Carlyle Founders’ Stakes Valued at $1 Billion Post-IPO

William Conway, Daniel D’Aniello and David Rubenstein, who founded Carlyle Group (CG) LP in 1987, are sitting on stakes valued at $1.03 billion each as the world’s second-biggest private-equity firm goes public.

Carlyle sold 30.5 million shares at $22 apiece, below the initial public offering’s proposed $23 to $25 range, according to a statement yesterday. The price cut reflects the hesitancy of investors who have seen the value of other buyout firms fall after their IPOs.

The offering by the Washington-based firm, which was priced at a discount to rivals in part to ensure first-day gains, leaves the three founders with stakes valued below those held by their counterparts at Blackstone Group LP (BX) and KKR & Co. (KKR) They told investors in New York last week they don’t plan to sell shares in the IPO and that they each plan to give the bulk of their wealth to philanthropic causes.

“This is their legacy,” Reena Aggarwal, a finance professor at Georgetown University’s McDonough School of Business in Washington, said in a telephone interview. “They started the firm from nothing, so their human capital and their financial wealth are tied up in the company. They need to have this liquidity event.”

An IPO is one way private-equity founders have cashed out after building firms that own dozens of companies employing hundreds of thousands of people. Stephen Schwarzman, who started New York-based Blackstone in 1985 with Peter G. Peterson, sold a portion of his stake for $684 million when the company went public in June 2007. His remaining stock was valued at more than $8 billion at its peak that year.

Peterson, 85, sold the majority of his Blackstone shares in the IPO for $1.92 billion, which he used to fund philanthropic efforts.

Schwarzman’s Stake

Schwarzman’s stake is valued at $3.07 billion based on yesterday’s closing price. Forbes magazine ranks the 65-year-old the 66th-richest American, with an estimated net worth of $5.5 billion. His firm oversees $190 billion, making it the largest private-equity firm by assets under management.

“Going public would crystallize the value in our work,” Schwarzman said at a Captains of Industry event last month in New York. “And I would have something to give to my heirs.”

Henry Kravis and George Roberts, the 68-year-old cousins who lead KKR, hold stakes worth $1.18 billion. They founded the New York-based company in 1976 with Jerome Kohlberg and haven’t sold any shares, according to the firm’s regulatory filings.

Record Distribution

Leon Black’s stock in Apollo Global Management LLC (APO), the New York-based buyout firm he founded in 1990, is worth about $1.17 billion.

The founders of the largest private-equity firms already are billionaires by virtue of profits from their funds known as carried interest, or carry.

Private-equity funds pool money from so-called limited partners such as pensions, endowments and sovereign wealth funds. The limited partners get 80 percent of the investment profits, with the remaining 20 percent going to the fund’s managers in the form of carry.

Carlyle returned a record $18.8 billion to its investors last year, more than three times its distribution in 2010, as it reaped profits from taking companies it owned public or selling them to other corporations. The three founders who hold 47 million shares each, earned a combined $413 million in 2011, mostly from distributions.

The firm’s stock will begin trading today on the Nasdaq Stock Market under the ticker symbol CG.

To contact the reporter on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editors responsible for this story: Jennifer Sondag at jsondag@bloomberg.net; Christian Baumgaertel at cbaumgaertel@bloomberg.net

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