Carlyle Sells Piece Of Itself

Will or won’t Carlyle Group go public? That’s the question this morning, following an announcement that the firm has agreed to sell a 7.5% position to a state-owned investment group in Abu Dhabi. My assessment is that it will, but not anytime soon.

Under terms of the ownership sale, Mubadala Development Co. will acquire its 7.5% position in exchange for $1.35 billion. For context, CalPERS paid just $175 million for a 5% stake back in 2000. Moreover, Mubadala also will commit $500 million to a new U.S. buyout fund that Carlyle is currently raising. It would be the group’s first fund investment with Carlyle, although state-owned sister group ADIA is a longtime Carlyle backer.

So back to the IPO question. On the one hand, this deal gives Carlyle a definitive value ($20b) of which to work with – similar to what Blackstone did with the Chinese government. On the other hand, Carlyle has been able to recognize some brand equity without having to go through the distasteful rigmarole of a public offering (it’s unclear if the transaction is proving Carlyle shareholders with actual liquidity).

Rubenstein seemed to tip his hand a bit yesterday at the PEA Conference in New York, by saying that all of the top firms will be public within the next five years. This is a slight semantic shift from past statements, in which he’s expressed a vaguer belief (i.e., no mention of “top” firms) in the likelihood of publicly-traded private equity. In other words, Carlyle will proceed with an IPO – but not until it’s good and ready. Until then, he’ll just kick back and watch the continued travails of Blackstone and KKR. Maybe during High Tea at The Emirates Palace…