A private company is one without publicly traded shares. Private companies can issue stock to shareholders, but those shares aren't listed on a stock exchange. Private companies are not subject to the reporting requirements imposed on publicly listed corporations by the U.S. Securities and Exchange Commission (SEC).
Private firms are free from the constant pressure to deliver quick returns, as is the case for many large publicly listed companies. That means management can embark on long-term, high-risk, and high-return ventures without worrying about quarterly results.
Some private companies, including private equity firms, extend those advantages to publicly listed companies they buy and take private. At deal closing, the publicly traded shares are delisted, with shareholders receiving the specified price per share in cash.
This article looks at 10 of the best known public companies that went private.
- Taking public companies private is a popular investment strategy and business model that has involved some of the most recognizable consumer brands.
- Companies taken private are often listed publicly again a few years later as their private owners seek to cash out.
- Newly private companies are freed from shareholder pressure but not from the imperative to deliver a financial return for their new owners as soon as possible
- An alternative to a second initial public offering after a going-private deal is the sale of the company or a part of the company to an industry buyer, often a competitor.
In April 2022, the messaging platform operator accepted a $44 billion buyout offer from Elon Musk, the planet's richest human at the time with an estimated net worth of $268 billion. Musk's fortune stems largely from his stake in Tesla, Inc. (TSLA), the maker of electric vehicles Musk leads.
Twitter's (TWTR) share price peaked above $77 in February 2021, but was down more than 50% from that high by January 2022, when Musk began accumulating the 9.2% stake he disclosed in March. Musk was offered and accepted a seat on Twitter's board, but declined it days later and instead made an informal offer of $54.20 per share in a public "bear hug" letter to Twitter's board.
Twitter adopted a poison pill shareholder rights plan to discourage Musk from increasing his stake, but entered talks with the tycoon after he disclosed committed financing for the transaction. Musk said after the deal was reached his goal for Twitter is to ensure free speech while improving the service's features.
Heinz, the producer of a famous ketchup brand dating back to 1869 and a variety of other processed foods, agreed to be acquired by Warren Buffett's Berkshire Hathaway (BRK-A) and Brazilian investment firm 3G Capital in 2013, in a deal worth about $28 billion including assumed debt.
In 2015, the company merged with Kraft Foods Group to form The Kraft Heinz Company (KHC), with Berkshire Hathaway and 3G Capital investing an additional $10 billion in exchange for 51% of the combined company.
The fast-food restaurant chain first went public in 2006, raising $425 million. Shares traded on the NYSE under the ticker symbol BKC.
3G Capital took the company private again in 2010, buying it for $24 per share, or $4 billion. Burger King relisted as a public company in 2012 through a reverse merger with London-listed Justice Holdings.
In 2014, Burger King bought Canadian coffee chain Tim Hortons in a tax inversion merger worth $11.5 billion at the time of the announcement. The combined company, named Restaurant Brands International (QSR), is based for tax purposes in Canada, though it retained a New York Stock Exchange listing in addition to one on the Toronto Stock Exchange (TSX).
Michael Dell, the chief executive officer (CEO) of Dell Computer who famously started the computer hardware supplier in his college dorm room, teamed up with the Silver Lake Partners private equity firm to take the company private for $24.4 billion in October 2013.
After acquiring EMC in 2015 in a $67 billion mostly debt-financed deal, Dell returned to public markets in late 2018 through a controversial exchange of Dell stock for VMWare tracking shares listed as part of the EMC deal. The deal was worth roughly $24 billion. In 2021, Dell spun off VMWare. Inc. (VMW) into a separate publicly listed company.
Alliance Boots PLC
The European health care and pharmacy chain, then listed on the London Stock Exchange (LSE), set a record as the biggest leveraged buyout in Europe when Kohlberg Kravis Roberts & Co. (KKR), and Italian billionaire Stefano Pessina bought it for $22.2 billion in 2007, prevailing over a rival group of private equity bidders.
U.S. pharmacy chain Walgreens purchased a 45% stake in the private company in 2012 and the remainder in 2014, paying a total of about $22 billion in cash and stock, to form Walgreens Boots Alliance (WBA).
Equity Office Properties Trust, founded by real estate tycoon Sam Zell, was the largest publicly listed owner of office and commercial properties in the U.S. when it agreed in 2006 to be acquired by an affiliate of the Blackstone Group (BX) for $36 billion. The deal followed multiple rounds of high-stakes bidding, with Blackstone ultimately prevailing over Vornado Realty Trust (VNO). The company changed its name to EQ Office in 2018.
Hilton Worldwide Holdings
Hilton is a leading global hotel franchise with more than 6,800 properties in 122 countries and territories. The company was founded by Conrad Hilton in 1919 after he purchased his first hotel in Cisco, Texas. The first hotel to use the Hilton name was in Dallas.
In October 2007, Blackstone Group bought the company in a leveraged buyout (LBO) for $26 billion. Hilton went public again, resuming trading on the NYSE under the ticker symbol HLT in December 2013, with Blackstone retaining a stake of more than 45%. The company's second IPO raised more than $2 billion.
Kinder Morgan was managing one of North America's largest energy pipelines and storage portfolios when it went private in May 2007 in a buyout by American International Group (AIG), The Carlyle Group (CG), Goldman Sachs Capital Partners, and Riverstone Holdings LLC for about $22 billion.
The company went public again less than four years later, raising about $3 billion from the listing of a 15.5% stake.
Panera has more than 2,100 locations nationwide and boasts annual sales of about $5.3 billion for 2020. In April 2017, Panera agreed to be acquired by the private investment firm JAB Holding Company—which also owns brands like Keurig, Krispy Kreme, and Peets Coffee and Tea—in a deal worth more than $7 billion. In a move to prepare for going public, JAB Holding Company combined Panera Bread, Caribou Coffee, and Einstein Bagels into Panera Brands in August 2021. A couple of months later, Panera Brands announced its intent to file paperwork with the SEC to launch an IPO; paperwork is still pending as of May 2022.
Celebrating its 100th birthday in 2022, Reader’s Digest is published in 22 countries and 17 languages.
Reader’s Digest, was acquired by Ripplewood Holdings LLC in March 2007 for $2.4 billion. The company faced financial problems before the deal, and in its aftermath filed for bankruptcy twice, in 2009 and 2013. A couple of years later in 2015, Reader's Digest Association rebranded itself as Trusted Media Brands.
The Bottom Line
The pattern is clear: today's going-private buyout is in some future year a likely new initial public offering, as private owners seek to cash out. Private equity firms have time-constrained investment horizons and are generally not in the business of running the same businesses for decades.
That, in turn, means that while private companies are not subject to pressure from public shareholders, they are still managed in the short-term interest of their new private owners. That might mean laying off employees, divesting assets, or taking on new debt to pay the owners a dividend, and such measures may or may not be in the company's long-term interest as distinct from that of its new paymasters.
In any case, private buyers taking control of publicly listed companies are among the most sophisticated players in business and finance. If they're paying up, it's likely because they've mapped several potentially lucrative exit strategies. Listing the company again in time is often going to be near the top of that list.