The biggest deal ever (pg. 3)
He's a familiar figure in that rarefied orbit, but Nelson is surprisingly anonymous in his hometown; he says he has never once been interviewed by the city's paper, the Providence Journal. "In Providence, among people who follow business, everybody of course knows about the firm and its success and that he's the top guy there, but that's about it," says Ralph Wales, headmaster of the Gordon School, a private school Nelson attended. "Jonathan is a very private man." He declines, for example, to talk about a particularly difficult period in his life when his first wife died and he became the primary caregiver for his three young daughters (he remarried in 2004).
That's not to say Nelson doesn't have any ego, especially where his firm's track record is concerned. "He's not an ostentatious guy who likes having his name on the front page of newspapers," says an executive who knows Nelson well. "But Jonathan flies in a private jet, and he wants you to write an article that says he's the smartest media and telecom investor in the world." Is he? "He's pretty darn good," the executive says.
And he's raising his profile in his hometown. In 2010, Brown University will open the $45 million Jonathan M. Nelson Fitness Center. Nelson, now a Brown trustee (are you surprised?), donated the lead gift for the facility. Nelson, who says he might have been a carpenter or architect if he hadn't become a media investor, also is playing a hands-on role in its design. "This whole area needs to be improved," he says. It is a warm afternoon in Providence, and we are standing in a parking lot in front of the existing athletic complex, which consists of personality-free concrete buildings. "I am confident that you'll come back here and smile," he says. A fitness buff who works out five days a week, Nelson clearly believes a healthy body and a healthy mind go together: Before the Brown fitness center, he helped the Gordon School build a new gymnasium.
Lately, Nelson may have moments when he wishes he'd become a carpenter. While he insists he loves the job, especially the stimulation he gets from working with smart colleagues, he also acknowledges that as Providence Equity has grown, his gig has become much tougher, the problems more public.
Take the fight with Wachovia (WB, Fortune 500). Providence prides itself on maintaining friendly relationships with its partners, so insiders were surprised when Wachovia sued Providence without warning. Providence had renegotiated the price of its Clear Channel television acquisition, and the bank said the price reduction violated the terms of the lending agreement. Providence countersued. The parties eventually dropped the suits and the financing went through, but it seems unlikely that Providence will do business with Wachovia again. "There were three banks involved, and two of them handled this difficult situation very well," Nelson says plainly. "We appreciate that, and we will remember their behavior."
Similarly, three of the four lenders backing the BCE buyout also are trying to renegotiate loans to the parties seeking to buy Clear Channel's radio stations; some analysts suspect the banks might try a similar tactic with the BCE deal. "We are engaging with the company and the banks and expect everyone will honor their commitments," Nelson says.
While the credit crisis is taking a toll, Providence isn't only an LBO shop, and it doesn't rely on debt markets for all its investments. It recently put $100 million into Hulu, the web-video joint venture of News Corp. (NWS, Fortune 500) and GE's (GE, Fortune 500) NBC Universal. It is pushing deeper into Internet investing, and many of its international investments involve companies seeking growth capital, not buyouts. Indian wireless operator Idea Cellular, for example, sold a 16% stake to Providence last year for $400 million. Neither Hulu nor Idea really needed Providence's money; what the companies sought was external valuation of their business, as well as the expertise and cachet that Providence brings. "It means a lot when someone of Jonathan's stature puts his firm's money into Hulu," says Jason Kilar, CEO of the venture.
Nelson says that the tough times in the markets will not lead him to alter his basic strategy. Providence certainly will do more big deals; after all, it has $12 billion to put to work. But while some peers look for distressed companies to bail out or bad debt to buy, Nelson plans to stick with what he knows best. Asked how he plans to weather the economic slowdown, for example, he trumpets the virtues of BCE: "Bell Canada looks like a great business to us, in part as a defensive position in a possible economic downturn," he says. "People don't shut their phones off." Similarly, Providence has recently been pouring money into one of its original businesses, cable television, albeit in places such as Ukraine. It may not sound all that glamorous, but it makes perfect sense for a guy who built a private equity powerhouse by sticking with what he knows.