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Carlyle’s Fourth-Quarter Profit Falls 57 Percent, as Asset Sales Slow

The firm, led by David Rubenstein, recently closed a second middle-market fund and is buying back $200 million of its stock

Carlyle Group LP (Nasdaq: CG) said fourth-quarter profit declined 57 percent as asset sales slowed and its holdings didn’t appreciate as quickly as a year earlier. The firm said it will buy back as much as $200 million in its stock.

Economic net income, which includes unrealized gains, decreased to $77.5 million, or 24 cents a share, from $182 million, or 56 cents, a year earlier, Washington-based Carlyle said in a statement Wednesday. Analysts estimated earnings of 31 cents a share, according to the average of 13 estimates in a Bloomberg survey.

Carlyle joins its biggest peers, Blackstone Group LP and Apollo Global Management LLC, in posting a steep decline in profit after the firms sold record amounts of holdings in previous quarters, and shares fell in some companies they’ve taken public. The firms mark the value of investments they hold -- a key determinant of economic net income, or ENI -- in line with the market.

Carlyle had “a meaningful slowdown in monetization activity, as it didn’t have any large transactions in the quarter, either via follow-on or M&A exits,” Credit Suisse Group AG Craig Siegenthaler said in a note to clients before the results were announced, referring to sales of shares in companies it owns or outright sales of the businesses.

Carlyle reported results before the start of trading in New York. The stock closed Tuesday at $11.69 after losing a quarter of its value this year. Carlyle’s buyback plan is its first since its 2012 initial public offering and follows similar programs announced since October by KKR & Co., Apollo and Fortress Investment Group LLC.

“Despite our history of strong results and significant future growth opportunities, the equity market currently ascribes little value to our diversified investment platform,” David Rubenstein, Carlyle’s co-chief executive officer, said in the statement.

The firm during the quarter sold shares in Booz Allen Hamilton Holding Corp. and CoreSite Realty Corp., and fully exited its stake in Australian hospital operator Healthscope Ltd. Distributable earnings, which reflect cash gains on those sales and others, were $145 million, down from $311 million a year earlier. Carlyle said it will pay shareholders a dividend of 29 cents a share on March 2.

Carlyle has been active in the middle-market and recently raised a $2.4 billion mid-market fund. In 2015, the firm purchased candle marker Blyth; reached a deal for cybersecurity services provider Coalfire Systems; and announced plans to add the Rhode Island State Energy Center.

The value of Carlyle’s private equity investments rose 3 percent in the quarter, compared with 7 percent a year earlier. Blackstone’s portfolio appreciated 2.8 percent, Apollo’s declined 2 percent and the Standard & Poor’s 500 Index advanced 6.5 percent.

Blackstone, the biggest manager of alternative assets such as private equity holdings, real estate and credit assets, last month posted a 70 percent drop in fourth-quarter economic net income as asset sales slowed and stakes in some companies it’s taken public declined. Apollo last week said its earnings fell 69 percent. KKR is scheduled to report results Thursday.

Carlyle struck several deals toward the end of the year, acquiring U.K. insurance technology company Innovation Group and data-analytics company Novetta Solutions and making investments in India-focused oil producer Magna Energy Ltd. and Chinese real estate website operator SouFun Holdings Ltd. The firm last month completed its $7.4 billion purchase of Symantec Corp.’s Veritas unit after terms of the loans backing the buyout were sweetened and the purchase price was lowered.

“Our current pipeline is strong and we believe that good deals can be financed in the current market,” Bill Conway, Carlyle’s co-CEO, said in the statement, adding that the firm has $4 billion in signed deals expected to be completed in the first half of the year.

 

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