Blackstone Takes Orbitz for a Pricy Flight

The best private equity kings consistently produce healthy double-digit returns for their investors, even after paying huge premiums for their investments. Ever wonder how they do it?

To find out, take a gander at the latest money-minting operation from the Blackstone Group. Blackstone, along with Technology Crossover Ventures, bought Travelport from Cendant nine months ago for $4.1 billion. Travelport is the parent company of Orbitz, which filed papers with the SEC yesterday to raise $750 million in an IPO.

According to the New York Post, the offering could value the online travel company at $2.1 billion. When Blackstone bought Orbitz last August, it was worth $1.3 billion, according to the filing. So if all goes well, Blackstone is set to reap a 62 percent return on its investment in nine months.

You had no idea the last nine months were so kind to the online travel booking industry, did you?

But over at GigaOm, a technology blog and news site, astute observer Kevin Kelleher (and a former editor of this reporter's) pokes more than a few holes in the Orbitz IPO.

Kelleher says the spinoff is way too early, and will come at the expense of future shareholders. The company lost money for the last three years, future investors won't have voting rights, and all of the proceeds raised in the IPO will go to pay down Travelport's debt, so there won't be anything left to invest back into the company's operations.

So wonder no more. That's how they do it.

by Megan Barnett