April 12, 2012 2:02 am

Oaktree IPO raises 25% less than it targeted

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Oaktree Capital Management raised $387m in its initial public offering, 25 per cent less than it had sought, a sign of weak investor interest in private equity ahead of Carlyle’s expected listing next month.

Los Angeles-based Oaktree sold 9m shares at $43 each, according to a person familiar with the situation. In regulatory filings the group said it had planned to sell 11.3m shares at $43 to $46 per share.

Carlyle, which has $147bn under management to Oaktree’s $82bn, is expected to start marketing its shares to investors next week, according to people familiar with the process. Expectations before Oaktree shares priced at the bottom of the range were that Carlyle would seek a valuation of $7.5bn to $8bn.

The Washington-based group has said that it intended to sell about a 10 per cent stake to the public, which would potentially raise $750m to $800m at the mooted valuation.

Carlyle and Oaktree will join Blackstone, KKR, Fortress and Apollo on the public markets. These once-secretive groups still raise large investment funds from private investors, but have sold shares in their own management companies to provide liquidity for executives and to build broader businesses as the founders step back.

However, chastened investors have revised expectations for private equity since the first round of listings, with Blackstone and Fortress trading substantially below their issue prices.

Carlyle’s putative market capitalisation is also less than the $18bn valuation agreed in 2007 when it sold a 7.5 per cent stake to Mubadala Development, an Abu Dhabi-based sovereign wealth fund.

Ryan Roebuck of XDR Capital, a hedge fund that did not participate in the IPO, said that investors could buy peers at cheaper valuations than those suggested for Oaktree and Carlyle. “These alternative asset managers are very much a levered play on the markets, and I don’t think investor confidence is high right now.”

The listings come as private equity groups have used buoyant equity markets to take portfolio companies public. Such “exits” are on track to represent the highest proportion of US and global IPO deals in more than a decade, according to Dealogic, a data provider. The 38 private-equity backed deals globally so far this year, raising $6.1bn, represent a third of worldwide IPO activity, the most since 1995.

As a result, more large IPOs are on the way. Oaktree’s Aleris Corporation, which had initially filed to go public a year ago, now hopes to raise $531m. Michaels Stores, the arts-and-crafts retailer backed by Bain Capital and Blackstone, aims to raise $500m later this year.

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