Carlyle expands with Dutch AlpInvest buy-out

AMSTERDAM Wed Jan 26, 2011 12:06pm GMT

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AMSTERDAM (Reuters) - Private equity giant Carlyle Group agreed to buy Dutch-based private equity fund-of-funds AlpInvest Partners to bulk up its product offering and attract more money from potential investors.

The deal could catapult Carlyle Group to rank as the world's largest private equity firm by assets under management and would provide a springboard for AlpInvest to expand internationally. No financial details were disclosed.

"We can say to our own investors we have an array of products, not just our own funds, but we have AlpInvest funds," David Rubenstein, Carlyle's co-founder and managing director, told Reuters on Wednesday on the sidelines of a news conference in Amsterdam.

"A number of investors around the world have said sometimes they don't want to invest in our funds directly, they would like to go in a fund of funds and asked who do we recommend ... and now we have somebody to recommend."

As a fund of funds, AlpInvest invests in other private equity funds rather than directly in companies and assets.

Rubenstein said AlpInvest will no longer be allowed to invest in Carlyle funds to avoid conflicts of interest, or any suggestion that it had been pressured into investing in Carlyle. But AlpInvest's existing investments with Carlyle will not be sold.

"The investments will just play out, they will not be sold," Rubenstein said.

Carlyle will take a 60 percent stake in the venture, with AlpInvest management taking the other 40 percent.

AlpInvest has more than 40 billion euros (34.5 billion pounds) in private equity funds and new commitments, including money for two major Dutch pension fund managers.

The two Dutch pension managers APG and PGGM who are selling their stakes will continue to commit funds to AlpInvest.

APG is the asset manager for ABP, the world's third-largest sovereign pension fund. PGGM is the asset manager for PFZW, the pension fund for the Dutch care and welfare sector.

ADDITIONAL FUNDING

AlpInvest Chief Executive Volkert Doeksen said the fund expects to attract an extra couple of billion euros in money in the next three to four years from large institutional investors as it takes advantage of Carlyle's global network.

Doeksen, a former Dresdner Kleinwort Benson partner and investment banker at Dillon Read and Morgan Stanley, helped start AlpInvest in 2000 and will stay on as AlpInvest CE0.

Both APG and PGGM said they will commit an additional 10 billion euros to AlpInvest's various investment programmes for the 2011-2015 period. The deal, which is subject to regulatory approval, is expected to close in March.

The deal would significantly increase Carlyle's assets under management and allow Carlyle to diversify its businesses as it prepares to follow rivals Blackstone Group (BX.N) and Kohlberg Kravis Roberts & Co (KKR.N) to a potential public listing.

Carlyle, which has investments in companies such as Dunkin' Brands, has been considering an initial public offering for years and may file papers to go public late this year, a source previously told Reuters.

But Rubenstein downplayed talk of an IPO, saying there were no immediate plans and investors "should not hold their breath".

A deal with AlpInvest could also give Carlyle an unusual window into its rivals' operations. As AlpInvest's funds are invested in so many private equity firms' funds, Carlyle could potentially have greater insight into its rivals' operations.

According to AlpInvest's website, its investment portfolio includes funds run by Blackstone, Bain Capital and KKR.

Rubenstein declined to say what rate of return the group would get on the investment, but said it was an "attractive rate."

(Editing by Sara Webb and Jon Loades-Carter)

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