In 1998, Bain Capital, led by Mitt Romney, bought Domino’s for $1.1 billion, investing $385 million in cash and borrowing the rest. Thomas Monaghan (on left) founded the company in 1960.
Cornell Law Professor William A. Jacobson at Legal Insurrection makes the point:
I have told you that Bain would be our undoing in a general election. But whenever someone questions Bain, they are accused of being anti-capitalist.
Wishing it away will not make it go away, ….
Beth Healy at The Boston Globe:
Amid a flash of cameras, Mitt Romney signed the check to buy Domino’s Pizza with a flourish. It was a huge deal for Romney’s Bain Capital back in 1998, worth $1.1 billion.
Thomas Monaghan, the pizza magnate and orphan raised by nuns in the Detroit area, was cashing out all but a small stake. He wanted the proceeds to start a Catholic university. So he handed over control of the company he built from a small pizza shop in Ypsilanti, Mich., in 1960, to Romney and the partners of Bain Capital.
Domino’s was not in need of rescue, nor was it a classic turnaround case for Bain. But it was still a bonanza for the Boston leveraged buyout firm, which makes money by buying and selling businesses. Bain reaped a 500 percent return on its investment in the nation’s largest pizza delivery chain over 12 years. [Bold added]
Domino’s grew its revenues and earnings under Bain, but its debt also surged to $1.5 billion, leaving the chain with a higher debt ratio than most of its rivals, and interest payments that eat up half its profit each year.
I spent many working years deeply immersed in the business of leveraged buyouts and venture capital investments in troubled and start-up businesses.
The way it works in the honest world is the investment company buys control of a troubled or start-up company, puts in more cash, reinvests profits back into the company, reworks the board of directors and key management positions and when the company is healthy and ready, it sells all (or most) of its holdings in a public offering. The investment company takes a huge risk but if the strategy works, profits are huge.
That’s not what Bain Capital did with Domino’s Pizza. They bought a healthy company, pulled out cash reserves, borrowed to the hilt to pocket more cash, and then sold the debt-laden company to poor suckers that couldn’t read balance sheets. That’s capitalism in reverse.
Obama will be correct to run ads that say that Bain killed jobs and cheated the public.
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"How Bain Capital Cheated Domino’s Stockholders"