March 23, 2010 / 11:47 PM / 10 years ago

Carlyle's Rubenstein says Canada beckons investment

* Says has done plenty of Canada deals, but not enough

* Likes financials, energy for future activity

* Expects to see more private equity firms going public

By John McCrank

TORONTO, March 23 (Reuters) - Canada has been largely overlooked by U.S. private equity firms and is ripe for foreign investment, David Rubenstein, co-founder and managing director of Carlyle Group [CYL.UL] said on Tuesday.

Rubenstein, speaking at a symposium on private equity in Toronto, said that relative to Canada’s gross domestic product, there are not as many foreign firms that are focused on the country as one might expect.

He said Carlyle, one of the largest private equity firms in the world with more than $86.1 billion under management, has done a fair number of deals in Canada, but not enough.

“I’m not sure why we really haven’t put an office here, why we really don’t have a dedicated team here, because we could probably have deployed a fair amount of capital,” he said.

“There is probably more opportunity to invest here than American firms have fully appreciated. I just don’t want to tell people too much about that because then my competitors will spend more time trying to hire people I’m trying to hire.”

The Canadian economy fared better than the United States during the recession, in part due to its sound banking system, strong economic fundamentals, and abundance of natural resources.

Financials and energy, seen as anchors of Canada’s economy, are areas in which Rubenstein said he expects to see deals happening.


Another trend expected to gain momentum is private equity firms going public, he said.

He likened the landscape for U.S. private equity firms to that of investment banking firms in New York in the 1960s. He said there were about 200 at the time and everyone was private, but once one big firm went public, all the rest followed suit.

“I think private equity will follow that same pattern,” he said. “The larger, and even medium-sized firms will probably go public.”

“The reason they will do so is to attract employees who are now having stock available to them from companies that are already public, to retain employees, and to have currency to make acquisitions, because I think private equity firms will begin to acquire other private equity firms — smaller ones.”

New York-based Apollo Management LP on Monday proposed in a regulatory filing an offering of up to $50 million of shares in an initial public offering on the New York Stock Exchange.

The private equity firm previously announced plans to move its shares — traded on a private exchange — to the NYSE, but had not previously proposed offering shares in the listing. The issue would represent only a small percentage of the overall company.

The listing will see it follow rival Blackstone Group (BX.N) in becoming one of the few publicly traded private equity firms. Blackstone, the trailblazer, went public in 2007, and rival Kohlberg Kravis Roberts & Co [KKR.UL] will soon follow after filing for its own long-awaited NYSE listing earlier this month.

Rubenstein did not say if Carlyle was planning an IPO. Last September he said if Carlyle ever does go public “it will be a long way off.”

In Toronto on Tuesday, Rubenstein said that in order for private equity firms to be successful when going public, they have to remain focused on their limited partners ahead of their shareholders.

“When Blackstone went public, I think they said publicly that they will always focus on their limited partners ahead of their shareholders and if you don’t like that, don’t buy the stock, and so far, I’m not aware that people have seen that they have favored shareholders over limited partners,” he said.

“I think anybody that goes public is going to have to have that attitude.” ($1=$1.02 Canadian)

Additional reporting by Megan Davies in New York; Editing by Richard Chang

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