Carlyle Asia IV to close in Q3

The firm expects to hit or exceed its $3.5bn target, co-founder David Rubenstein reveals

Global private equity firm The Carlyle Group will close its fourth Asia-focused private equity fund this quarter on or above target, David Rubenstein, Carlyle co-founder and co-chief executive officer, said on the firm’s second quarter earnings call this week.

“We expect to have final closings during the third quarter on our fourth Asian buyout fund and our first international energy fund, with both funds expected to have closings at levels above our initial target sizes,” he revealed.

Carlyle is targeting $3.5 billion for its latest Asia offering and had raised $1.6 billion of that by January this year, Private Equity International reported earlier.

The firm made its first deal out of the fund in March, buying Korea-based security business ADT Caps in a corporate carve-out transaction that was worth $1.93 billion – Korea’s largest US dollar buyout since 2008, according to the firm.

However, in addition to its pan-Asia fund, Carlyle is currently raising a Japan-focused buyout vehicle – a country where the group believes there are a number of well-priced opportunities. The vehicle has a target of JPY 100 billion (€769 million; $1.02 billion) and expects to close by the end of this year, Rubenstein said earlier.

William Conway, co-founder and co-chief executive of Carlyle, explained on the earnings call that Japan, as well as Europe, is where the firm is seeing the most discounted assets, in contrast to the US or China, where valuations are high.

“Europe and Japan are both priced about 20 percent lower than the United States, at least, in their public markets which translates pretty closely to what's going on in the private markets as well – and I would say that is too big a discount [to ignore],” he said on the earnings call this week.

“I know they are going to grow [slower] than America, and I think they have other issues, in Europe particularly. But those discounts versus prices in America make it worthwhile taking a hard look at investments in Europe and in Japan.”

He added that Asia in general is part of the firm’s high-growth strategy, although prices remain high.

“I think that I'm satisfied with our investment pace [in Asia] today. No question that the prices are high, but I feel satisfied with the investment pace.”

Co-founder of Carlyle Daniel D’Aniello added that Japanese, as well as European, businesses are gradually opening up to private equity as a source of capital – one of the key constraints historically in Asia’s developed markets such as Japan and Korea – making investments more prevalent.

“There's greater acceptability by potential sellers of private equity as a source of capital. It used to be [that] in Europe or Japan, people thought that private equity [firms] were not really appropriate buyers. But I think that's really changed, and therefore, there is more opportunities that we're seeing in Europe and Japan than we were years ago, and that's an important factor.”