Carlyle Group Files for Initial Public Offering
Carlyle Group Files for Initial Public Offering
By Cristina Alesci – Sep 6, 2011
Carlyle Group, the second largest manager of private-equity funds, filed plans to join rivals Blackstone Group LP (BX) and KKR & Co. as a publicly traded company amid signs the buyout market is weakening.
Carlyle, which hasn’t set a price range or the number of shares it aims to sell, registered for an initial public offering of $100 million by next year, according to a filing today with the U.S. Securities and Exchange Commission. That amount is a placeholder to calculate filing fees and the final amount may vary.
The Washington-based firm, which has discussed an IPO for years, is proceeding as investors again grow skittish about the buyout business. Last month, Blackstone and KKR had their worst one-day declines in more than a year on concerns that a falling stock market will hinder their ability to sell companies. A surge in borrowing costs, signs that the U.S. economy has stalled and skittish lenders are also threatening deals.
“Firms don’t seek capital unless they need it or they think investors will overpay for an asset,” said Harold Bradley, chief investment officer of the Ewing Marion Kauffman Foundation in Kansas City, Missouri, which promotes entrepreneurship. “Carlyle is looking into the future and seeing its fundraising cycle lengthening and, as a result, declining fees and they’ve identified this as the time to sell.”
24 IPOs Shelved
Private-equity firms combine debt with money from endowments, foundations, pensions and wealthy individuals to buy stakes in companies or acquire them. The firms usually take fees equal to about 2 percent of fund assets and 20 percent of investment profits.
Carlyle co-founder William Conway told Bloomberg News last year that the firm was gearing up for a public share sale to amass permanent capital. The offering will also give Carlyle’s co-founders, including Daniel D’Aniello and David Rubenstein, a way to eventually begin converting their ownership stakes to cash while helping the firm compete with Blackstone, whose assets have surged 43 percent year-over-year to a record $159 billion.
Carlyle has internally debated an IPO since at least 2007, when Blackstone first sold shares to the public. The global financial crisis of 2008 brought leveraged buyouts to a halt and prevented Carlyle from moving forward.
Net Income Rises
The firm is proceeding with the offering even as at least 24 U.S. initial offerings seeking a total of more than $3.4 billion have been shelved or scrapped in the three months ended Sept. 6, according to data compiled by Bloomberg. That’s the most since the same period in 2004, when 28 IPOs were withdrawn or postponed, Bloomberg data show.
In an effort to beef up demand, Carlyle and its advisers have been talking to analysts and investors since at least June to convince them that it is the right time to buy Carlyle stock.
The filing required Carlyle for the first time to publicly disclose earnings. The firm said net income attributable to Carlyle Group rose to $1.27 billion in the first six months of the year from $304.3 million a year earlier. Revenue increased to $2.07 billion from $762.5 million. Assets under management were $107 billion as of June 30 and increased to $153 billion this quarter, helped by the acquisition of AlpInvest Partners NV.
Blackstone, which is based in New York, reported revenue of $2.46 billion for the first half, up from $1.25 billion a year earlier. Net income attributable to shareholders rose to $128.9 million from a loss of $314.7 million a year earlier.
Shareholders who bought private equity firms at their offering prices haven’t done well so far. Blackstone, which completed its $4.8 billion IPO in June 2007, trades 61 percent below the offering price.
Apollo Global Management LLC ended last week 36 percent below its IPO price. The firm, founded by Leon Black, raised $565 million in its March 29 offering, and its shares have never ended a day of trading above their $19 offer price.
Fortress Investment Group LLC (FIG) has lost 83 percent of its market value since the firm raised $729 million in a February 2007 IPO.
Since its founding in 1987, Carlyle has expanded its buyout business into countries outside the U.S., opening 35 offices on six continents, two-thirds more than Blackstone’s 21 global offices.
Carlyle, which has helped take over companies ranging from coffee shop operator Dunkin’ Donuts Inc. to pipeline transportation company Kinder Morgan Energy Partners LP, has invested about $46.7 billion since inception. Those investments were valued at $84.5 billion as of June 30.
In an effort to court public investors, Carlyle has recently tried to diversify earnings beyond its share of the buyout investment profits, which stockholders consider volatile and, as a result, value less than management fees that the firms generate. Carlyle has been bulking up its global market strategies unit, which includes hedge funds, and agreed in January to buy Dutch private-equity fund of funds manager AlpInvest.
Carlyle picked JPMorgan Chase & Co., Citigroup Inc. and Credit Suisse Group AG to underwrite the offering.
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