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Thu 3 May 2012 03:28 PM

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Carlyle IPO disappoints, deflates Abu Dhabi valuation

Firm valued at US$6.7bn, compared to US$18bn based on Mubadala stake

Carlyle IPO disappoints, deflates Abu Dhabi valuation
Carlyle founder, David Rubenstein.

Carlyle Group’s disappointing IPO yesterday raised just US$671m from investors, meaning Abu Dhabi-based Mubadala Development Company massively overvalued the Washington-based private equity firm when it bought a 7.5 percent stake four years ago.

Carlyle, which has taken many of its portfolio companies public since its founding in 1987, had previously said it was looking to raise US$762.5m in its initial public offering and was looking at a valuation of around US$7.5bn to US$8bn.

Securing US$671m in Wednesday’s IPO values it at around US$6.7bn, less than half the market capitalisation of rival Blackstone, even though their assets under management are similar in size.

Mubadala's purchase of a 7.5 percent stake for US$1.35bn four years ago valued the private equity firm at US$18bn.

CalPERS, the California pension fund for public employees and one of private equity's largest investors, has done better. It took a 5.5 percent stake in the firm in 2001 and it valued its initial US$175m investment at US$436.1m as of the end of June 2011, according to its latest published data.

This would imply Carlyle's value has dropped from US$7.9bn at the end of June 2011 to US$6.7bn, although CalPERS has more than doubled its investment based on the IPO price.

"Private equity firms have not been performing that well as they're getting pressure from all sides," said Reena Aggarwal, a professor of business administration and finance at Georgetown University's McDonough School of Business in Washington.

"Fundraising has become somewhat of an issue. They are getting pressure on the fee structure from limited partners."

Carlyle has diversified beyond buyouts into investments such as credit, hedge funds and real estate. It boasts a total of 89 funds, although buyouts still account for a sizeable chunk of its business.

Carlyle will issue new equity and its owners will not pocket any cash from the IPO directly. Instead, the proceeds will be used to pay down debt and finance operational needs, acquisitions and new fund commitments.

Carlyle, which has about US$147bn in assets under management, returned a record US$19bn to its fund investors in 2011 and reported a 152 percent year-on-year jump in distributable earnings, as sales of several assets in its funds boosted profits.

Carlyle founders William Conway, Daniel D'Aniello and David Rubenstein have recruited 21 banks to help market the IPO to investors. JP Morgan Chase & Company.

Units of Carlyle, which counts movie theater operator AMC Entertainment, donut maker Dunkin' Brands and car rental company Hertz among its investments, are set to begin trading on the NASDAQ Global Select Market on Thursday under the 'CG' symbol.

Arabian Business digital magazine: read the latest edition online

Omar 8 years ago

Oops...which astute financially insightful decision maker in Mubadala made that investment decision? Well he was close...only out by a factor of almost three. I wonder what his 2008 bonus was? In most firms I would think such a result would be a career stopper.