Private equity firm Carlyle Group said on Thursday it is selling a 7.5 percent stake to an Abu Dhabi investment arm for $1.35 billion in a deal that values the Washington-based buyout company at $20 billion.
Selling the stake to the Abu Dhabi firm gives Carlyle a cash infusion to expand its business, attract and retain talent and possibly prepare for a public offering.
It follows buyout firm Blackstone Group LP's move earlier this year to sell a $3 billion stake to the Chinese government, just prior to selling 10 percent of the firm in a public offering.
In some respects it may be a better move than going public, said Duke University Law School professor James Cox, commenting on the Carlyle deal. If you can raise substantial sums of money on terms that work well for you, which I'm imagining they are, why would you submit any of your operations to the enhanced transparency that we saw happen to Blackstone on its offering.
Carlyle co-founder David Rubenstein, speaking at a conference in New York on Wednesday, said that there are several reasons why buyout firms pursue public offerings.
Private equity firms will use stock to grow the business and make acquisitions, he said. Five years from today, all major private equity firms will be public.
Carlyle, one of the world's largest private equity firms, manages $76 billion and owns or has stakes in such companies as coffee and pastry chain Dunkin' Donuts, semiconductor company Freescale Semiconductor Inc, marketing firm Nielsen and former General Motors Corp unit Allison Transmission.
The Abu Dhabi deal is another example of the increasing influence of Gulf Arab states in takeovers and investments.
Duke's Cox said the moves were driven by a huge accumulation of petrol dollars and cheap prices in the United States. A weaker dollar has made North American assets more attractive to foreign buyers.
Mubadala Development Co, the Abu Dhabi entity buying the Carlyle stake, is an investment and development group wholly owned by the Abu Dhabi government.
Mubadala also committed $500 million to an investment fund managed by Carlyle. The deal is expected to close in October.
Goldman Sachs advised Mubadala, and Citigroup Inc advised Carlyle on the transaction.
Earlier Thursday, Nasdaq Stock Market Inc and Dubai's stock exchange struck a deal that takes the Nasdaq brand into the Middle East and Asia.
Other recent developments include state-owned Qatar Investment Authority's offer to buy British supermarkets chain J. Sainsbury Plc, while State-owned Dubai Ports World bought UK-based port operator P&O.