The fabulously wealthy will get even richer as Blackstone Group LP, one of the world's biggest private equity firms, plans to raise up to $4 billion in a highly anticipated initial public offering.
The New York-based firm, known for marquee takeovers such as February's $23 billion buyout of Equity Office Properties, is headed by former Lehman Brothers Holdings Inc. bankers Stephen Schwarzman and Peter Peterson. Schwarzman, 60, is one of the world's wealthiest people, with a fortune estimated at more than $3 billion.
The world of private equity, which works by taking public companies private with investors' and borrowed money, is one of secrecy because few of the firms are exchange listed. Schwarzman, though, doesn't hide from the spotlight.
Last month, for example, his multimillion-dollar birthday bash at an armory building in New York included hundreds of his closest friends and performances by Rod Stewart and Patti LaBelle. According to Fortune, which ranks the Blackstone chief as the 249th richest in the world, Schwarzman has a $30 million apartment in a building that once housed members of the Rockefeller and Vanderbilt families.
Until Blackstone filed to go public, its finances were cloaked in the fog of being a private company. But consider that Blackstone's funds own companies with 375,000 employees and $83 billion in annual sales. That would put Blackstone among the Top 15 in public U.S. companies.
"They've operated in their own stealth realm for so long that this really does take advantage of the flip side of the coin. They have an opportunity to benefit by being a public company," said Denise Valentine, senior analyst at business consultancy Celent LLC's securities and investment group. "This is going to be a big IPO, oversubscribed, and it will give Blackstone a bigger kingdom."
Blackstone, founded in 1985, said the initial public offering would allow it to tap new sources of capital for buyouts. In addition, it would help extend Blackstone's brand name and gives management a way to profit from the increased value of its stakes.
Details revealed in the firm's SEC filing show it has enjoyed an amazing 40 percent annual return on its various investments since 2001.
"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 price," the company said in the prospectus, which did not reveal the possible timing of an IPO or how many shares would be issued.
How did it do it? The Blackstone Group business is really four different businesses cobbled together under one roof.
The biggest part of the company's growth comes from its investments in hedge funds and other alternative investment vehicles. That part of the business has shown a better than 51 percent annual growth in the value of its investments.
It also invests in real estate, growing annually at 41 percent, corporate buyouts and restructuring -- annual compound growth of more than 31 percent. The firm also offers advisory services to other Wall Street players, with a growth rate of almost 23 percent.
According to Thursday's filing, Blackstone has 57 top partners and an additional 335 investment gurus on the payroll in New York and 10 offices around the world. Schwarzman and other top management don't plan to cede control of the company or the collection of companies it has acquired.