April 11, 2012 / 14:39 IST
Carlyle Group LP is eyeing a market valuation of USD 7.5 billion to USD 8 billion in an initial public offering, as the U.S. private equity firm prepares to kick off a marketing blitz to investors, perhaps as soon as next week, said a source with knowledge of the situation.
Carlyle, which has USD 147 billion in assets under management, plans to sell a 10% stake to raise USD 750 million to USD 800 million in the IPO, the source told Reuters on Tuesday.
The firm had said in a regulatory filing earlier this month that it might sell a 10% stake but its expectation on market value was not previously known.
Carlyle declined to comment.
Carlyle's market value represents a significant comedown from the peak of the private equity industry in 2006-2007, when easy credit spurred the largest leveraged buyouts of all-time. In 2007, Abu Dhabi state investment firm Mubadala paid USD 1.35 billion for a 7.5% stake in Carlyle, valuing the private equity firm at USD 18 billion.
Blackstone Group LP, which went public in 2007, raised about USD 7 billion by selling a 24% stake at the time, implying a value of around USD 29 billion. Blackstone, which had USD 166 billion under management at the end of 2011, has a current market capitalization of USD 16.5 billion.
The sharp difference in the estimated market value of Carlyle and that of Blackstone, even though the latter manages only slightly more assets, highlights the difficulty investors have in valuing private equity firms.
"Although these companies are all thrown into the same bucket in the eyes of many, under the hood their operations and culture and the way they share economics are all different," said David Snow, founder of PrivCap, a media company that covers the private equity market.
DIVERSIFICATION PREMIUM
Analysts say Blackstone commands a higher valuation than many rivals because of the firm's diverse businesses. Besides buyouts, the company's businesses also include financial advisory, hedge fund solutions, credit and real estate. Many of these businesses produce fee income, which is a steadier stream of revenue than that produced by leveraged buyouts.
Carlyle too has taken steps to diversify its business, although it still relies heavily on its buyout unit.
Carlyle will join a handful of other major private equity firms that have gone public in recent years. KKR & Co LP transferred its listing from Amsterdam to New York in 2010. About 30% of its shares were listed in New York.
Apollo Global Management LLC
, which has about 15% of its shares listed on the stock market, raised USD 382.4 million by issuing new shares in its IPO last year.
William Conway, Daniel D'Aniello and David Rubenstein, who founded Carlyle in 1987, have recruited 21 banks to help market the IPO to investors.
Carlyle plans to issue new equity in the offering and its founders 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.
CalPERS, the California pension fund for public employees and one of private equity's largest investors, took a 5.5% stake in the firm in 2000.
Bloomberg News earlier reported Carlyle's valuation expectations. 
