The Carlyle Group LP, a private equity firm, has started its road show in anticipation for its initial public offering (IPO) in early May. It expects to sell just over 30 million units (it is a limited partnership that has units instead of shares), valued between $23 and $25 per unit, raising approximately $700 and $750 million in new equity.
Hawaii is familiar with the Carlyle Group as it led the purchase of Hawaiian Telcom (HCOM, NASDAQ, 52 week range 13.31 30.10) from Verizon in 2005, and more recently invested about $100 million in Central Pacific Financial’s (CPF, NYSE, 52 week range 9.37 16.89) recapitalization, among other deals.
Carlyle first filed for their IPO last September and is being very cautious in respect to pricing the offering. Private equity firm Oaktree Capital (OAK, NYSE, 52 week range 39.35 43.00) went public last week, pricing at the lower end of its expected range, and has seen it share price drop below $40, or 7 percent below the $43 offering price. Another private equity group, Apollo Group (APOL, NASDAQ, 52 week range 35.45 58.29) went public last year and has seen its share price down about 30 percent since. Also, the Blackstone Group (BX, NYSE, 52 week range 10.51 19.63), the world’s largest private equity firm, went public in 2007 and has lost approximately half of its value since.
The situation has caused Carlyle and its underwriters to be conservative as they move towards pricing the offering. The Chief Investment Officer at money management firm Palisade Capital Management comments that “These are difficult companies to pay a big multiple for” and “It’s always easier to raise the price if there’s substantial demand rather than lower it.”
Carlyle has performed well with approximately $147 billion in assets and returned a recorded $19 billion to its investors in 2011, showing a 152 percent rise in distributable earnings. Some say that sales of older assets contributed to the jump with the hope that investors will reinvest their returns in the group. But this is the norm for private equity, as in venture capital, to always strive for a monetization of its investments.
One of the three founders, Daniel D’Aniello is telling the prospective investors that its global strategy is to focus on specific countries and regions with 33 outposts on 6 continents. More importantly saying that, “We have an intense focus on our investors, we work for them and the better we perform for our limited partners, the better our results will be for our public unit holders.” The significance of this statement is in light of the controversy over the Goldman Sachs (GS, NYSE, 52 week range 84.27 156.10) ex-director’s statements on how GS “ripped off “ its clients and some referred to those clients as “Muppets.”
JP Morgan, Citigroup, Credit Suisse and BofA Merrill Lynch are the lead underwriters of the offering and the units will trade on the NYSE with the symbol “CG.”