Blackstone IPO bid to refuel public fund pursuit

NEW YORK (Reuters) - Blackstone's plans to publicly float a small portion of its general partnership is likely to reignite the public offering debate that sparked several large private equity firms into action last spring.

Analysts and bankers see Texas Pacific Group as a likely candidate to explore such a move, although several major factors loom, including the timing of floating an IPO while the markets remain shaky.

Blackstone is preparing an IPO, people familiar with the plans said, aiming to float about 10 percent of its partnership, which media reports say could value the entire firm at anywhere from $20 billion to $40 billion.

Blackstone has not commented on the matter, and the firm could abandon the plans at any time. The financial world has been abuzz since the news broke on Friday.

Private equity firms raise money from institutional investors, and then buy and sell companies, borrowing most of the money to finance their deals. These so-called buyout firms have pursued IPOs of themselves because such a move allows them to diversify into public fund holdings and raise money quickly without having to go to investors on a long and costly fund-raising tour around the world.

Several large private equity firms are expected to follow in Blackstone's wake, bringing the leveraged buyout world back to last spring, when Kohlberg Kravis Roberts & Co. launched a publicly traded fund in Europe.

"There's a herd instinct that pervades business transactions," said finance expert and Duke University Law School professor James Cox. "Seeing one entity have some success will attract others."

Any perception of success that Blackstone reaps could prompt others to pile on the band wagon, Cox said.

IPO POSSIBILITIES

Bankers and private equity investors say that Texas Pacific Group is among the most likely buyout firms to explore an IPO. So far, TPG does not have a publicly traded fund, unlike several of its peers.

Apollo Management and KKR also come up as IPO candidates, but they already have publicly traded funds. KKR seized headlines last spring when it launched KKR Private Equity Investors KKR.AS, which raised $5 billion and trades on the Euronext. Blackstone Group and TPG pursued plans for similar offerings, sources said at the time, but abandoned them after Apollo came up $1 billion short with its own public fund, also on Euronext ENXT.PA.

Carlyle Group is another firm that is mentioned in the IPO chatter, but it, too, is focusing on floating a separate fund -- not the general partnership. Carlyle plans to launch a debt-related fund in Europe sometime early this year, a source close to the firm has told Reuters.

"We have no plans at this time to do an IPO," Carlyle spokesman Chris Ullman said on Sunday.

KKR's Todd Fisher said last month in Frankfurt that the firm's public fund reflects the maturity of private equity, and that other buyout funds will want exposure to the public market.

"We think it's a good thing to be diversified," Fisher said.

A public offering also helps protect a private equity firm like Blackstone against a downturn in the leveraged buyout market -- something that some buyout executives think is not too far away.

Blackstone's IPO plans come amid speculation that more private equity and hedge funds will seek public money after the IPO last month of Fortress Investment Group LLC (FIG.N), a private investment fund that raised more than $600 million.

And yet, Blackstone CEO Stephen Schwarzman has repeatedly said he is not interested in an IPO for the firm.

"I think the public markets are overrated," he said in Frankfurt last month.

The New York-based firm says it has raised more than $64 billion across its private equity, real estate, corporate debt, distressed debt and marketable alternative investments groups.

Through June 30, Blackstone said it had invested total capital of $24.1 billion in 318 transactions with a total enterprise value of over $198 billion through its Private Equity, Real Estate, and Mezzanine funds and more than $5.1 billion across 439 different senior loan and other debt instruments through its Corporate Debt funds. The firm has 750 employees.

(Additional reporting by Megan Davies)