Bloomberg News

Jeb Bush Raising Private Equity Funds as Campaign Weighed

July 17, 2014

Jeb Bush

Former Florida Governor Jeb Bush. Photographer: Peter Foley/Bloomberg

As other Republicans travel the country laying the groundwork for 2016 presidential campaigns, former Florida Governor Jeb Bush is raising private-equity funds for oil and gas ventures.

Bush, 61, whose family made much of its fortune in Texas oil, has teamed with former Credit Suisse Group AG and Lehman Brothers Holdings Inc. bankers to create an investment firm based in Coral Gables, Florida, according to regulatory filings disclosed last month.

In April, his firm Britton Hill Holdings LLC used backing from a Chinese conglomerate to acquire a stake in a Stamford, Connecticut, shipping startup seeking to capitalize on surging Asian demand for U.S. shale oil and gas.

“Governor Bush is a businessman and investor and is proud of the work Britton Hill has done to invest in important projects,” said Kristy Campbell, his spokeswoman. “If Governor Bush becomes a candidate for office, he will review and comply with all necessary business disclosures.”

Since Bush completed his second term as governor in 2007, he’s immersed himself in corporate America, joining the board of hospital operator Tenet Healthcare Corp., advising Lehman Brothers and Barclays Plc and giving paid speeches. The son of a former president and brother of another, he’s also engaged in public debates on immigration and education, and is viewed by some within the Republican Party as well positioned to compete for the White House in 2016. Bush has said he will decide whether to run by the end of this year.

2016 Calculation

As he considers a White House run, the criticism that Republican presidential nominee Mitt Romney faced in the 2012 campaign for his role in private equity will have to be a factor for Bush -- yet not the major one, said Kevin Madden, a Romney adviser.

“I expect it’s a part of his consideration,” Madden said in a phone interview today. “Will it go a long way toward convincing him to decide for or against a run? I don’t think so.”

Bush expects scrutiny of his business dealings and his supporters know that, Madden said.

“One of the many reasons folks are attracted to Jeb Bush as a candidate is he knows a lot of the challenges that are attached to a national candidacy,” he said. “And it wouldn’t come as a surprise to Jeb Bush that everything related to his record as governor and everything related to his resume after governor will be explored by other candidates and the media.”

John Geer, a professor of political science at Vanderbilt University in Nashville, Tennessee, said Bush can benefit from Romney’s experience of defending his role in private equity.

Handle Carefully

“If he gets himself involved in some financial ventures that don’t look good, it could cause him some problems,” said Geer. “It really depends on how he handles it.”

Even as he forges business contacts, other Republicans mulling presidential bids are making connections in early primary and caucus states. New Jersey Governor Chris Christie is visiting Iowa this week, the first state to cast presidential nominating votes. Texas Governor Rick Perry will be in the same state this weekend, and Kentucky Senator Rand Paul is scheduled to travel there next month.

Bush can afford to wait while other lesser-known candidates build campaigns, said Darrell West, director of governance studies at the Brookings Institution in Washington.

“He does have the ability to start his campaign late, because he’s well-known and likely can tap into a large fundraising network, so he doesn’t necessarily have to be spending a lot of time in Iowa and New Hampshire right now,” he said. “But then again, you don’t want to be doing something this close to an election that is coming back to bite you.”

Romney Reminders

Private equity “is hard to explain to the average voter,” West said. “It’s just going to remind people about Mitt Romney, and that’s just not a positive association for any Republican candidate.”

Britton Hill Holdings was set up in May 2013 but Bush’s role as chairman and part owner wasn’t publicly available information until last month when the firm registered as an exempt adviser with the U.S. Securities and Exchange Commission. Firms only have to do this once they manage more than $100 million. The threshold for limited SEC registration can be lower if the adviser is exempt from state oversight.

Shale Exploitation

Filings describe Britton Hill as a closely held advisory and investment firm that focuses on the energy, infrastructure, logistics and environmental services sectors. Its first investments have been tied to the exploitation of shale oil and gas in the U.S., a booming area for private equity including some of the largest companies such as Apollo Global Management LLC, Carlyle Group LP (CG:US) and KKR & Co. They’re tapping into advances in hydraulic fracturing that’s unlocking vast new sources of energy.

Located at Bush’s personal business office at the Biltmore Conference Center of the Americas in Coral Gables, Britton Hill has three other owner-managers, including former Lehman banker Amar Bajpai. Bush and Bajpai were listed in Florida state filings as managing members of Britton Hill Partners LLC, a company that was incorporated in May 2008 less than a year after Bush became an adviser to Lehman. The New York-based investment bank filed for bankruptcy in September 2008.

The others are David Savett, an ex-natural-gas trader for Credit Suisse, and Ross Rodrigues, previously an analyst in the Swiss bank’s leveraged finance and sponsor coverage group who later managed funds at Odyssey Investment Partners LLC.

Britton Hill raised more than $40 million for its first fund in May 2013, according to a private placement notice filed with the SEC at the time.

Inflection Investment

It then invested in Inflection Energy LLC, a Denver-based startup that was seeking capital from investors to explore for natural gas in the Marcellus Shale formation in Pennsylvania and New York. In June 2013, Inflection reported that it raised $104 million in capital, more than doubling its initial goal, with Bajpai joining the board.

A second Britton Hill fund called BH Logistics LP raised $26 million from 10 investors in April, including China’s HNA Group Co., according to regulatory filings. The fund used the proceeds to buy 1.4 million shares of Dorian LPG Ltd. (LPG:US), according to filings. Dorian expanded its board and appointed Savett as a director.

HNA Group, based on the tropical Chinese island of Hainan, operates a fleet of 483 jets through its control of Hainan Airlines Co. and Hong Kong Airlines Ltd. The company had about $58 billion of assets as of April, including controlling stakes in 10 companies listed on mainland Chinese and Hong Kong exchanges.

Gas Carriers

Selling a stake to HNA could help Dorian gain entry to a key market. The company, formed last July to own and operate a fleet of gas carriers that transport propane overseas, expects need for the super-sized ships to increase amid rising demand for U.S. shale oil and gas from Asia, documents for its May listing on the New York Stock Exchange show. China is building a series of plants to manufacture propylene, an essential building block for plastics, that will probably run on imported propane, according to Dorian.

The company initially acquired four ships by issuing stock to several entities, including an affiliate of Seacor Holdings Inc. (CKH:US), a Fort Lauderdale, Florida, operator of cargo ships that is run by Charles Fabrikant. A frequent contributor to both Republican and Democratic candidates, Fabrikant joined forces with Bush in 2011 when a Seacor subsidiary then called O’Brien’s Response Management and Bush’s Old Rhodes Holdings LLC agreed to jointly provide disaster response services.

Fabrikant, through an assistant, declined to comment.

Buyout Scrutiny

In the last presidential campaign, Romney, the co-founder of Bain Capital LLC, was attacked by Democrats and dubbed a ‘vulture’ capitalist because of the jobs eliminated after the investment firm’s takeover of companies. Private equity has also come under scrutiny because profits are taxed at a much lower rate than ordinary income.

“You have to remember that it was unique with Governor Romney in that he made his business resume his central reason as to why he should be president,” adviser Madden said. “It fully defined his case for going into politics. I don’t think that is the case for Governor Bush.”

In addition, Geer said, “Romney’s problem was that he didn’t get the concern” about his business dealings and lower personal income taxes paid as a result. “He really couldn’t get his mind around it.”

Bush Businesses

The Bush family are no strangers to the energy industry or private equity. In 1953, the governor’s father, former U.S. President George H.W. Bush, entered into a partnership with J. Hugh and William Liedtke to form the Zapata Petroleum Co. and later founded a drilling affiliate, Zapata Offshore. After his presidency, he served as a senior adviser to the Asia advisory board of Carlyle, the Washington-based buyout firm.

The governor’s brother, former President George W. Bush, found less success with his own oil and gas company in the late 1970s under the name Arbusto Energy. He later made millions of dollars selling his stake in the Texas Rangers baseball team.

To contact the reporters on this story: Miles Weiss in Washington at mweiss@bloomberg.net; Mark Silva in Washington at msilva34@bloomberg.net

To contact the editors responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net; Christian Baumgaertel at cbaumgaertel@bloomberg.net Pierre Paulden, Sree Vidya Bhaktavatsalam


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Companies Mentioned

  • CG
    (Carlyle Group LP/The)
    • $27.45 USD
    • 0.44
    • 1.6%
  • LPG
    (Dorian LPG Ltd)
    • $12.67 USD
    • 0.37
    • 2.92%
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