Mubadala ups investment in Carlyle to nearly $2bn

The Abu Dhabi-backed investment group will pour $500m more into the global private equity and real estate firm to further expand its business lines, prompting speculation about Carlyle's desire to go public.

Middle Eastern investment group Mubadala will pay $500 million for an undisclosed amount of convertible subordinated notes and “additional equity” in The Carlyle Group’s general partnership.
That will put the Abu Dhabi government-backed group’s total investment in the private equity firm to nearly $2 billion, having in 2007 paid $1.35 billion for a 7.5 percent stake in Carlyle’s management company.

Carlyle co-founder David Rubenstein and Mubadala chief executive Khaldoon Al Mubarak said in a statement the deal strengthened an already robust relationship that is characterised by collaboration on MENA deals in sectors including healthcare, aerospace and technology. Carlyle is investing in the region from its first MENA-focused fund, which closed on $500 million last year.

Mubadala revealed in its 2009 annual report that it had written down the value of its stake in Carlyle by 36 percent, citing adverse economic conditions in 2008. Mubadala's subsequent financial statements have not disclosed if the Carlyle stake has been written back up, however, Al Mubarak  said his organisation was “confident in Carlyle’s ongoing success as a global alternative asset manager”.

Carlyle and Mubadala did not immediately respond to requests for comment.

The $500 million investment will be used to further Carlyle’s aggressive expansion of product lines and geographic reach. It most recently revealed plans to take a majority stake in the $4.5 billion credit hedge fund Claren Road Asset Management.

The Claren Road deal was seen by some as a move to diversify revenues with more liquid instruments in advance of a possible listing of Carlyle’s management company next year.

Likewise, the additional stake purchase by Mubadala might be interpreted as a precursor to a public float; both The Blackstone Group’s sale of a $3 billion stake to China Investment Corp. and Fortress Investment Group’s sale of an $888 million stake to Tokyo bank Nomura helped to lock in franchise values ahead of IPOs.

Mubadala is not the only Carlyle LP which is also a strategic investor in the firm's GP: the California Public Employees’ Retirement System purchased a 5.5 percent stake in Carlyle in 2000.