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Carlyle Seeks IPO That Would Value Firm Below Blackstone

April 16 (Bloomberg) -- Bloomberg's Cristina Alesci reports that Carlyle Group is seeking to raise as much as $762.5 million in its initial public offering, a sale that may value the Washington-based private-equity firm at up to $7.6 billion. Carlyle will offer 30.5 million shares at $23 to $25 each. Even at the top end of the price range, Carlyle’s valuation would be less than half that of rival Blackstone Group LP. She speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Carlyle Group LP (CG) is seeking to raise as much as $762.5 million in an initial public offering that would give the Washington-based private-equity firm less than half the market value of Blackstone Group LP. (BX)

Carlyle, the world’s second-biggest buyout firm by assets under management, will offer 30.5 million shares at $23 to $25 each, a regulatory filing today shows. At the top end of the range, the firm would be valued at as much as $7.6 billion, compared with about $16.5 billion for Blackstone, the biggest private-equity firm, and $9.8 billion for KKR & Co.

The IPO would follow last week’s offering by Oaktree Capital Group LLC (OAK), which raised less than planned and has dropped for three straight days. Firms such as Blackstone and Apollo Global Management LLC (APO) have also declined since their debuts. That performance, coupled with the difficulty of projecting earnings, may have persuaded Carlyle to value itself conservatively, said Palisade Capital Management LLC’s Dan Veru.

“These are difficult companies to pay a big multiple for,” said Veru, Palisade’s chief investment officer. His Fort Lee, New Jersey-based firm oversees $3.7 billion. “It’s always easier to raise the price if there’s substantial demand rather than lower it.”

Carlyle’s IPO may price as soon as May 2, according to data compiled by Bloomberg. The firm had about $147 billion in assets under management as of Dec. 31, compared with about $166 billion for Blackstone. The New York-based firm, which went public at a market value of $33.5 billion in 2007, has since shrunk by half.

Oaktree’s Performance

Oaktree, the world’s largest distressed-debt investor, on April 11 carried out the first IPO by an alternative-asset manager since Apollo sold stock last year. The Los Angeles-based firm raised $380.2 million, 27 percent less than it sought, as the Standard & Poor’s 500 Index pared this year’s rally.

The measure of U.S. stock market volatility known as the VIX has surged as much as 43 percent since March 26, when it hit the lowest level in almost five years.

“Carlyle is dealing with the uncertainty of the stock market,” said Steven Kaplan, finance professor at Chicago Booth School of Business. “I still think it may be a way for them to create positive momentum in anticipation of trading. If there’s demand at the valuation they go out at, they can start raising the price.”

Carlyle plans to offer about 10 percent of its stock in the sale, and expects to use the proceeds to repay debt. JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Credit Suisse Group AG (CS) will lead the IPO, according to regulatory filings. The firm is listing on the Nasdaq Stock Market under the symbol CG.

Carlyle’s Investments

Carlyle has helped take over companies ranging from coffee shop operator Dunkin’ Donuts Inc. to pipeline company Kinder Morgan Energy Partners LP. The firm’s revenue rose 1.7 percent in 2011 to $2.85 billion, with $1.36 billion in net income. Distributable earnings more than doubled to $864.4 million from $342.5 million in 2010, following $165.3 million in 2009.

Private-equity firms including Carlyle have been selling older holdings and returning capital to private backers with the aim of getting those clients to recommit to newer investment pools. So-called exit activity “is proving to be a relatively bright spot” for the buyout industry, researcher PitchBook Data Inc. said in a report this month.

Founders’ Shares

Founders William Conway, Daniel D’Aniello and David Rubenstein won’t sell any of the shares in the firm they founded in 1987, the filing shows. Each of the founders own about 47 million units that will be worth $1.2 billion at the top of the IPO price range, according to the document.

Carlyle’s other owners include the California Public Employees Retirement System and Mubadala Development Co., an investment company controlled by the Abu Dhabi government.

In a video of its pre-IPO marketing presentation posted on RetailRoadShow.com, D’Aniello emphasized Carlyle’s strategy of opening local offices and funds focused on specific countries or regions, with 33 outposts on 6 continents. He also sought to show how investment returns for the funds’ backers would translate to profits distributed to shareholders.

“We have an intense focus on our investors,” he said. “We work for them and the better we perform for our limited partners, the better our results will be for our public unit holders.”

To contact the reporters on this story: Lee Spears in New York at lspears3@bloomberg.net; Devin Banerjee in New York at dbanerjee2@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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