Carlyle Group in diversification flurry

August 16, 2011

The Carlyle Group is expected to announce $40 million in energy investments Wednesday, capping a flurry of deals over the past two weeks led by the sale of a $3 billion cable company to Time Warner Cable and a $200 million investment in a Chinese consumer business.

Carlyle also has added $1 billion in new assets it is managing, boosting to about $153 billion the total assets under management. The recent deals come as speculation persists that the District-based firm is making preparations to go public later this year.

The firm has declined to comment on any plans to sell shares to the public, but industry observers said the signs are there.

“Carlyle has been diversifying for a couple of years now,” said Dan Primack, senior editor at Fortune.com covering private equity. “If you read analysts reports on private equity firms that have gone public, the more diversified you are, the more favorably analysts look upon you.”

Primack said Carlyle’s sale on Monday of Insight Communications, the ninth largest cable company in the United States, is a sign that parts of the economy are still robust. Carlyle bought Insight in 2005 for $2.1 billion.

“Carlyle is basically in the harvesting mode,” Primack said. “When mergers and acquisitions is going strong, it’s time to sell investments. U.S. corporations are sitting on record amounts of cash, so it’s not surprising they are looking to buy. Look at Google, spending $12.5 billion from its balance sheet to buy Motorola Mobile.”

On Wednesday, Carlyle is expected to announce two investments of about $20 million each into Core Minerals and Black Raven Energy, both energy exploration and production companies, according to a person familiar with the deals but who was not authorized to speak publicly.

Earlier this month, Carlyle made a considerable investment in Haier, a large Chinese manufacturer of household appliances, buying 9 percent of the company for more than $200 million.

Carlyle’s China strategy is to buy appliance companies that cater to the Asian country’s growing middle class. In the case of Haier, which manufactures washing machines and other appliances, Carlyle is betting that rising Chinese incomes will create more demand for consumer goods among workers.

The company already owns stakes in animal feed, fishing and infant formula, all focused on changing demographics that are accompanying China’s rise in income.

Last week, Carlyle added $1 billion in new collateralized loan assets under management to its portfolio. The assets include $500 million from a management contract Carlyle purchased from the Foothill Group.

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade.
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