"1848 and Beyond"
posted August 4, 2005

"An African Queen"
posted August 11, 2005

"Near Hit"
posted August 16, 2005

"Orko Gold"
posted August 18, 2005

"Mr. Smith Goes To Hungary"
posted September 1, 2005

"A Letter To
President Bush"

posted September 8, 2005

"Mr Clarke -
Call In The Boys"

posted September 12, 2005

"Orezone"
posted September 23, 2005

"U.S. Gold Corp."
posted September 29, 2005

"Mr. Prime Minister"
posted October 13, 2005

"The Business of Hungary is Business!"
posted October 31, 2005

"Then And Now"
posted November 9, 2005

"50 Relatives Worse Than Yours"
posted November 14, 2005

"Bunker Hunt-Silver-China"
posted November 28, 2005

"The Currency of Mass Destruction"
posted December 5, 2005

"Sonesta International Hotels Corporation"
posted December 29, 2005

"Northern Star Mining"

posted January 16, 2006

"Other People"s Money -Enron & Martin Siegel, Esq."
posted January 28, 2006

"Your Money Is Not Yours"
-Enron & Martin Siegel, Esq.

posted February 9, 2006

"A Tribute to
Rudy Giuliani
"
posted February 15, 2006

"Interview with
Robert McEwen-
U.S. Gold Corporation
"

posted February 22, 2006

"Sparton Resources"
posted March 1, 2006

"Harvest Gold"
posted March 2, 2006

"Midway Gold
Corporation
"

posted March 23, 2006

"Pocketful Of
Miracles"

posted April 8, 2006

"J.P. Morgan Offers Advice To Ken Lay"
posted April 11, 2006

"The Principal Guest Was Missing"
posted April 25, 2006

"Ken Lay"s Legacy"
posted May 8, 2006

"Gateway Gold:
It"s A Gold Story"

posted May 15, 2006

"Northern Star
Mining Corp."

posted May 19, 2006

"I Am An Immigrant!"
posted June 7, 2006

"Oil & Gas
Energy Crisis Solution"

posted July 3, 2006

"Let There Be  Sunshine"
Kirk Kerkorian

posted July 12, 2006

"The Age of Mediocrity"
posted July 19, 2006

"Silver In The
Twenty-First Century"

posted August 16, 2006

"Silver Wheaton - SLW"
posted August 28, 2006

"A Matter of Reasonable Doubt"
Ken Lay - Enron

posted August 30, 2006

"Brilliant Mining Corp."
posted September 17, 2006

"The Kennedy-Nixon debate revisited"
posted October 4, 2006

"The Arrival of the
Nickel Billionaires"

posted October 18, 2006

"Global Options
Group, Inc."

posted November 1, 2006

"This Year I"m Voting For Dick Nixon"
posted November 7, 2006

"Aero Mechanical Services, Ltd"
posted November 17, 2006

"Entrée Gold Inc."
posted December 13, 2006

"WisdomTree Investments, Inc."
posted December 26, 2006

"My Father Died In Auschwitz"
posted January 19, 2007

"Lexam Exploration, Inc."
posted February 11, 2007

"Robert Friedland -
The Man of The Year"

posted February 21, 2007

"Rubicon Minerals Corp."
posted March 1, 2007

"Warren Buffett - Franklin Roosevelt"
posted March 15, 2007

"Golden Valley Mines, Ltd"
posted April 21, 2007

"Brilliant Mining Corp."
posted May 22, 2007

"Bayswater Uranium Corp."
posted May 30, 2007

"Ghengis Kahn Was Hungarian"
posted May 31, 2007

"Portal Resources"
posted June 12, 2007

"Aldershot Resources Ltd."
posted July 16, 2007

"Entrée Gold Inc."
Follow Up Report #1

posted July 24, 2007

"The Age of Special "Corporate" Relationships"
posted August 23, 2007

"Interview with
David Hjerpe - Newmac Resources, Inc."

posted August 27, 2007

"Interview with
Jim Davis - President of Leeward Capital Corporation"

posted September 4, 2007

"Interview with Professor William Pfaffenberger - Torch River Resources"
posted September 22, 2007

"Ghengis Kahn Returns"
posted September 27, 2007

"Jasper Mining Corporation"
posted September 27, 2007

"Gold Indexed Bonds"
posted October 11, 2007

"Tagish Lake Gold Corp."
posted November 1, 2007

"Stalin & Chavez"
posted November 9, 2007

"Sanj Bayar -
The Prime Minister of Mongolia"

posted November 15, 2007

"The Mongolian Wakeup Call"
posted November 16, 2007

"Watergate Saved Nixon's Life"
posted November 28, 2007

"No More Munich -
The Mongolian Version of 1938"

posted December 11, 2007

"Sir, Do Not Abdicate"
posted December 27, 2007

"Mongolian Gold"
posted January 8, 2008

"The Unexpected
Mongolian Dilemma"

posted February 2, 2008

"Entrée Gold, Inc"
posted February 11, 2008

"Gold At 2000!!"
posted February 14, 2008

"Warren Buffett Receives A Call From Franklin Roosevelt"
posted February 19, 2008

"Tanzania Gold - Douglas Lake Minerals - Harp Sangha"
posted February 21, 2008

"Olympus Pacific Minerals, Inc."
posted February 28, 2008

"Prime Minister Sanj Bayar of Mongolia Receives The Nobel Peace Prize"
posted March 17, 2008

"The Mongolian Manifesto"
posted April 4, 2008

"Letter to Prime Minister of Mongolia"
posted April 24, 2008

"Altek Power Corp."
posted April 27, 2008

"Judy Garland &
The Subprime Crisis"

posted April 29, 2008

"Western Potash Corp.
(WPX-VSE) "

posted May 12, 2008

"Tanzania - An Up & Coming Mineral & Agricultural Producer In Africa"
posted June 2, 2008

"The Emergence of Tanzania"
posted June 4, 2008

"North American Gem, Inc."
posted June 5, 2008

"Mongolia: The 10th Richest Country in the World"
posted June 10, 2008

"The Douglas Lake Story In The Age Of Fear"
posted June 25, 2008

"Goldsource Mines, Inc."
posted July 1, 2008

"Mongolian Newsletter, First Edition"
posted July 2, 2008

"The Mongolian Revolution"
posted July 10, 2008

"Cal-Maine Foods Inc."
posted August 4, 2008

"Stalin In The
White House"

posted September 2, 2008

 

Andrew Racz  

Articles by Andrew Racz 

BERAL, INC.  
Andrew G. Racz  
Director of Research
 
300 East 54 Street, Suite 26C  
New York, New York 10022  
Telephone: (212) 319-6949  
Fax: (212) 753-1944
 

 E-mail: mlikar@aol.com   


Don't Miss Any of Andrew Racz's Articles With His RSS Feed! RSS Feed Don't Miss Any of Andrew Racz's Articles With His RSS Feed!  

 


September 3, 2008

 

The current trends in international finance, as well as the dislocation of the American induced monetary crisis, are creating not only the old billions of business but actually the new billions. If anything, there is more need for international investment banking and as more people work there will be more need for wealth management. These developments are not only on the multi-billion but on the multi-trillion level.

             It is all done by educated and principled people.

             This is the world that is opening for Evercore and its contemporaries.



Evercore Partners, Inc.

(EVR – NYSE, Inc.)


Price: $13½

52-range: $20 - $7½

Book Value: $16.00

2007 Revenues: $271M

Revenue Per Share: $21.5M

Shares Outstanding: 11.66M


Note: Fully diluted shares:

(1)           

(2)        
   

 

Investment Concept

 

By the second half of 2008, the United States unnecessarily created a real estate crisis which has shaken up the very foundation of investment banking all over the world. In fact, we have created the money crisis of the 20th century—the tragic version of the inverse Marshall Plan.


While the markets have been institutionalized in the beginning of the 1990s, followed by the 21st century, the creative side of the merger acquisition and money raising functions have gradually shifted to a set of new companies that call themselves “alternative asset managers” and “alternative merger and acquisition entities.” These entities—of which Evercore is a good example—gradually broke into the most profitable segment of traditional investment banking.


Next to the traditional international merger companies like Lazar, there came an upstart, Greenhill & Company, an investment banking firm in North America and Europe that operates with only 214 employees. The company offers advice on valuations, on strategy, structuring alternative deals and financing. Greenhill was formed by a group of individuals coming from major brokerage firms in the 1990s, but it has accumulated a corporate value remarkable in its achievements.


Market cap $1.53 billion

Profit margin $29.35 million

Return of assets $40.3 million

 


The remarkable thing was that Greenhill achieved is revenues of $430 million, an equivalent of $15 per share.


With 26.77 million shares outstanding, the resulting $1.53 market cap provides $76.500 value per employee.


We mustn’t forget that this has happened at a time when a traditional investment banking house, Lehman Brothers, shrank to a capitalization of $16 billion and its balance sheet is actually of questionable value.


Meanwhile, the world has actually expanded. By the year 2010, 7 billion people will be working, domestic and international transactions will exceed $100 trillion. The largest steel company Mittal, which has been put together by mergers, has a market cap of $120 billion, the potential takeover of Rio Tinto by BHB has a size of $140 billion, and Cleveland Cliffs is contemplating a $10 billion purchase of a large American coal company.


Cleveland-Cliffs

 

Our intellectual assumption is that the international corporate world needs companies, needs modern banking companies, like Evercore Partners, Inc. Evercore Partners is nothing but people. It was formed less than 14 years ago by Roger Altman, a former Assistant Secretary of the Treasury, who worked under the legendary Senator Lloyd Bentsen. By definition it is an investment banking boutique that provides advisory services to multinational corporations worldwide on mergers, acquisitions, divestiture and reconstruction.


INVESTMENT BANKING COMPANIES RANKED BY INVESTMENT BANKING SALES
Company
Symbol
Price
Market Cap
Citigroup Global Markets Inc.
Private
 
 
JPMorgan Chase & Co.
JPM
40.78
140.11B
Goldman Sachs Group Inc.
GS
178.97
70.48B
Morgan Stanley
MS
41.98
46.56B
Merrill Lynch & Co.
MER
27.10
26.70B


The size and numerical scope of the so-called independents are still Lilliputs in the total picture.

 

 

DIRECT COMPETITOR COMPARISON
 
EVR
GHL
LAZ
Industry
Market Cap:
153.80M
1.70B
2.30B
640.61M
Employees:
303
214
2,458
700
Qtrly Rev Growth (yoy):
-8.80%
-22.80%
10.90%
30.70%
Revenue (ttm):
270.80M
396.56M
1.89B
414.07M
Gross Margin (ttm):
96.75%
96.90%
98.62%
57.91%
EBITDA (ttm):
N/A
N/A
N/A
151.53M
Oper Margins (ttm):
12.78%
44.02%
19.25%
28.92%
Net Income (ttm):
6.55M
111.96M
142.58M
18.75M
EPS (ttm):
0.514
3.992
2.230
8.88
P/E (ttm):
25.66
15.87
18.24
19.00
PEG (5 yr expected):
1.07
1.17
1.2
1.17
P/S (ttm):
0.56
4.27
1.21
1.73
Pvt1 = Allen & Company LLC (privately held)
GHL = Greenhill & Co. Inc.
LAZ = Lazard Ltd.
Industry = Asset Management

 

We do not consider the performance of Evercore financially indicative of their future. Their numerical evaluations do not reflect the importance they are destined to play in the international advisory business.

 

 
Three Months Ended June 30,
 
U.S. GAAP
Adjusted Pro Forma
 
2008
2007
% change
2008
2007
% change
Net Revenue            
Advisory
$57,731
$56,846
2%
$57,731
$56,846
2%
Investment Management
597
1,143
(48%)
597
1,143
(48%)
Pre-Tax Income (Loss)
$ 7,869
$(103,646)
NM
$ 9,654
$25,913
(63%)
Net Income (Loss)
$ 2,056
$( 44,174)
NM
$ 5,777
$15,506
(63%)


 
Six Months Ended June 30,
 
U.S. GAAP
Adjusted Pro Forma
 
2008
2007
% change
2008
2007
% change
Net Revenue            
Advisory
$98,423
$140,792
(30%)
$98,423
$140,792
(30%)
Investment Management
1,819
2,090
(13%)
1,819
2,090
(13%)
Pre-Tax Income (Loss)
$ 5,267
$(79,550)
NM
$16,107
$54,264
(70%)
Net Income (Loss)
$ 1,091
$(39,953)
NM
$10,272
$32,472
(68%)

 

 

Going into the second half of 2008, the numbers are solid but alone they do not reflect the future. Like any rapidly growing business, with no historical precedent, the initial figures may indicate the potential direction and growth but the earnings figures do not indicate the future.


The actual and projected business, however, is where the future value lies. In fact, Evercore and other private equity bankers are to be judged as a young movie company. United Artists was formed by Charlie Chaplin, Mary Pickford and Douglas Fairbanks, Sr.


Many years later Steven Spielberg formed a company.

 

They both represented a trend but their early figures did not indicate the enormous future success, but rather their early performance served as a guideline.


 

Breakdown of the Business
Revenues
Advisory
Advisory Revenue was $57.7 million and $98.4 million for the second quarter and six months ended June 30, 2008, respectively, compared to Advisory Revenue of $56.8 million and $140.8 million, for the second quarter and six months ended June 30, 2007, respectively. These results include revenue related to our restructuring engagements, where we have seen a rise in client activity in 2008.

Among the transactions announced ruing the second quarter of 2008 on which Evercore is advising are:
•  
Time Warner Cable on its separation from Time Warner, Inc.
•  
Electronic Data Systems on its sale to Hewlett-Packard
•  
Creditex Group Inc. on its sale to IntercontinentalExchange
•  
Blackbaud, Inc. on its acquisition of Kintera, Inc.
•  
IAC/InterActiveCorp on the sale of its Entertainment Publications, Inc. subsidiary to MH Equity

 

Transactions that closed during the second quarter of 2008 on which Evermore advised included:
•  
De Ruiter Seeds Group BV on its sale to Monsanto Company
•  
Bright Horizons Family Solutions on its sale to an affiliate of Bain Capital
•  
Performance Food Group Company on its sale to an affiliate of The Blackstone Group and Wellspring Capital Management
•  
Cengage Learning on its acquisition of Houghton Mifflin College Division
•  
Bracco Diagnostics, Inc. on its acquisition of E-Z-EM, Inc.
•  
Rockefeller Financial Services on its sale of a 37% stake to Société Générale’s private banking group
•  
Haights Cross on the sale of Oakstone Publishing to Boston Ventures
•  
Grupo Concord and Prudential Real Estate Investor on the creation of a joint venture project for Costa Baja Resort & Marina

 

A substantial portion of Evercore’s second quarter 2008 Advisory revenues were derived from clients based in the United States.

 

With an infinitely better backing of the business, helped by the recent Japanese financing—EVR can look for a $100M quarterly business sometime in 2009.


A positive stock market, always plausible capital gains possibilities—all helping per share earnings.


Looking at the current and just closed transaction, one could surmise that one is dealing with a billion dollar company. The Mizuho corporate deal is undoubtedly a turning point in Evercore’s early history.


A projection—with imagination
Advisory fee
$500,000,000
Operating income
100,000,000
Capital gains
200,000,000
 
Wealth Management
  
2B in assets
1% margin
20            
 
140,000,000
Taxes
70,000,000
Per share (42M)
70,000,000
   
Per share (42M)
$1.50+
Value
$30 - $45

 

 

In the course of the last year there has been a tremendous institutional accumulation which is reflected partially in the table below.

 

TOP INSTITUTIONAL HOLDERS
Holder
Shares
Value
BAMCO INC.
1,094,559
$19,428,422
TIMES SQUARE CAPITAL MANAGEMENT
1,006,800
$17,870,700
ROYCE & ASSOCIATES, INC.
834,650
$14,815,037
MAZAMA CAPITAL MANAGEMENT, INC.
578,900
$10,275,475

 

Only recently Evercore made two major decisions.

 

(1) It has entered the money management business by purchasing a London-based company. Its stated aim is to match revenues from money management with that of the advisory business.

 

 

Money Management
Holder
Shares
Value
JANUS CAPITAL MANAGEMENT, LLC.
413,930
$ 7,347,257
WELLINGTON MANAGEMENT COMPANY, LLP
1,462,822
$25,965,880
WELLS FARGO & COMPANY
1,220,092
$21,656,633
BARON GROWTH FUND
863,400
$15,325,350
ROYCE OPPORTUNITY FUND
308,400
$ 5,474,100
ROYCE VALUE TRUST, INC.
276,800
$ 4,913,200

 

This decision is actually a success story for Legg Mason, who matched with money management business its basic brokerage, and Merrill Lynch that owns its most important assets, 49% of Brooks & Company.

 

(2) It has sought and succeeded in getting a partner by accepting some $300 million from a Japanese company and issuing only 5.5 million warrants at $22. The current price of Evercore is $13.


(3) The Japanese deal.


NEW YORK and TOKYO, Aug. 21, 2008 / PRNewswire-FirstCall via COMTEX News Network – Evercore Partners Inc. (NYSE: EVR) today announced it has entered into an agreement with Mizuho Corporate Bank, Ltd. (“Mizuho CB”) pursuant to which Mizuho CB will purchase from Evercore $120 million principal amount of senior unsecured notes due 2020 with a 5.20% coupon and warrants to purchase 5,454,545 shares of Evercore Class A Common Stock at $22.00 per share, for an aggregate purchase price of $120 million in cash. In addition, Mizuho CB and Mizuho Securities Co., Ltd. (collectively, “Mizuho”) have agreed, subject to the joint approval by Evercore and Mizuho of each allocation of Mizuho’s capital commitment, to commit up to $150 million to be invested in Evercore-affiliated funds. Evercore and Mizuho also entered into a new strategic alliance agreement strengthening their U.S.-Japan cross-border strategic alliance announced in 2006, which will expand the M&A relationship and form a steering committee to jointly review certain advisory opportunities.

 

 

Conclusion

 

It is now obvious that major changes are facing both the corporate advisory and money management business.


The traditional risk of “toxic” money management is over. Securities oriented money management will never again be mixed with options, futures and real estate.


The hedge fund business which reached $2 trillion will be stripped of tax advantages by the new administration and probably and rightfully will lose many members for non-performance.


At the same time movement of equity money in responsible hands will have a totally unheard of expansion. The hedge funds have reached $2 trillion without uniform performance; responsible and traditional investment management could reach $5-10 trillion in a decade. Considering that Evercore has 42 million fully diluted shares, entering this enterprise has much to offer for current stockholders. As we mentioned earlier, the past, impressive as it may be, can only vaguely be used to predict corporate future.

 

Evercore Partners Reports Second Quarter 2008 Results; Declares Quarterly Dividend of $0.12 Per Share
Thursday, July 24, 2008 6:00 am ET
Highlights

  • Advisory revenues for the second quarter of $57.7 million exceed the prior quarter and second quarter of 2007 by 52% and 2%, respectively.
  • Advising on two of the ten largest transactions announced in the quarter: $42 billion separation of Time Warner Cable from Time Warner and $13 billion sale of EDS to Hewlett-Packard.
  • Progress towards strategic objectives.
  • Building Restructuring business with addition of Senior Managing Director Dan Celentano.
  • Entering the Wealth Management business with an initial investment in Evercore Pan Asset Management in Europe and additional investments on track for the second half of the year,
  • Quarterly dividend of $0.12 declared.

Concerning the advisory business the current backlog of $56 billion is nothing but an initial test of the international community of Evercore’s strength. Multiplying the backlog we can come to the conclusion that the actual numbers could be remarkable.


Evercore is a small capitalization international advisory and money management concern. Its current capitalization is about $150 million. Its backlog is remarkable and so are the corporate contents. All in all, it represents a new historical entity, stepping into the world of serious banking crises, stepping into the world which is internationalizing on a scale unheard of in our entire history.


It is functioning in a world which has no precedent. The best reference I could find is the remarkable book by Clyde Prestowich, president of the Economic Strategic Institute in Washington, DC, Three Billion New Capitalists.


The current trends in international finance, as well as the dislocation of the American induced monetary crisis, are creating not only the old billions of business but actually the new billions. If anything, there is more need for international investment banking and as more people work there will be more need for wealth management. These developments are not only on the multi-billion but on the multi-trillion level.


It is all done by educated and principled people.


This is the world that is opening for Evercore and its competitors.



 

Evercore Partners to Receive $120 Million Investment From Mizuho Corporate Bank
- Proceeds to be Used to Fund Near-term Investment Management Opportunities and General Build-out of Investment Management and Advisory Businesses.
- Two Firms Strengthen Strategic Alliance for Cross-Border M&A Advisory Services and Forge a New Alliance for Investment Management Activities.


NEW YORK and TOKYO, Aug 21, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Evercore Partners Inc. (NYSE: EVR) today announced it has entered into an agreement with Mizuho Corporate Bank, Ltd. ("Mizuho CB") pursuant to which Mizuho CB will purchase from Evercore $120 million principal amount of senior unsecured notes due 2020 with a 5.20% coupon and warrants to purchase 5,454,545 shares of Evercore Class A Common Stock at $22.00 per share, for an aggregate purchase price of $120 million in cash. In addition, Mizuho CB and Mizuho Securities Co., Ltd. (collectively, "Mizuho") have agreed, subject to the joint approval by Evercore and Mizuho of each allocation of Mizuho's capital commitment, to commit up to $150 million to be invested in Evercore-affiliated funds. Evercore and Mizuho also entered into a new strategic alliance agreement strengthening their U.S.-Japan cross-border strategic alliance announced in 2006, which will expand the M&A relationship and form a steering committee to jointly review certain advisory opportunities.


Proceeds from Mizuho's purchase of the newly issued senior unsecured notes and warrants will be used to provide Evercore with capital to fund a number of specific investment management opportunities, several of which Evercore expects to announce before the end of the year, as well as a general build-out of its Investment Management and Strategic Advisory businesses, including geographic expansion. In connection with the investment by Mizuho, a representative of Mizuho will become a member of Evercore's Board of Directors, and following closing, Mizuho will be permitted to purchase Evercore Class A Common Stock in the open market, provided Mizuho's total voting interest does not exceed 4.9% of the total voting interest in Evercore.


"We have enjoyed a strong alliance with Mizuho, and this broader relationship enables both our Advisory and Investment Management businesses to partner with a truly leading Japanese institution. Moreover, Evercore has regularly stressed its two overriding strategic objectives,&