Rubenstein Says Benefit of Carlyle IPO Is ‘Liquefying’ Stake

David Rubenstein, co-chief executive officer of Carlyle Group LP, said one of the reasons he is taking his private-equity firm public is to “liquefy” his stake.

“When you create value, ultimately you want to liquefy and get the benefit of that,” Rubenstein said today at the Bloomberg Link China Conference in New York. “I’m committed to giving away the bulk of my money. If I have money that is available to me as a result of some factors, that’s what I’m going to do with it.”

Carlyle is in the process of going public, following Blackstone Group LP’s IPO in 2007 and KKR & Co.’s in 2010. Rubenstein, along with co-founders William Conway and Daniel D’Aniello, received a combined $413 million last year as Carlyle’s profits rose, the Washington-based firm said in a regulatory filing last month.

Private-equity managers benefit from a lower tax rate on their share of investment profits, known as carried interest. The managers have been put under a public spotlight this year by opponents of Republican presidential candidate Mitt Romney, who say the former Bain Capital LLC CEO made the bulk of his wealth at the expense of companies and their workers.

Rubenstein defended Romney against attacks on his tax rate, which the candidate revealed to be 13.9 percent, and called for comprehensive reform of a “disgraceful” U.S. tax code.

‘Biggest’ Mistake

“When people comply with the law, they shouldn’t be criticized by people who say, ‘The law says you’re supposed to pay X, you should have paid 2X,’” Rubenstein said. “Change the law if you don’t think the law is appropriate.”

Rubenstein, 62, also praised Facebook Inc. CEO Mark Zuckerberg, who is set to take his company public, for the 27-year-old’s commitments to philanthropy. Facebook is expected to file its IPO registration statement today.

“It’s amazing how an entrepreneur like Mark Zuckerberg built in a relatively short time a company that has such impact in the world,” Rubenstein said. “Now that he’s going to be one of the wealthier people in the world, I think his initial efforts in philanthropy are very encouraging.”

Rubenstein had an early opportunity to invest in Facebook, he said, when his son-in-law told him about a friend who was dropping out of Harvard University to pursue a social media startup. He declined to meet with the young Zuckerberg.

“I’ve made some mistakes,” Rubenstein said, “but that was probably my biggest.”

IPO Benefits

Rubenstein, who co-founded Carlyle with Conway and D’Aniello in 1987, didn’t answer specific questions about his firm’s pending IPO because regulators are in the process of evaluating its public filings.

In San Francisco today, Leon Black, CEO of Apollo Global Management LLC, said there are several reasons for a private-equity firm to want to go public, including attracting new talent and allowing the firm to use stock to finance deals. He said the timing for the New York-based firm’s $565.4 million IPO last year was “miserable,” as Europe’s sovereign-debt crisis fueled market volatility. Apollo’s shares have lost 23 percent since the March IPO.

“I still believe in the long run that it makes sense, given the vision of wanting to build a global multiproduct platform with scale,” Black said at the SuperInvestor U.S. conference. “It’s also a compensation tool which has everybody at the firm feeling that they’re all rowing together.”

TPG’s Plans

David Bonderman, co-founder of private-equity firm TPG Capital, said at the same conference that his firm isn’t planning to pursue an initial public offering and will evaluate the performance of its competitors, including Carlyle, after their IPOs.

“If there turns out to be no negative consequences, we’ll see happen in our industry what happened in investment banking,” Bonderman said. “All the major firms will go public.”

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