Term Sheet

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

The Carlyle IPO discount?

April 30, 2012: 2:41 PM ET

Get it while it's cheap

Has Carlyle Group lost value in the past year?

FORTUNE -- The Carlyle Group is expected to go public later this week, and would be worth approximately $7.3 billion were it to price in the middle of its IPO offering range. But this wouldn't be the first third-party valuation for Carlyle, which has been closely-held by its founding partners since being formed in 1987.

In early 2001, the California Public Employees' Retirement System (CalPERS) purchased a 5.5% equity stake in Carlyle for $175 million. It was the first such deal of its kind -- an institutional investor buying into an actual private equity firm, rather than just a private equity fund -- and valued Carlyle at approximately $3.18 billion. By the middle of 2008, the firm's value had skyrocketed to nearly $17 billion, according to an annual CalPERS investment report.

That was during the "golden age" of private equity, a term coined by Carlyle's own David Rubenstein. It was also a high point. Carlyle's value would drop to $4 billion the following year, and rebound a bit to $6 billion by mid-2010.

CalPERS had just published its most recent investment report, showing a $436 million carrying value for its Carlyle investment through June 30, 2011. That works out  to a valuation of nearly $7.93 billion.

A cynic might read this as Carlyle having lost value over the past year, which isn't the best directional signal for a pending IPO. But, to me, it seems to be confirmation that Carlyle is intentionally seeking to go public at a discount. Particularly given that it's in the process of raising a new $10 billion North American buyout fund that should create a brand new pool of recurring management fees. Plus, it's private equity portfolio has appreciated significantly over the past year, given that it's required to mark private companies to public market comps.

In fact, David Rubenstein reportedly has told prospective investors that Carlyle is seeking to offer its units at a discount to rivals like Blackstone Group (BX) and Kohlberg Kravis Roberts & Co. (KKR), in order to better create return potential. The CalPERS data seems to confirm that strategy.

Sign up for Dan's daily email newsletter on deals and deal-makers: GetTermSheet.com

Join the Conversation
About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

Email a Tip | @danprimack | RSS
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.