Carlyle Aims For Value In Private Equity IPO Pricing (CG, BX, APO, KKR)

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Carlyle Group (NASDAQ: CG) is originally being viewed as a mixed debut for an initial public offering.  The market remains a bit cautious when it comes to investing into private equity outfits because the investors are last in line behind the partners and firm’s customers receiving payouts.  Stakeholders also effectively have no real vote and cannot take any control over the operations and procedures of a private firm that is public.  Perhaps the biggest worry is that the only real reason these companies need to be public is so that the already wealthy partners inside these private equity shops can liquidate a portion of their interests through time.

So you have some of the negative cases against public private equity shops.  So why is the IPO for Carlyle being considered a win or at worst a mixed bag?  The reduced pricing was deemed to be aiming very low at the offering price because other private equity IPOs have seen the value of their interests (share equivalents) drop after coming public.

The 30.5 million common unit offering priced at $22.00 per unit and that is shy of the $23.00 to $25.00 originally projected.  This While it depends upon which valuation metric you use, Carlyle was thought to be valued at as much as half of rival private equity shop The Blackstone Group LP (NYSE: BX) despite a $6.5 billion market valuation for the rival.  Those valuation comparisons may need some caveats but the idea was to get the shares out at a price that was attractive to Carlyle partners AND attractive to investors.

Kohlberg Kravis Roberts & Co. (NYSE: KKR) and Apollo Global Management, LLC (NYSE: APO) are both relatively new as publicly traded private equity shops worth $3.07 billion and $1.55 billion, respectively.

The last amended filing showed that if the 30.5 million common units were sold without relation to the overallotment option that some 304,500,000 common units would be outstanding if all outstanding Carlyle Holdings partnership units held by existing owners were exchanged for newly issued common units on a one-for-one basis.  We will wait for a new filing to see exactly what the share count is in the coming weeks but that at least offers a read into the full value of the company.

Now Carlyle has to join the ranks of other public companies and open up its books each quarter.  Shares have fluctuated between slightly positive and slightly negative so far on the debut and some 8 million shares having traded with a last print of $22.08 at the 11:30 AM time stamp.

JON C. OGG

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