June 15, 2011 / 12:28 PM / 9 years ago

Carlyle IPO could raise $1 billion: source

NEW YORK/LOS ANGELES (Reuters) - Private equity giant Carlyle Group CYL.UL is moving closer to an initial public offering, and could raise around $1 billion based on what banks are pitching, one source familiar with the process said on Wednesday.

Carlyle, co-founded in 1987 by David Rubenstein, has yet to release any information about its profitability and management fees, making it impossible to accurately value how much it would be worth as a public company.

Carlyle was valued at $20 billion in September 2007, when an investment unit of the Abu Dhabi government bought a 7.5 percent stake in the company, before the credit crisis sent stock markets sliding.

It had an implied value of about $6 billion in June 2010 — based on the $334 million value Calpers gave to its 5.5 percent stake, bought in 2001. Calpers discloses the figure in its annual investment report under the section “Expansion Capital”.

If Carlyle’s value had appreciated in line with rival Blackstone’s — which is up 60 percent since then — it could be valued today at about $10 billion. A variant of this valuation method was previously reported by Fortune publication’s Term Sheet blog.

An IPO would see Carlyle join rivals Blackstone Group (BX.N), Kohlberg Kravis Roberts & Co (KKR.N) and Apollo Global Management (APO.N) as publicly traded private equity firms.

Private equity firms saw the value of their portfolio companies diminish and their ability to strike new deals evaporate in the wake of the credit crisis. However, the outlook for both selling portfolio companies and striking new deals has since improved.

Publicly traded shares can help a company incentivize employees and provide a currency for acquisitions.

Carlyle hopes to file its IPO prospectus with the U.S. Securities and Exchange Commission in the third quarter, sources previously told Reuters.

Banks have been making pitches this week to underwrite the deal, two sources familiar with the process said on Wednesday.

An offering could be around $1 billion, based on what banks are pitching, one of the sources said. The second source said an offering of around $1 billion would be a reasonable size for Carlyle to target. CNBC earlier reported the IPO could total $750 million to $1.2 billion.

Carlyle declined to comment.

If Carlyle were to file for an IPO in the third quarter, it could realistically price an offering and begin trading some time after the September U.S. Labor Day, but before the December holiday season.

If it misses that window, it could wait until early 2012, after it finalizes its full-year 2011 financial statements.

EXPANDING BUSINESS MODEL

Carlyle, which has invested in companies including Dunkin Brands, Alliance Boots and Freescale Semiconductor, has been expanding its business model. In January, it struck a deal to buy Dutch-based private equity fund-of-funds AlpInvest Partners, Europe’s largest, to bulk up its product menu and attract more money from investors.

The firm has assets under management of more than $106.7 billion according to its website. In February, Carlyle hired NASDAQ OMX Group Inc (NDAQ.O) Chief Financial Officer Adena Friedman as its CFO.

Blackstone Group blazed the trail for private equity firms going public in 2007 with its own high-profile IPO — timed just before the market started to collapse.

Alongside it were hedge funds Och-Ziff Capital Management Group LLC OZM.N and Fortress Investment Group LLC FIG.N which all made their debuts on the New York Stock Exchange in the space of a year.

Rival buyout firms such as Apollo and KKR, which had also been planning to list, watched in the wings as their chance evaporated.

Since the economy and market started recovering, private equity firms have started looking again at going public.

KKR, which originally filed for a U.S. IPO in 2007, listed in Amsterdam instead. It moved its shares to the New York Stock Exchange in July. Apollo listed on the NYSE in March.

Separately, Carlyle said on Wednesday it had raised two funds totaling $1 billion to make investments in Brazil and elsewhere in South America.

Reporting by Megan Davies, Clare Baldwin and Paritosh Bansal, editing by Gerald E. McCormick, Derek Caney and John Wallace

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