Blackstone Files for $4 Billion IPO

The Blackstone Group has filed for a $4 billion IPO. It did not disclose the number of shares or a propsective price range. Download the filing here: Blackstone.pdf

I’m still skimming through the document, but one thing jumped out first: The complete absence of Goldman Sachs. The original CNBC report last week said that Blackstone was meeting with Goldman, but it is perhaps the only major Wall Street firm not listed in the S-1. Citigroup and Morgan Stanley are co-lead underwriting, with other participants including Lehman Brothers, Credit Suisse, Merrill Lynch and Deutsche Bank.

Also, Blackstone seems to have answered the question about how it can go public while simultaneously recommending that other public companies get taken private. It says: “Our largest businesses—corporate private equity and real estate—have benefited greatly in recent years from public companies accepting going-private acquisition offers in order, among other reasons, to avoid the public markets’ focus on short-term earnings performance. As a public company we do not intend to permit the short-term perspective of the public markets to change our own focus on the long-term in making investment, operational and strategic decisions. Because our businesses can vary in significant and unpredictable ways from quarter to quarter and year to year, we do not plan to provide guidance regarding our expected quarterly and annual operating results to investors or analysts after we become a public company.”

Other items of note:

  • Blackstone’s assets under management have grown from $14.1 billion at the end of 2001 to around $78.7 billion as of March 1, 2007.
  • Blackstone’s annualized IRR (internal rate of return) for all private equity funds since inception is 30.8%. It’s 22.8% net of fees. The data is even better for real estate.
  • Last year Blackstone generated nearly $200 million in income from its corporate advisory business.
  • Why is Blackstone going public? It gives a few reasons: (1) To access new sources of permanent capital; (2) To enhance brand value; (3) Enhance flxibility in pursuing future strategic acquisitions; (4) Expand financial incentives for Blackstone employees; (5) Generate equity realizations for existing shareholders.
  • No ticker symbol disclosed.
  • Here is a spreadsheet of select recent Blackstone investments, including Blackstone’s equity contributions: Blackstone_Deals.xls
  • Schwarzman’s base salary is $350,000. Neither he nor any other managers will have golden parachutes.
  • Like with the short-term earnings issue, Blackstone is up-front about concerns that its ficuciary duties will shift away from its traditional limited partners. It says: “Serving the investors in our investment funds has been our guiding principle, and we remain fully committed to our fiduciary and contractual obligations to these investors. We do not intend to permit our status as a public company to change our focus on seeking at all times to optimize returns to investors in our investment funds. Accordingly, we expect to take actions regularly with respect to the purchase or sale of investments and the structuring of investment transactions for our investment funds to achieve this objective, even if these actions adversely affect our near-term results. We believe that optimizing returns for the investors in our funds will create the most value for our common unitholders over time.”
  • Blackstone generated $404 million in private equity fund management fees in 2006, which is up from “just” $175 million in 2005. The kicker is that 2006 expenses were $117 million.
  • Busy day for IPO filings. In addition to Blackstone, there was Netezza Corp., Limelight Networks and McLeod USA.