Blackstone boosts IPO after Beijing takes $3bn stake

The Chinese government is to use $3bn of its vast foreign exchange reserves to buy a 9.9% stake in Blackstone, as the US buy-out fund said it had increased the size of its IPO to up to $4.75bn.

Stephen A. Schwarzman, president and CEO of the Blackstone Group

Private equity giant Blackstone said on Monday it planned a partial stock flotation and a stake sale to a Chinese state investmentghgh 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 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 in...

Financial Times
6/4/2007 1:02:14 PM