The Carlyle IPO: Long Time Coming

For a company with close to $100 billion AUM and a legacy which spanned Wall Street’s most profitable decades, Carlyle is flying mighty low beneath the radar these days. After several false starts, the Carlyle IPO seems back on track and set for a Q3 kick off.

Oddly enough… it seems as though nobody cares. Further evidence that there is no such thing as a living legend on Wall Street. Once the wet dream of every incoming analyst, Carlyle has become just another PE behemoth. Hoping it can cash in assets whose values have recently tumbled from heaven to earth. It is hard to argue that Carlyle and other mega mega funds didn’t miss their greatest IPO moment. The real question is… how much did they miss out on?

Enough has been written and said about the bailout that another rant on the subject is not necessary. It does bear witness to fitness to mention something many brought up back in 2008. Carlyle’s default on almost $17 billion of MBS debt is symbolic of the symbiotic government/finance symbiotic parasite born out of TARP. The company which once employed ex-President George H.W. Bush and his Secretary of State James Baker has the deepest of ties to Washington. One could even argue the Carlyle was the real behind the scenes Wall Street muscle pushing the bailout.

None of this has anything to do with my question. I am just reminiscing a bit. Today, I’m taking bets on who will get to handle the prestigious public offering. I am also soliciting opening bell prices.

Who wants to take a shot? SBs for the best analysis…subject to be revisited, allegedly in the third quarter.

p.s. Nowitzki bitches
.

 
Best Response

I won't take any personal credit for this (I'll take SBs anyway), but the best analysis I've seen came from Dan Primack in his daily Term Sheet newsletter (which you should all be getting if you're not already). He does a comparison of AUM with IPO prices of Blackstone and KKR, as well as previous private transactions with CalPERS that's pretty well thought out and values Carlyle at $10.9B.

Dan Primack:
The Carlyle Group is planning to file for an initial public offering sometime next quarter, Reuters reported yesterday. So, how much would it be worth?

This might sound like a specious question, given that we haven't yet seen any official paperwork from Carlyle, but we actually do have some numbers to work with. And I'm not just talking about matching assets under management to market caps of already-public buyout firms like Apollo Global Management, Blackstone Group or Kohlberg, Kravis Roberts & Co.

Ten years ago, Carlyle sold a 5.5% ownership position in its management company to the California Public Employees' Retirement System (CalPERS), for $175 million. At the time, that worked out to an enterprise value of around $3.18 billion.

CalPERS updates the carrying value of its Carlyle stake each year in its Annual Investment Report, although it's buried inside of a section titled "Expansion Capital." The most recent edition has data through June 30, 2010 -- yes, these run on a serious lag -- and lists the value of CalPERS' Carlyle position at around $334 million. That's an enterprise value of approximately $6.07 billion, compared to $4.04 billion in June 2009 and nearly $17 billion in June 2008 (an era that Carlyle co-founder David Rubenstein called the "Golden Age" of private equity).

It's unfortunate that we don't have a more current value, so now let's look at those public comps. Blackstone Group stock today opened trading 80.36% higher than it did on July 1, 2010. KKR stock today opened 78.57% higher than it did on July 12, 2010 -- which is the day that its listing transfered from Amsterdam to New York.

Given that these two increases are nearly identical, it's fair to extrapolate that Carlyle Group today would be valued around 79% more than it was at the end of last June. I stipulate that it's hardly a perfect comparison, given that private market valuations and public market comps may differ, and every firm has different portfolios. But it's the best we've got right now, and works out to Carlyle being worth around $10.86 billion.

- Capt K - "Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham
 
CaptK:
I won't take any personal credit for this (I'll take SBs anyway), but the best analysis I've seen came from Dan Primack in his daily Term Sheet newsletter (which you should all be getting if you're not already). He does a comparison of AUM with IPO prices of Blackstone and KKR, as well as previous private transactions with CalPERS that's pretty well thought out and values Carlyle at $10.9B.
Even higher since CALPERS likely adjusted their minority stake using a 20%-30% private co/illiquidity discount if they valued their book using public comps
 
CaptK:
I won't take any personal credit for this (I'll take SBs anyway), but the best analysis I've seen came from Dan Primack in his daily Term Sheet newsletter (which you should all be getting if you're not already). He does a comparison of AUM with IPO prices of Blackstone and KKR, as well as previous private transactions with CalPERS that's pretty well thought out and values Carlyle at $10.9B.
Dan Primack:
The Carlyle Group is planning to file for an initial public offering sometime next quarter, Reuters reported yesterday. So, how much would it be worth?

This might sound like a specious question, given that we haven't yet seen any official paperwork from Carlyle, but we actually do have some numbers to work with. And I'm not just talking about matching assets under management to market caps of already-public buyout firms like Apollo Global Management, Blackstone Group or Kohlberg, Kravis Roberts & Co.

Ten years ago, Carlyle sold a 5.5% ownership position in its management company to the California Public Employees' Retirement System (CalPERS), for $175 million. At the time, that worked out to an enterprise value of around $3.18 billion.

CalPERS updates the carrying value of its Carlyle stake each year in its Annual Investment Report, although it's buried inside of a section titled "Expansion Capital." The most recent edition has data through June 30, 2010 -- yes, these run on a serious lag -- and lists the value of CalPERS' Carlyle position at around $334 million. That's an enterprise value of approximately $6.07 billion, compared to $4.04 billion in June 2009 and nearly $17 billion in June 2008 (an era that Carlyle co-founder David Rubenstein called the "Golden Age" of private equity).

It's unfortunate that we don't have a more current value, so now let's look at those public comps. Blackstone Group stock today opened trading 80.36% higher than it did on July 1, 2010. KKR stock today opened 78.57% higher than it did on July 12, 2010 -- which is the day that its listing transfered from Amsterdam to New York.

Given that these two increases are nearly identical, it's fair to extrapolate that Carlyle Group today would be valued around 79% more than it was at the end of last June. I stipulate that it's hardly a perfect comparison, given that private market valuations and public market comps may differ, and every firm has different portfolios. But it's the best we've got right now, and works out to Carlyle being worth around $10.86 billion.

Rapes technicality, gets banana, defends LeBron in the clutch...oh wait, one of those requires no effort

 
manbearpig:
Edmundo Braverman:
Capt, that's hilarious. The Carlyle Group is worth $11 billion, but Groupon is worth $25 billion.
LOL wow.
Therefore the fact that I get daily emails from Groupon makes me kind of a big deal, right?
If I had asked people what they wanted, they would have said faster horses - Henry Ford
 
Edmundo Braverman:
Capt, that's hilarious. The Carlyle Group is worth $11 billion, but Groupon is worth $25 billion.
Obviously, haven't you heard? No profits necessary if your company name ends in dotcom. C'mon dad.
- Capt K - "Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham
 

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