Carlyle eyes $800 million IPO

The private-equity company is making moves on its path to an offering, but will investors bite?

By Benzinga Apr 11, 2012 5:23PM

By Ilir Shkurti, Benzinga Staff Writer


Carlyle Group, the private-equity conglomerate with $147 billion in management, will soon take its show on the road as it seeks to offer a tenth of its equity to the public. But it isn't giving investors much reason to jump in.


Still, the company expects to raise between $750 million and $800 million, according to Reuters, which would put its valuation at $7.5 billion to $8 billion.


Carlyle's long road to its IPO -- it initially filed in September -- suggests that investors may be reluctant to participate. In a very hot season of IPOs, investors may find the prospect of owning Carlyle shares underwhelming.


Carlyle hasn't made its shares very appealing. It's offering limited voting rights and essentially no say against the firm's general partners. The company's S-1 form also hinted at existing partnership agreements that effectively reduced or eliminated fiduciary duties to shareholders. Last month, the SEC made the company withdraw aggressive provisions effectively eliminating public investors' abilities to sue for wrongful misconduct or fraud on the part of its officers. The damage, however, may remain.


Another source of investor reluctance is the prospect of being saddled with debt for the benefit of the firm's principals. Although the company has made it clear that the funds will not be used for partner payouts, such distributions have already taken place. 


In December of 2010, the company borrowed half a billion dollars, 80% of which went to tax-deferred compensation to its three founders. This, Bloomberg says, echoes private equity tactics used to extract cash from acquisitions, and is what has given the industry a bad rep.


Investors may also consider the fact that comparable public issues to Carlyle have tended to underwhelm. Of four big comparables going public in the last four years, Dealbook says, only KKR & Co (KKR) trades above its initial offering price. 


The others, including Fortress Investment Group (FIG), Blackstone Group (BX) and Apollo Global Management (APO), are worth less than their IPO prices. Carlyle's own targeted valuation is less than half of what it was in 2007, when Abu Dhabi's Mubadala paid $1.35 billion for a 7.5% stake.


Carlyle has hired more than 20 banks in order to push its shares to investors. JP Morgan, Citigroup and Credit Suisse are among them.


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1Comment
Apr 12, 2012 7:07AM
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this company seems shady and unstable
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