Blackstone IPO is priced at top end of range
Blackstone Group priced its initial public offering at the top end of the range Thursday, raising $4.13 billion in the largest U.S. IPO since 2002, even as lawmakers pushed for a delay in the offering.
The expected debut today of Blackstone’s stock on the New York Stock Exchange is a watershed event for the booming private equity industry.
The first major U.S. buyout firm to go public, Blackstone will trade under the symbol “BX.”
The $31-a-share IPO values Blackstone at $33.48 billion, or about a third of Goldman Sachs Group Inc.’s market value and three-quarters the size of Lehman Bros.’
A separate deal to sell a nearly 10% stake to China would add $3 billion to the IPO proceeds.
IPO underwriters, led by Morgan Stanley and Citigroup, have the option to buy 20 million more shares, on top of the 133.3 million being sold, to cover over-allotments.
If exercised, that would put an additional $620 million in Blackstone’s coffers.
Blackstone co-founders Stephen Schwarzman, 60, and Peter Peterson, 81, will earn a huge windfall from the IPO, pocketing more than $2.4 billion between them.
Schwarzman’s 23% stake in the company is worth $7.74 billion alone.
The IPO also will shower hundreds of millions of dollars onto other senior members of the firm.
Schwarzman and Peterson founded Blackstone with $400,000 in 1985 after leaving top posts at Lehman.
It started as mainly a merger advisory boutique and grew into a private equity giant with more than $88 billion under management.
“Their compound annual growth is simply phenomenal,” said Scott Sweet at research firm IPOboutique.com.
A last-minute plea from Rep. Henry A. Waxman (D-Los Angeles) to delay the IPO was rejected by U.S. regulators Thursday. The chairman of the House Committee on Oversight and Government Reform was among the politicians taking aim at the offering.
While lawmakers have been mulling over whether to alter the favorable tax treatment enjoyed by private equity firms, they seized on the Blackstone IPO shortly after Schwarzman’s riches and lavish lifestyle attracted media scrutiny.
Waxman’s attempt came a day after Max Baucus, co-author of a U.S. Senate bill that would raise taxes on private equity firms that go public, said he was open to shortening a transition period that would cushion any potential tax hit on Blackstone.
The bill would require publicly traded partnerships deriving income from investment advisor and asset management services to pay the federal corporation tax rate of up to 35% instead of the 15% rate their partners now pay.
Blackstone would get a five-year grace period under the current version of the bill. Blackstone makes the bulk of its money through private equity investing -- buying companies with mostly borrowed money and then selling them after a few years of retooling.
Despite the threat of increased taxes if it goes public, Blackstone rival Kohlberg Kravis Roberts & Co. hired Citigroup Inc. and Morgan Stanley to help the private equity pioneer prepare for a possible IPO, cable channel CNBC reported Thursday.
KKR is watching Blackstone’s offering, has “drawn up the paperwork” and may file for an IPO later in the year, CNBC said.
Frothy debt markets, a steady economy and investor appetite have created a highly favorable climate for private equity.
