(Updated) Hedge Fund Cerebus in Talks to Buy Blackwater Worldwide

Talk about potential for growth. If this or a similar deal goes through: the sky’s the limit for Blackwater.

Update: According to ABC News, it appears as though the deal is off. (Great news)

The gigantic hedge fund, Cerebus, that owns a controlling interest in Chrysler Motors and GMAC, the large financing arm of General Motors, is in intense negotiations to purchase outright the controversial North Carolina-based security mercenary firm Blackwater Worldwide. Blackwater has been the recipient of huge U.S. Defense Department [no-bid] contracts over the past decade worth hundreds of millions of dollars.

On paper, the purchase appears to be a good deal for both parties, with enormous profit potential attached. Besides the expected bloated profit margins, the deal would also set up the huge security mercenary firm for expansive growth opportunities all over the world, largely at U.S. taxpayer expense.

The hedge fund, Cerebus Capital Management could invest as much as $200 million for its stake in Blackwater. Sources familiar with the negotiations say there is no deal yet but Cerebus has been examining Blackwater’s books since the beginning of the year, and that the negotiations remain ongoing. The source added that there was a good chance a deal could definitely be announced sometime in the future.

For their part, a Cerebus spokesman said the company doesn’t comment on market rumors or speculation. In a letter earlier this year, the reclusive founder of Cerebus, Stephen Feinberg, reportedly told his core of investors that he hated all the attention the company was currently getting.

Brian Ross over at ABC News website has the exclusive story:

"We do our best to avoid the spotlight," wrote Feinberg, "but unfortunately, when you do some large deals, such as Chrysler and GMAC, it is hard to avoid."

Owning control of Blackwater would certainly attract even more attention to Cerberus. Blackwater has been accused of tax fraud, improper use of force, arms trafficking and over-billing connected to its work for the U.S. government in Iraq. A grand jury, federal prosecutors and congressional investigators are all currently probing allegations against the company.

Despite the controversy, however, Blackwater was recently renewed for a $1.2 billion private security contract with the State Department. The one-year extension is worth an estimated $240 million.

The chairman of Cerberus is former Treasury Secretary John Snow, and former Vice President Dan Quayle is also a prominent figure in the company. Cerberus holds controlling or significant minority interests in companies around the world that in aggregate currently generate more than $60 billion in annual revenues, according to their Web site.

Of course, the political connections to Cerebus and Blackwater are both telling and ominous. Telling in the sense of the apparent U.S. Defense Department preferential readiness to hand over contracts to Blackwater Worldwide on a regular basis, and ominous in the sense of our politician’s proclivities to continue this quasi-imperialist foreign policy, which inevitably leads to waging perpetual war around the world.

With rising body counts (both American and Iraqi) in Iraq and intensified fighting due to the resurgence of the Taliban in Afghanistan, I would posit (duh) that this is not a good time for the expanse of any industry profiting off wars of aggression.

The website Iraq Coalition Casualty Count (IC), (which, by the way, is the best website I’ve found as far as stone cold facts about death tolls in Iraq)  is reporting that we’ve lost 50 American servicemen in April – a seven month high. According to the (AFP) via the Turkish Press, estimated civilian deaths have escalated to an astonishing 1072 across Iraq in the last month; with deaths in Sadr City alone said to be as many as 925 -- with up to 2, 605 injured, according to CNN

Yeah, the "surge" is working all right; only not in the way the Bush regime would like Americans to believe.

The wise words of Barack Obama come to the forefront of my mind at this moment:

"We not only need to end the war; we also need to change the mindset of war."

Peace