is that I will, almost inevitably in certain groups of people, get asked medical questions. I'm a mathematician, not an MD.

When I explain this, I will frequently get responses like, "Well, you're obviously smart. What's your opinion?" Again, with things like medical questions.

Why this is, I do not know. But, it happens with great regularity - to the point where I actively tell people that I don't want to be introduced as Dr. KGIII. They seem to think that I have expert knowledge in all things. Trust me, I don't.

No. This lets them extract more dollars from the technology industry, as memory is constrained and getting more costly.

They'll constrain product supply more, then spinoff before competitive capacity comes online.

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