Carlyle IPO Raises $671 Mln

Deal brings in less than private equity firm sought; pricing represents 65% discount to Blackstone.

Carlyle Group LP raised $671 million in its initial public offering, pricing below the marketed range after struggling to win investors wary of the track record of publicly traded buyout firms.

The Washington-based firm sold 30.5 million shares for $22 each, according to a statement yesterday, fetching 12 percent less than it sought after offering the stock for $23 to $25. That represents a 65 percent discount to larger rival Blackstone Group LP.

Carlyle is seeking to avoid the fate of Blackstone, Apollo Global Management LLC and other alternative asset managers, whose stocks have tumbled in public trading. Investors have struggled with how to value private equity firms partly because their earnings are hard to predict, with the bulk coming from buyout funds that sell assets at various times.

“Given the track record of these IPOs, it makes sense that it’s going to have to be priced cheaply in order not to go to an immediate loss,” said Tom Mangan, who helps oversee about $3.4 billion at James Investment Research in Xenia, Ohio.

Carlyle, the second-biggest private equity firm, sold about a 10 percent stake and will start trading today on the Nasdaq Stock Market under the symbol CG. The IPO price values the firm at $6.7 billion, or 7.6 times last year’s distributable earnings of $881.6 million, adjusted for the effects of the IPO and the acquisition of AlpInvest Partners NV, according to data compiled by Bloomberg.

New York-based Blackstone, by comparison, had a market value of $14.9 billion yesterday, or about 21 times its 2011 distributable earnings of $696.7 million. The earnings measure largely reflects profits made from selling companies owned through buyout funds.

In marketing its deal, Carlyle had touted its record of taking companies public in private discussions with investors, according to a person familiar with the meetings. Seven of the 11 U.S. IPOs the firm led for portfolio companies since 2010 are trading above their initial prices.

Carlyle-backed companies such as Dunkin’ Brands Group Inc. and Nielsen Holdings NV have gained 72 percent and 27 percent, respectively, since their IPOs and rose 38 percent and 13 in the 30 days after going public, according to data compiled by Bloomberg. The 11 companies that Carlyle has taken public in the U.S. since 2010 gained an average of 4.5 percentage points more than the Standard & Poor’s 500 Index in the first 30 days after their debuts, Bloomberg data show.

The firm’s peers, by contrast, have almost universally lost money for investors.

 

Peers’ Performance

Blackstone declined 57 percent through yesterday since raising $4.75 billion in a 2007 IPO. The same year, Fortress Investment Group LLC and Och-Ziff Capital Management Group LLC held their own U.S. IPOs and have since lost 80 percent and 73 percent. Apollo, whose shares were previously traded on a private exchange run by Goldman Sachs Group Inc., held a $565 million U.S. share sale in March 2011 and has lost 33 percent since then.

The exception is KKR & Co., which gained 29 percent since moving its listing to the U.S. from Amsterdam in July 2010. The company didn’t hold an IPO, choosing instead to combine with its publicly traded European fund.

JPMorgan Chase & Co., Citigroup Inc. and Credit Suisse Group AG led the offering, whose proceeds will go toward paying off debt.

Co-founders David Rubenstein, Bill Conway and Daniel D’Aniello, who started the firm 25 years ago, didn’t plan to sell any of their personal holdings in the IPO. Each was to own about 15 percent of the firm following the offering, or about 47 million shares, according to a regulatory filing. Those stakes would each be worth $1.03 billion at the IPO price.

 

 

Bloomberg News


 

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