Chinese sovereign wealth fund Chinese Investment Corporation will raise its ownership stake in private equity giant The Blackstone Group.
To pave the way for CIC to purchase a larger stake, Blackstone raised the equity limit CIC could own in the publicly listed firm to 12.5 percent, according to an SEC filing.
Beijing Wonderful Investments, the investment vehicle CIC used to buy more than 100 million non-voting units of Blackstone prior to the firm’s public float last year, was formerly prohibited from owning more than 9.99 percent of the Steve Schwarzman-led firm. CIC paid roughly $3 billion for that stake.
CIC intends to raise its stake in Blackstone by purchasing shares in the open market, according to a source. The transaction will not result in any additional capital for the firm. Blackstone declined to comment on the transaction beyond the SEC filing.
Shares in Blackstone have plunged well below the firm’s initial offering price of $31 per share. Blackstone shares ended trading yesterday at $9.36, up almost two percent for the day but still down 70 percent from the IPO.
The firm’s market capitalisation has been hurt severely both by general public market anxiety over the financial services industries and on how the credit crisis will affect Blackstone’s original bread and butter revenue stream — leveraged buyouts.
Publicly traded private equity house Fortress Investment Group has similarly watched its stock price sink significantly since its initial float. On Tuesday, investment bank Jefferies & Company upgraded the investment management firm to “hold” from “underperform” based on potential market share gains, despite also lowering third quarter estimates for the firm.
Earlier this year, CIC reportedly invested $4 billion in a fund managed by financial services specialist JC Flowers.