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Carlyle Founders’ Stakes May Be Worth More Than $1 Billion

By Jason Kelly and Devin Banerjee on April 16, 2012
Bloomberg Businessweek
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Carlyle Group (CG) (CG)’s co-founders stakes in the firm that are likely to be on par with George Roberts and Henry Kravis’s holdings in KKR & Co. (KKR) (KKR) and worth less than Stephen Schwarzman’s shares in Blackstone Group LP. (BX) (BX)

Carlyle, which updated its initial public offering registration with the U.S. Securities and Exchange Commission today, said it will offer 30.5 million shares at $23 to $25 each. William Conway, Daniel D’Aniello and David Rubenstein’s stakes in the firm they founded in 1987 would be worth $1.13 billion apiece at the midpoint of the expected price range.

The firm, based in Washington, is the world’s second- largest private-equity manager, with $147 billion in assets as of Dec. 31. An IPO is one way founders are cashing out after building firms that control dozens of companies employing hundreds of thousands of people.

“What determines a good private-equity firm is the guys in the corner offices,” said Paul Schaye, managing partner of New York-based Chestnut Hill Partners, which helps private-equity firms evaluate deals. “These are 21st-century conglomerates. They’ve created something in reality with underlying value.”

Schwarzman’s piece of New York-based Blackstone is worth about $3.4 billion at today’s stock price. Schwarzman, who created Blackstone in 1985 with Peter G. Peterson, held 232 million shares of the firm at the end of 2011. The 65-year-old Schwarzman sold a portion of his stake for $684 million when Blackstone went public in June 2007. His remaining stock was valued at more than $8 billion at the peak that year.

Blackstone, which oversees about $166 billion, is the largest private-equity firm by assets.

‘Crystallize the Value’
Peterson, 85, sold the majority of his Blackstone shares in the IPO for $1.92 billion, which he used to fund philanthropic efforts. Blackstone President Tony James has a stake worth about $625 million, according to the firm’s government filings.

“Going public would crystallize the value in our work,” Schwarzman said at a Captains of Industry event last week in New York. “And I would have something to give to my heirs.”

Carlyle’s founders aren’t planning to sell any shares in the offering, a person familiar with the firm said this month. The proceeds of the IPO will go toward paying down debt, according to today’s filing.

Kravis and Roberts, who founded KKR in 1976 with Jerome Kohlberg, both hold stakes in the New York-based firm worth about $1.23 billion. Kravis and Roberts, who are cousins, haven’t sold any shares in KKR, according to the firm’s filings.

Apollo’s Black
Leon Black’s stock in Apollo Global Management LLC (APO) (APO), the New York-based buyout firm he founded in 1990, is worth about $1.24 billion at today’s share price.

The founders of the largest private-equity firms already are billionaires by virtue of profits from their funds known as carried interest, or carry.

Private-equity funds pool money from so-called limited partners such as pensions, endowments and sovereign wealth funds. The limited partners get 80 percent of the profits, with the remaining 20 percent going to the fund’s managers in the form of carry.

Carlyle returned a record $18.8 billion to its investors last year, more than three times its distribution in 2010, as it reaped profits from taking companies it owned public or selling them to other corporations. The three founders earned a combined $413 million in 2011, mainly from distributions.

To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net; Devin Banerjee in New York at dbanerjee2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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