Posted on: Wednesday, November 28, 2001
Kamehameha investment unit may sell shares
By Miles Weiss
Bloomberg News Service
Goldman Sachs Group Inc. said Kamehameha Activities Association and a unit of Japan's Sumitomo Mitsui Banking Corp. may sell $1.27 billion of shares, the last of the investments they made when the securities firm was Wall Street's largest private partnership.
Kamehameha Activities and SMBC Capital Markets Inc. said they have no immediate plans to sell their total 14.1 million shares.
Kamehameha Activities is the charitable arm of the Hawai'i-based Kamehameha Schools, formerly known as Bishop Estate.
Sumitomo Mitsui, the world's second-biggest bank, has sold about $2 billion in Goldman shares since 1999, in part to raise money to cope with slumping business at home, analysts have said.
The investments expanded Goldman's capital when the firm was closely held and made the institutions the largest outside investors in Goldman before its 1999 initial stock sale, allowing them to share in the firm's earnings. Selling the shares increases the number of Goldman shares available for trading and allows Sumitomo Mitsui and Kamehameha Activities to cash out at a profit.
"The investment was always opportunistic," said Roy Smith, a New York University finance professor and retired Goldman partner. "There's no reason to continue it."
Kamehameha Activities invested $500 million in Goldman, half in 1992 and half in 1994. The charity already has reaped proceeds of $2.05 billion through four prior stock sales, President Wallace Chin said, and its remaining stake of 5.45 million shares is worth $491 million.
Sumitomo Mitsui, which first bought a stake in Goldman in 1986, has 8.67 million shares worth $780 million. The bank sold 9 million shares in Goldman's initial stock sale, as did Kamehameha Activities, and has sold shares in three other blocks since then.
Shares of Goldman, the No. 3 U.S. securities firm by capital, fell $1.44, or 1.6 percent, to $90. The shares have fallen 15 percent this year, including reinvested dividends, while the Bloomberg Wall Street Index has fallen 18 percent and the Standard & Poor's 500 Index has lost 12 percent.
"It's been a very good investment for the entire organization," said Chin. "We'll be able to further our charitable mission, which is to educate Native Hawaiians."
The proceeds will be invested in stocks, he said.
Chin said Goldman asked the charity to participate in the filing at the request of Sumitomo Mitsui. Robert Rabbino, general counsel for SMBC Capital Markets in New York, said he was "not aware of that history."
Rabbino declined to comment on what Sumitomo Mitsui might do with the proceeds.
Chin said that under an agreement with Goldman, Kamehameha Activities would have attained the right to sell the shares April 1. The new filing allows the charity to sell before then, he said.
"I don't expect this to have much impact on Goldman shares because investors were expecting this," said Diana Yates, an A.G. Edwards & Sons Inc. analyst who recommends investors hold Goldman shares.
The sale brings Goldman a step closer to having enough shares available for trading so that the company will be eligible for inclusion in the S&P 500, investors and analysts said.
If Kamehameha Activities and Sumitomo Mitsui sell all their stock, Goldman will have about 40 percent of its shares available. Current or former Goldman employees owned almost 249 million shares, or 52 percent of the company, as of Sept. 30.
Goldman now has about 479 million shares outstanding.
