Executives at private equity giant Blackstone, led by founders Stephen Schwarzman and Pete Peterson, will receive $4.5 billion from the buyout group's listing after a $3 billion investment by the Chinese government prompted them to nearly double the size of the offering to $7.8 billion.
The move will turn Blackstone's initial public offering into the world's second-largest this year and enable its partners to cash in part of their stakes during an unprecedented boom for the private equity industry.
The hunger to share in private equity's riches was underlined at the weekend by the Chinese government's surprise decision to spend $3 billion of its foreign exchange reserves on a stake of about 9.9 per cent in Blackstone.
In a regulatory filing issued yesterday, Blackstone said it would increase the size of the IPO from the planned $4 billion to up to $7.8 billion by selling a stake of about 10 per cent to the public and 9.9 per cent to China's soon-to-be-formed foreign exchange agency.
Shares in the IPO, expected in the next few months, will be priced at between $29 and $31, valuing Blackstone at $33.6 billion. "Our existing owners will receive $3.9 billion of the proceeds . . . or approximately $4.47 billion," if, as likely, Blackstone's advisers sold all the shares in the listing, the filing said.
The document did not reveal how much each of Blackstone's founders and other dozen top executives would sell into the IPO. However, the buyout group had previously said that Mr Peterson (80) would retire at the end of 2008 and would be allowed to sell his stake in the listed vehicle immediately.
Blackstone also said in the filing that it would contribute $150 million raised in the offering to the Blackstone Charitable Foundation, which is expected to give to educational, cultural, scientific and other organisations as well as to charities.
The news came as private equity executives and business and political leaders said the Chinese investment in Blackstone was more than just a financial coup for the buyout group.
They said that the backing of a powerful Beijing agency would help Blackstone navigate China's treacherous market for private equity deals, which have proven difficult to come by for rival buyout groups such as Carlyle and Kohlberg Kravis Roberts.
The deal, which was clinched in just a few weeks and before the new agency had been set up, could also help the relationship between Washington and Beijing at a time of growing tensions over the level of the renminbi. According to Mr Schwarzman, the deal signalled Beijing's willingness to continue to invest part of its $1,200 billion of foreign reserves in US assets, despite its stated policy of moving away from low-yielding US treasuries. - (Financial Times service)
