Private equity giant Blackstone said on Monday it planned a partial stock flotation and a stake sale to a Chinese state investment firm that together could raise more than $7 billion (Rs 28,700 crore).
The initial public offering (IPO) marks the first step into the world of publicly-traded and regulated stocks for a company at the heart of the boom in private equity deals.
For China, flush with $1.2 trillion in foreign exchange reserves, the deal agreed on Sunday with Blackstone represents a fledgling state investment vehicle’s launch into the high-risk end of Western capital markets.
Blackstone’s alternative asset management businesses include the management of corporate private equity funds, real-estate opportunity funds, hedge funds and senior debt vehicles.
Private equity firms typically buy troubled businesses, restructure them and sell them at a hefty profit.
“We intend to continue to follow the management approach that has served us well as a private firm of focusing on making the right decisions about purchasing and selling the right assets at the right time and at the right prices,” Blackstone said in its filing Monday with the Securities and Exchange Commission (SEC).
China’s major investment came on the eve of top-level US-China trade talks on Tuesday in Washington and aimed at defusing frictions, such as the US’s massive trade deficit with China.
Blackstone can expect to reap significant clout from the transaction, analysts said. “The deal gives the buyout firm significant leverage in its quest to expand into China’s private equity market,” said Kimberly DuBord of Briefing.com.
The Blackstone Group’s foray into the stock market is unusual for private equity groups, which traditionally prefer to keep their financial and strategic information confidential.
Blackstone said it would float 133.3 million shares on the New York Stock Exchange in an IPO that could raise $3.86 to $4.13 billion.
It anticipated the IPO shares would be priced between $29 and $31 and the shares floated would represent 12.3% of the firm’s capital.
An additional 20 million shares will be floated if demand warrants, raising a total $4.75 billion in the listing, the group said.
On Sunday, Blackstone and the soon-to-be-established Chinese state forex firm, provisionally named the State Investment Company (SIC), announced that SIC had agreed to buy $3 billion worth of Blackstone non-voting shares at a unit price of 95.5% of the IPO price.
“We are very pleased to be able to make the State Investment Company’s very first investment in such a well-respected firm as Blackstone,” Lou Jiwei, head of the working group of the SIC, said in the companies’ joint statement.
Blackstone said the IPO and the Chinese sale combined was expected to raise between $6.86 billion and $7.75 billion.
The sale to the Chinese firm is subject to, and will close at the same time as, the completion of the IPO and will be capped at below 10% of Blackstone’s capital.
Following the two transactions, the firm’s current owners will hold 78% of the capital, investors in the IPO will own 12.3% and the Chinese state will have a 9.7% share.
The SEC filing on Monday was an amendment to a filing in March that announced the plan for a partial flotation.
Blackstone was founded with $400,000 in 1985 by Peter Peterson, a former White House aide and ex-chief executive of Lehman Brothers, and Stephen Schwarzman, a former Lehman Brothers mergers and acquisitions specialist.
Since then, it has mushroomed into a global firm and has assets under management of approximately $88.4 billion as of 1 May, Blackstone said.
One of its most recent deals was last week’s agreed takeover of Alliance Data Systems Corporation, a specialist marketing firm, for $7.8 billion, including the assumption of certain debts. In February, Blackstone won a $39 billion bid to buy the largest US office management firm, Equity Office Properties Trust.