MB Civic

[Ian’s note: Herbert Allen’s annual conclaves are a critical barometer of where the “New World Order” is headed vis-a-vis globalization, especially re mergers and acquisitions (i.e., agglomeration of ownership) of national and transnational corporations, including telecomm, banking, insurance, entertainment, etc.]

By ANDREW ROSS SORKIN
Sun Valley, Idaho

THE annual mogul-fest that Allen & Company holds here every year is best known for A-list attendees like Rupert Murdoch of the News Corporation, Richard D. Parsons of Time Warner, Howard Stringer of Sony and Sumner M. Redstone of Viacom.

It is a conference that has taken on an almost supernatural reputation for deal making amid barbecues, discussion panels and whitewater rafting. (The seeds of Walt Disney’s acquisition of ABC/Capital Cities in 1996 were sown here.) But this year, the ones to watch were deep-pocketed people you may have never heard of, from the world of private equity and hedge funds.

“I walked into dinner last night and didn’t recognize three-quarters of the people there,” said the chief executive of one of the world’s largest media companies, who refused to speak on the record for fear of upsetting Herbert A. Allen of Allen & Company, who frowns on attendees talking publicly about the invitation-only conference, which ended yesterday. “It was all these hedge fund and finance guys I had never met before. The balance of power is shifting.”

The guest list at Mr. Allen’s conference, which began in 1982, may be the ultimate barometer of where the center of influence lies in corporate America and on Wall Street. For most of the 1980’s and early 90’s, the power players were Hollywood studio moguls like Barry Diller, then of Paramount, and Michael D. Eisner, formerly of Disney. By the mid-1990’s, cable and telecommunications executives like John C. Malone of Liberty Media and Brian L. Roberts of Comcast became the belles of the ball. In the late 1990’s and early 2000’s, technology and Internet executives like Stephen M. Case, the founder of America Online, and Jerry Yang, co-founder of Yahoo, were drawing crowds at the hotel bar.

Now, flush with billions in cash and the ability to borrow heavily on top of that, the private equity bigwigs and hedge fund managers have become the stars. Call it Predators’ Ball 2.0 — a kind of outdoorsy reprise of Michael Milken’s famous gathering of leveraged-buyout mavens of the 1980’s.

“We used to come here every year to sniff each other,” said the chief executive of another media company, who also did not want his name used. “Now, all these finance people are sniffing us.” With media stocks down virtually across the board, some may smell opportunity.

James B. Lee Jr., vice chairman of J. P. Morgan Chase, who has financed many of the largest corporate takeovers, seemed to be paying more attention than usual to the leveraged-buyout set this year.

Among the private equity players invited this year were Henry R. Kravis of Kohlberg Kravis Roberts (who did not attend); John A. Canning Jr., chairman and chief executive of Madison Dearborn Partners; Stephen Pagliuca of Bain Capital; Jonathan M. Nelson of Providence Equity Partners; Timothy C. Collins, chief executive of Ripplewood Holdings; and William E. Ford, president of General Atlantic. Invitees from the hedge fund industry included Wesley R. Edens of the Fortress Investment Group; Sanford J. Colen of Apex Capital; John Griffin of Blue Ridge Capital; and Daniel Och of Och-Ziff Capital Management.

And then there were the famed money managers like Mario J. Gabelli of Gamco Investors and Bill Miller of Legg Mason. In an age of increasing shareholder activism, such prominent institutional investors have greater influence as well. In case you were wondering, Carl C. Icahn, the billionaire financier who jousted with Time Warner earlier this year, didn’t get an invitation.

Many of these investors have been to Sun Valley before, but they are grabbing more attention as their stature has grown. Even Larry Page, the Google co-founder who enjoyed rock-star treatment at the World Economic Forum in Davos, Switzerland, seemed to have reverted to regular-guy status in Sun Valley — as regular as you can be with billions of dollars of Google stock.

Mr. Nelson of Providence, at the conference for his second year, seemed to be buttonholed by nearly every media mogul for a walk around the grounds or a chat by the duck pond. His firm, which focuses on the media sector, is an investor with several other private equity firms in businesses like Warner Music and MGM. Most recently, it was part of the winning consortium in the auction for the Spanish-language broadcaster Univision.

The Univision consortium also includes the media magnate — and Sun Valley attendee — Haim Saban, who made his fortune selling Fox Family to Disney after brokering the deal at an earlier Allen conference. At this year’s event, the winning consortium spent much of the week in meetings with representatives of Grupo Televisa, the losing bidder for Univision, to discuss Televisa’s plans for its stake in Univision.

Other investors, like Mr. Och, Mr. Miller or Mr. Nevo — whose firm is the largest investor in Time Warner — were spotted throughout the conference hobnobbing with the likes of Robert S. Wiesenthal, the chief financial officer of the Sony Corporation of America, and Harvey Weinstein of the Weinstein Company.

What are all these money men looking for? “Any opportunity to put our money to work — financing movies, new technologies, special projects and buyouts,” said one hedge fund/quasi-private equity fund manager.

After leaving Miramax, Mr. Weinstein turned to hedge funds for much of the financing for his new company. Last week, Mr. Weinstein and Robert L. Johnson, founder of Black Entertainment Television, announced here that they were forming a joint venture to produce films for urban audiences. That means they are likely to be in the market for more financing.

THIS year’s gathering continued to feed speculation about media deals, this time with private equity (that is, when attendees weren’t talking about Mr. Murdoch’s hair, newly dyed a youthful brown).

Leslie Moonves of CBS is expected to sell his company’s Simon & Schuster book division — or possibly even its Infinity radio division. Both have the hallmarks of a tempting buyout target: steady cash flow that can be easily leveraged. There was renewed chatter about Time Warner’s AOL unit, a cash cow that is quickly deteriorating, after news that the company is (again) considering a range of possible strategies.

Other properties that inspired crystal-ball-gazing were some of Viacom’s cable assets, since the business has not been performing as well as expected since its split with CBS. Also floating through the mountain air was the perpetual rumor about a buyout of EchoStar, the satellite television company owned by Charles W. Ergen, who also attended the conference.

With their ample supply of cash and newfound celebrity at Sun Valley, private equity and hedge fund professionals may want to enjoy their time in the Idaho sun while they can. Next year, depending on how the buyout market turns, many of them could discover that they are off the list.