Mubadala in line to benefit from Carlyle IPO

Abu Dhabi fund will get discount on price and may get seat on US private equity giant's board
UAE-based Mubadala is likely to be one of the main benefactors in IPO announced by US-based Carlyle Group
By Shane McGinley
Wed 07 Sep 2011 12:06 PM

UAE-based Mubadala
Development Company is likely to be
one of the main benefactors in the initial public offering (IPO) announced on
Tuesday by US-based private equity company Carlyle Group.

The
Washington-based firm filed for an IPO on Tuesday, a long-awaited move to catch
up with rivals Blackstone, KKR and Apollo.

While
the volatility of global markets means an offering is unlikely until the first
half of 2012, the Abu Dhabi-owned investment fund Mubadala,
which bought a 7.5 percent stake in 2007, is likely to be one of the
benefactors of the move.

Mubadala,
which in December invested a further $500m in Carlyle, could see its stake in
the firm rise to as high 19.9 percent and is rumoured to be in line for a
seat on the buyout firm’s board if the IPO is successful.

However,
it could be a difficult road ahead: the US IPO market has struggled as concerns
about Europe's debt crisis and a weak recovery in the US have made markets
volatile. A number of deals were withdrawn last month.

"There
is going to be pricing pressure for this deal, given the weak demand for
financial IPOs and the performance of the listed companies," said Josef
Schuster, founder of Chicago-based IPO research and investment house IPOX
Schuster.

The
market conditions and the poor performance of other listed private equity
companies like Blackstone Group and Apollo Global Management, and the complex
listing of Kohlberg Kravis Roberts & Co, may also damp investor appetite.

Carlyle's
filing, with the US Securities and Exchange Commission, lists an offering size
of $100m, but that may be a placeholder amount. Sources said in June the
offering could be as large as $1bn.

Under
the terms of the filing, Mubadala will be able to avail of a 7.5 percent
discount on the IPO price when the flotation is initiated early next year.

A
spokesperson from Mubadala told Arabian Business it was “not in a position to
provide any comment during Carlyle’s registration process” and declined to
comment on speculation regarding a seat on the firm’s board, the timing of the
IPO or how much of a stake Mubadala will seek.

Continued on next page...

Carlyle,
whose investments include Dunkin Brands, Alliance Boots and Freescale
Semiconductor, was valued at $20bn in September 2007, before the credit crisis
sent stock markets tumbling.

The
buyout firm said it generated economic net income --a measure of profitability
used by private equity firms - of more than $1bn last year and about
$770m in the first half of this year.

The
firm sold a 7.5 percent stake to Mubadala in 2007 after shelving plans for an
IPO amid the credit crisis and in December the Abu Dhabi invested a further
$500m.

The
collaboration will seek to identify investment opportunities in the Middle East
and North Africa, specifically in the healthcare, aerospace and technology
sectors.

“Since
the initial investment in 2007, our two firms have collaborated across a number
of industry sectors. We are confident in Carlyle’s ongoing success as a global
alternative asset manager and are pleased to support their strategic
initiatives, including product and geographic expansion,” said Mubadala CEO
Khaldoon Al Mubarak.

Carlyle
is famed - and sometimes criticised - for its political connections and a
history of having Washington heavyweights on its payroll. The list of
politicians who have worked in some capacity for Carlyle includes former US
President George HW Bush and former British Prime Minister John Major.

"We
were seen by many as a shadow government... a Trilateral Commission, and that
we were out to rule the world," co-founder David Rubenstein said at a
conference in 2004.

Carlyle
is controlled by its senior managers and investors that own minority interests
in the business: Mubadala Development Co, an Abu Dhabi-based strategic
development and investment company, and California Public Employees' Retirement
System (Calpers).

Private
equity companies and hedge funds typically give little, if any, decision-making
power to shareholders.

"Investors
have to be very comfortable with the fact that they are just a speck of sand on
the beach when it comes to having any say in what's going on with the
company," said David Menlow, president of IPOfinancial.com.

Carlyle
manages about $153bn in assets, compared with Blackstone's $159bn. Carlyle said
in the SEC filing that JPMorgan, Citigroup and Credit Suisse are underwriting
the IPO. The filing did not reveal how many units the company plans to sell or
their expected price.

*
With agencies

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