The battle to be 'King of the Street'

NEW YORK (Fortune) -- Nothing makes a business story more gripping than a great rivalry and there is no larger one today than the ongoing showdown between Blackstone's Steve Schwarzman and KKR's Henry Kravis.

At stake: Just who is the biggest, baddest man in the world of private equity, which nowadays means Wall Street writ large. The two Type-A, mega-wealthy financiers almost seem to be engaged in a constant, ongoing game of oneupsmanship.

To wit: Late Tuesday afternoon, just when every other working stiff was headed out to the beach or a barbeque for Wednesday's July 4th holiday, two jaw-dropping deals crossed the tape within minutes of each other, one from Kravis, the other from Schwarzman.

But first some background. This rivalry has been building for years, but has become even more heated recently. Last August, KKR beat out Blackstone (Charts) in a bidding war for Royal Philips Electronics. But then in September, when Blackstone and group were about to shake on a deal with Freescale Semiconductor, KKR and group swooped in at the last second with a higher bid.

Some say (perhaps friends of Blackstone) that KKR did so without a proper amount of due diligence. In any event, Blackstone ultimately won Freescale, but only after raising its bid.

As for raising money, Blackstone announced last July that it closed the largest buyout fund ever at $15.6 billion. (Hold that thought for a second.) Then KKR (and Bain) announced the HCA deal for $33 billion, finally topping KKR's own troubled, landmark transaction for RJR.

But hang on, we're not done yet.

In November, Blackstone announced its deal for Equity Office Properties at $39 billion. Then KKR closed an even bigger pool, a $16.6 billion fund, topping Blackstone's. And not to be outdone on the deal front, KKR (and TPG) announced the TXU deal for $45 billion. Then Blackstone raised the stakes even higher going public on June 22, raising $4.13 billion, in a very high-profile IPO. Whew! Got all that?

So now, flash forward to late Tuesday afternoon, July 3rd:

Headline No. 1: "KKR Files for $1.25 Billion IPO" Invariably the wires noted that KKR's going public was "following in the footsteps of rival Blackstone Group." A smaller deal on the face of it too, still it seemed that Kravis would have a nice day of headline garnering over July 4th. Top business news story and all that. Right? Maybe not.

Headline No. 2: " Hilton Hotels Agrees to Be Acquired by Private Equity Firm Blackstone Group in $26 Billion Cash Deal" Now this is a REAL headline grabber! It's Steve Schwarzman and the wild and crazy private equity wave meets ... Paris Hilton! Now, you've got my attention! And you can almost hear Henry Kravis gnashing his teeth. Curses, foiled again...

Although then again, maybe not. With all the unwanted attention Schwarzman seems to be getting these days from Capitol Hill, where some lawmakers want higher taxes on partnerships like Blackstone and KKR, maybe flying under Blackstone's cover makes for a nice understated July 4th for Henry Kravis.

Oh, and just one more thing. Forget the moguls. What about the REAL top of the mind question. As in, what does the Hilton deal mean for Paris Hilton? The simple answer is that no one really knows.

But here's some math: According to Hilton's 2007 proxy, Barron Hilton, Paris's grandfather, owns 20.8 million shares of the company's stock or 5.3% of the company. Blackstone is buying shares for $47.50, which would give Barron about $1 billion. Mr. Hilton has eight kids (including Paris's Dad Rick), which could conceivably mean that each branch would some day get $125 million.

Going further than that entails excessive speculation - in fact even that $125 million figure is just a guesstimate because a) the fortune need not be split up evenly, and b) there may be all sorts of other trusts and troves in play. In any event, it's been a great couple of days for Paris. Exit jail, enter Steve Schwarzman!