Carlyle buying Booz Allen unit stake for $2.54 bln

By Megan Davies

NEW YORK (Reuters) - Washington-based private equity firm Carlyle Group CYL.UL is buying a majority stake in the U.S. government business of management consulting technology firm Booz Allen Hamilton Inc for $2.54 billion, the companies said on Friday.

One of the few significant deals to be struck since last summer's credit crunch froze the debt markets to large leveraged transactions, it is the biggest for Carlyle since it closed the $4.9 billion buyout of U.S. nursing home operator Manor Care in December.

Credit conditions seem to be thawing somewhat. Rival private equity firm Blackstone Group LP (BX.N: Quote, Profile, Research) said on Thursday that markets had stabilized and banks were open for lending again after clearing much of the leveraged loan backlog off their books.

Under the deal announced Friday, McLean, Virginia-based Booz Allen said it will split in two, separating its U.S. government business from its global commercial businesses. The commercial business will be a stand-alone company. The deal is expected to close in mid- to late 2008.

Booz Allen sells management consulting, engineering, information technology and other services to the U.S. government.

Carlyle, which has stakes in companies such as rental car firm Hertz Corp, fast food chain Dunkin' Donuts and chip company Freescale Semiconductor, was founded in 1987 by William Conway, Daniel D'Aniello and David Rubenstein, former deputy domestic policy adviser to Jimmy Carter.

The company said it has completed over 40 deals in the aerospace, defense, and government services sectors.

The Service Employees International Union has in the past criticized such a deal, saying it raised concerns about national security because Carlyle is minority-owned by an investment unit of the Abu Dhabi government. Carlyle in September sold a 7.5 percent stake to the Abu Dhabi group.