Blackstone Sees Plunging Oil as Buying Opportunity, Baratta Says

Falling oil prices create an investment opportunity, according to Joe Baratta, Blackstone Group LP’s global head of private equity.

“This is a momentary decline in the price -- it won’t be structural,” Baratta said in an interview with Bloomberg Television’s Erik Schatzker and Stephanie Ruhle yesterday. “Demand is chunking along OK globally for refined products. Over time, wells will stop being drilled and that will reduce the amount of supply. Prices will snap back.”

Oil prices have tumbled since June to the lowest in four years as slower growth in global demand combined with surging production in North America. The Organization of Petroleum Exporting Countries further depressed prices after refusing to cut output on Nov. 27. Oil futures in New York fell as much as $1.29 to $66.09 a barrel today, 38 percent lower than the price on June 20.

Baratta, whose group manages leveraged buyout and energy funds, said Blackstone’s risk to falling prices is minimal. Most of the New York-based firm’s holdings are in energy transportation infrastructure, merchant power plants in the U.S. and renewable-energy projects, he said.

The drop in oil prices comes at an opportune time, Baratta said, because typical LBO prices remain high. The firm considered five or six deals worth $10 billion to $12 billion in the past year and passed, Baratta said. Its largest buyout this year was the $5.4 billion takeover of industrial-products maker Gates Global Inc. from Onex Corp. and Canada Pension Plan Investment Board, which was completed in July.

Fewer Transactions

Blackstone is doing fewer transactions in which it takes public companies private and is instead focusing on mid-sized companies in consolidating industries that it can grow with additional acquisitions.

“Prices are high and you have to navigate carefully,” Baratta said. “Half the deals we’ve done this year have been this buy-and-build model.”

Blackstone, led by billionaire Steve Schwarzman, is the largest manager of alternative assets, overseeing $284 billion in private equity holdings, real estate, credit assets and hedge funds. Baratta joined the firm in 1998 and was named global head of private equity in 2012.

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