New York, May 21 (Reuters): The Blackstone Group on Monday said it planned to raise as much as $7.75 billion from selling stakes to the public and to China, in perhaps the year’s most eagerly awaited US initial public offering.
In a filing with the US Securities and Exchange Commission, the private equity firm said it plans to offer 133.3 million common units at $29 to $31 each, for proceeds of $3.87 billion to $4.13 billion. The IPO may grow to $4.75 billion if another 20 million units are sold to meet demand.
The IPO would rank among the top 10 US maiden offers, according to Dealogic, and be the largest by a private equity firm. It could value Blackstone at $33.6 billion, based on an equivalent 1.085 billion units outstanding after the offerings, the firm said. It was not immediately clear when the IPO might take place.
“Valuations of private equity firms have got to be higher than they have ever been,” said Colin Blaydon, a professor at Dartmouth College’s Tuck School of Business and director of the Center for Private Equity and Entrepreneurship. “If things are not at a top, it’s certainly a very attractive time for them to go to investors, or to the public.”
Blackstone announced the IPO terms one day after saying China would take a $3-billion stake at a 4.5 per cent discount. Beijing would hold its stake at least four years.
Blackstone has been focusing on pharmaceutical and media firms in India. It has already closed two deals: in February, it made a $275-million investment in Ushodaya Enterprises of the Eenadu group and picked up a 26 per cent stake — arguably the largest media sector investment in the country. Last August, it invested $366 million in Emcure Pharmaceuticals.
The private equity firm’s Indian operations are headed by Akhil Gupta, who was head hunted from the Reliance group a couple of years ago. Two month ago, it hired Amit Dixit from Warburg Pincus in New York to beef up its India team.
Blackstone has poached Amit Dixit from Warburg Pincus to join the firm in its Mumbai offices as a principal. Dixit was earlier a principal at Warburg Pincus, based in New York, with a focus on transactions in the technology, media and telecom sectors.
Blackstone controls the India Fund, which has $2.2 billion in assets under management, and has given an annualised return since inception of 30.1 per cent. The India Fund invests at least 80 per cent of its total assets in the equities of Indian companies.
Blackstone is betting big on India. However, the fact that a Chinese state-owned entity will end up owning 10 per cent of Blackstone's equity after its public offering could weigh on the minds of Indian authorities when they clear the deals. Chinese companies have faced some problems in obtaining investment approvals in India on security considerations.
Founded in 1985 by Stephen Schwarzman and former Lehman Brothers chief Pete Peterson, Blackstone is going public as low debt costs spur a boom in private equity takeovers.
Private equity firms buy companies, restructure their businesses, and sell them. Blackstone said profit for the quarter that ended March 31 more than doubled to $1.13 billion from $487.2 million a year earlier.
Rival Fortress Investment Group went public in February in a $635-million IPO, and on Friday had a market value of $11.4 billion. Two investment banks, Lehman Brothers Holdings Inc and Bear Stearns Cos, had respective market values of $38.6 billion and $17.8 billion.
Blackstone is selling units as a master limited partnership, giving shareholders limited voting rights.
Existing holders would retain a 78.1 per cent stake, while Beijing would own a 9.7 per cent and new unit holders 12.2 per cent, Blackstone said.
