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Iron Triangle: Carlyle Group Exposed - 46 min - May 24, 2006
VPRO Netherlands TV

An in-depth analysis of the Carlyle group, and the Military Indutrial Complex they help nurture. Includes interviews with actual founders of Carlyle group.

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Carlyle Group
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The Carlyle Group
Carlyle Group Logo
Type Private Partnership
Founded 1987
Key people Louis V. Gerstner, Jr., Chairman
William E. Conway, Jr., Founder
Daniel A. D'Aniello, Founder
David M. Rubenstein, Founder
John F. Harris, CFO
Industry Financial Services
Products Management buyouts
Real estate
Leveraged finance
Venture and growth capital
Revenue Undisclosed to public
Employees 750

The Carlyle Group is a global private equity investment firm, based in Washington, D.C., with more than $81.1 billion of equity capital under management.[1] The firm operates four fund families, focusing on leveraged buyouts, venture & growth capital, real estate and leveraged finance investments. The firm employs more than 575 investment professionals in 21 countries with several offices in North America, South America, Europe, Asia and Australia; its portfolio companies employ more than 286,000 people worldwide. Carlyle has over 1200 investors in 68 countries.

The firm has employed political figures and notable investors. Some of these figures, such as former US President George H. W. Bush and former US Secretary of State James A. Baker III, have generated controversy stemming from allegations of conflicts of interest.

* 1 History
* 2 Specialization
* 3 The Partnership
* 4 Current portfolio and major acquisitions
o 4.1 Carlyle Capital Corporation
* 5 Past acquisitions
* 6 Controversy
* 7 Notable current and former employees and affiliated persons
o 7.1 Business
o 7.2 Political figures
+ 7.2.1 North America
+ 7.2.2 Europe
+ 7.2.3 Asia
+ 7.2.4 Middle East
o 7.3 Media
* 8 See also
* 9 References
* 10 Further reading
* 11 External links

[edit] History

Carlyle was founded in 1987 by Stephen L. Norris, and David M. Rubenstein.[2] They later hired Dan D'Aniello, William Conway and Greg Rosenbaum.[3] Rosenbaum left in 1987;[4] Norris left in 1995.[5] The three remaining founders are reported to collectively own around a 50% interest in the group's general partnership. The California Public Employees Retirement System (or CalPERS) is the only US institution which owns a stake in the partnership, holding 5.5% of Carlyle for which it paid $175 million in 2001. In 2007, Mubadala Development, an investment vehicle for the Government of Abu Dhabi, purchased a 7.5% stake for $1.35 billion.[6]

As they wanted the firm to outlive them, Norris and Rubenstein named the firm after the Upper East Side area hotel in New York City, the Carlyle Hotel, where they first met to discuss the idea. Carlyle's current chairman is Lou Gerstner, former chairman and CEO of IBM and Nabisco.

Carlyle is the largest private equity firm in the world, according to a ranking called the PEI 50.

[edit] Specialization

Carlyle deals in the following industries: aerospace and defense, automotive, consumer and retail, energy and power, health care, real estate, technology and business services, telecommunications and media, and transportation. The Carlyle Group's investments are focused on East Asia, Europe and North America, with most investment money coming from the United States (65%), Europe (25%), Asia (6%), Latin America, and the Middle East.[citation needed] Defense investments represent about 1% of the group's current portfolio;[citation needed] for example, Carlyle owns 33.8% of QinetiQ,[citation needed] the recently privatized British defense contractor.

[edit] The Partnership

Carlyle has only allowed two outsiders to buy into its partnership.[7] The first is the California Public Employees' Retirement System (CalPERS), who "own a 5.5% stake in the company that is estimated to be worth about $1 billion."[7] The second is Mubadala Development Company - "an investment group owned by the government of Abu Dhabi, which is part of the United Arab Emirates."[7] In September of 2007, they bought a "7.5 percent share of [Carlyle's] general partnership for $1.35 billion."[7]

[edit] Current portfolio and major acquisitions

Though known for its expertise in aerospace and defense, Carlyle invested more than thirty percent of its assets in telecommunications and media. Noted portfolio companies are Dex Media, the former directories business of Qwest Communications; Willcom, a Japanese wireless company; Casema, a Dutch cable company; and Insight Communications, the ninth largest cable company in the U.S. The Carlyle Group was once a major investor in US Investigations Services, which is the privatized arm of the United States Office of Personnel Management's Office of Federal Investigations, but has since divested itself, selling its stake to Providence Equity Partners in 2007.[citation needed]

Brand-name companies that Carlyle owns include: Dunkin' Brands, which owns Dunkin' Donuts and Baskin-Robbins, and oral hygiene company Water Pik. Carlyle also recently took rental car company Hertz public.

On January 29, 2007, Carlyle announced that it would acquire Synagro Technologies, Inc, which according to Synagro's website is "the largest recycler of biosolids and other organic residuals in the United States". The total enterprise value of the transaction, including the assumption of debt, is $772 million.[8]

On June 28, 2007, Carlyle announced that it would partner with Onex Corporation to buy the Allison Transmission unit from General Motors for $5.6 billion.[9]

On July 2, 2007, it was disclosed that the Carlyle Group was looking to buy Virgin Media UK cable business.[10] Richard Branson is the largest shareholder, and the Virgin Group own the name Virgin, and Virgin Media have the rights to use the name Virgin for 10 years[citation needed].

On July 28, 2007, Carlyle announced the acquisition of Applus+ from its shareholders Agbar, Unión Fenosa and Caja Madrid for an enterprise value of €1,480 million.[11]

On December 18, 2007, David Rubenstein, representing the Carlyle Group, purchased the Magna Carta (one of seventeen copies) at Sotheby's Auction House in New York City. He paid the Perot Foundation $21.3 million. Mr. Rubenstein expressed his intent for it to be returned to the National Archives for display.

[edit] Carlyle Capital Corporation

In March 2008, Carlyle Capital Corporation, established in August 2006[12] for the purpose of making investments in U.S. mortgage-backed securities, defaulted on about US$ 16.6 billion of debt as the global credit crunch brought about by the subprime mortgage crisis worsened for leveraged investors. The Guernsey-based affiliate of Carlyle was very heavily leveraged , up to 32 times by some accounts, and it expects its creditors to seize its remaining assets.[13] Tremors in the mortgage markets induced several of Carlyle's 13 lenders to make margin calls or to declare Carlyle in default on its loans.[14] In response to the forced liquidation of mortgage-backed assets caused by the Carlyle margin calls and other similar developments in credit markets, on March 11, 2008, the Federal Reserve gave Wall Street's primary dealers the right to post mortgaged-back securities as collateral for loans of up to $200 billion in higher-grade, U.S. government-backed securities. [15] On March 12, 2008, BBC News Online reported that "instead of underpinning the mortgage-backed securities market, it seems to have had the opposite effect, giving lenders an opportunity to dump the risky asset" and that Carlyle Capital Corp. "will collapse if, as expected, its lenders seize its remaining assets."[16] On March 16, 2008, Carlyle Capital announced that its Class A Shareholders had voted unanimously in favor of the Corporation filing a petition under Part XVI, Sec. 96, of the Companies Law (1994) of Guernsey[17] for a "compulsory winding up proceeding" to permit all its remaining assets to be liquidated by a court appointed liquidator.[18]

The losses to the Carlyle Group due to the collapse of Carlyle Capital is reported to be "minimal from a financial standpoint".[19]

[edit] Past acquisitions

Carlyle acquired United Defense Industries in October 1997, bringing in over 60% of Carlyle's defense business. United Defense went public on the New York Stock Exchange in December 2001 with Carlyle retaining a stock ownership position. Carlyle completed the sale of all of its United Defense stock and exited the investment in April 2004[20]--in private equity terms, the investment was "realized" at that time.[21] (One major United Defense program was the XM2001 Crusader self-propelled howitzer which was canceled by Defense Secretary Donald Rumsfeld in early 2002 causing United Defense stock prices to fall 27 percent.[22])

[edit] Controversy

Connections between the Carlyle and the Bush family have created controversy, particularly in relation to the War on Terror and the Iraq War. George H. W. Bush and his Secretary of State James A. Baker III have at times been advisors to the group. One writer claimed that Saudi Arabian interests have given $1.4 billion to firms connected to the Bush family.[citation needed] Of this figure, $1.18 billion comes from contracts awarded to defense contractor Braddock, Dunn & McDonald, which Carlyle sold before George H. W. Bush became an advisor.[23] A Carlyle spokesman noted in 2003 that its 7% interest in defense industries was far less than several other Private equity firms.[24] The group has in the past had links with the Bin Laden family, although the group argues investment was relatively minor and made by relatives including half brother to Osama Bin Laden who had "disowned" him. [25]

[edit] Notable current and former employees and affiliated persons

[edit] Business

* G. Allen Andreas - Chairman of the Archer Daniels Midland Company
* Daniel Akerson - company director
* Joaquin Avila - investment banker
* Laurent Beaudoin - CEO of Bombardier (1979-)
* Paul Desmarais - Chairman of the Power Corporation of Canada
* Arthur Levitt - former Chairman of the U.S. Securities and Exchange Commission
* Karl Otto Pöhl - former President of the Bundesbank
* Olivier Sarkozy (half-brother of Nicolas Sarkozy, President of France) - co-head and managing director of its recently launched global financial services division, since March 2008 [26].
* Jeffrey Chen- CEO of ASE-Taiwan
* Jason Chen- Chairman of ASE Group

[edit] Political figures

[edit] North America

* George H. W. Bush, former U.S. President, Senior Advisor to the Carlyle Asia Advisory Board from April 1998 to October 2003.
* George W. Bush, current U.S. President. Was appointed in 1990 to the Board of Directors of one of Carlyle's first acquisitions, an airline food business called Caterair, which Carlyle eventually sold at a loss. Bush left the board in 1992 to run for Governor of Texas.
* James Baker III, former United States Secretary of State under George H. W. Bush, Staff member under Ronald Reagan and George W. Bush, Carlyle Senior Counselor, served in this capacity from 1993 to 2005.
* Frank C. Carlucci, former United States Secretary of Defense from 1987 to 1989; Also, former Princeton wrestling partner of former US Secretary of Defense, Donald Rumsfeld. Carlyle Chairman and Chairman Emeritus from 1989 to 2005.
* Richard Darman, former Director of the U.S. Office of Management and Budget under George H. W. Bush, Senior Advisor and Managing Director of The Carlyle Group from 1993 to the present
* Randal K. Quarles, former Under Secretary of the U.S. Treasury under President George W. Bush, now a Carlyle managing director
* Allan Gotlieb, Canadian ambassador to the United States (1981-89) and member of Carlyle's Canadian advisory board.
* Arthur Levitt, Chairman of the U.S. Securities and Exchange Commission (SEC) under President Bill Clinton, Carlyle Senior Advisor from 2001 to the present
* Dan Senor - political consultant
* Peter Lougheed - Premier of Alberta (1971-85)
* Luis Téllez Kuenzler, Mexican economist, current Secretary of Communications and Transportation under the Felipe Calderón administration and former Secretary of Energy under the Zedillo administration.
* Frank McKenna, Canadian ambassador to the United States and former member of Carlyle's Canadian advisory board

[edit] Europe

* John Major, former British Prime Minister, Chairman, Carlyle Europe from 2002 until 2005

[edit] Asia

* Liu Hong-Ru, former chairman of China's Securities Regulatory Commission
* Anand Panyarachun, former Prime Minister of Thailand (twice), former member of the Carlyle Asia Advisory Board until the board was disbanded in 2004
* Fidel V. Ramos, former president of the Philippines, Carlyle Asia Advisor Board Member until the board was disbanded in 2004
* Thaksin Shinawatra, deposed Prime Minister of Thailand, former member of board, who resigned on taking office in 2001

[edit] Middle East

* Shafig bin Laden, older brother of Osama bin Laden

[edit] Media

* Norman Pearlstine - editor-in-chief of Time magazine from (1995-2005)

[edit] See also

* Carlyle Group companies
* Private equity
* Leveraged buyout
* Saudi Arabia
* Military industrial complex

[edit] References

1. ^ Carlyle Group website
2. ^ Dan Briody, The Iron Triangle: Inside the Secret World of the Carlyle Group, John Wiley & Sons, 2003, ISBN 0-471-28108-5
3. ^ David A. Vise, "Area Merchant Banking Firm Formed," Washington Post, Oct. 5, 1987, F33
4. ^ Paul Farhi, "Chi-Chi's Bid Won D.C. Investment Firm Wall Street's Attention," Washington Post, June 6, 1988, F1
5. ^ John Mintz, "Founder Going Beyond the Carlyle Group," Washington Post, Jan. 9, 1995, F9
6. ^ Thomas Heath, "Government of Abu Dhabi Buys Stake in Carlyle", New York Times, September 21, 2007, D01
7. ^ a b c d [1] | Heath, Thomas, "Pair of Proposals Take Aim at Carlyle Group," Washington Post, February 15, 2008.
8. ^ "The Carlyle Group to Acquire Synagro Technologies for $5.76 Per Share" 2007-01-29
9. ^ Reuters/Yahoo! News: "GM selling Allison for $5.6 billion," 2007-06-28
10. ^ CNN Money: "Virgin Media In Talks With Carlyle Group Over Buyout," 2007-07-02
11. ^ "Carlyle Group acquires Applus," 2007-07-28
12. ^ Carlyle Capital Corporation Intends to File for Compulsory Winding up in Guernsey
13. ^ Carlyle Capital in default, on brink of collapse - Reuters
14. ^ Washington Post "Carlyle Group Holding 'Crisis' Talks in N.Y.," 03-10-08
15. ^ 'Fed Hopes to Ease Strain on Economic Activity' 03-11-08
16. ^ "Hedge fund on verge of collapse", BBC News Online (13 March 2008).
17. ^ Companies Law of Guernsey (1994)
18. ^ "Carlyle Capital Corporation Intends To File For Compulsory Winding Up In Guernsey" Carlyle Capital Corporation New Release, March 16, 2008
19. ^ Jessica Hall, Dane Hamilton (March 14, 2008). "CCC's Woes Seen as Small Blemish for Carlyle Group", Reuters.
20. ^ United Defense
21. ^ [2]
22. ^ Windfalls of War - The Center for Public Integrity
23. ^ Craig Unger. House of Bush, House of Saud.
24. ^ Doward, Jamie (2003-05-23). "'Ex-presidents club' gets fat on conflict", The Observer.
25. ^ 1597_web.indd
26. ^ Nick Clarck, Carlyle poaches Olivier Sarkozy, The Independent, 4 March 2008 (English)

[edit] Further reading

* James K. Glassman, "Big Deals," Washingtonian Magazine, June 2006
* Geoffrey Colvin & Ram Charan, "Private Lives," Fortune Magazine, November 27, 2006
* Emily Thornton, "Carlyle Changes Its Stripes," BusinessWeek, February 12, 2007
* Dan Briody, The Iron Triangle: Inside the Secret World of the Carlyle Group, John Wiley & Sons, 2003, ISBN 0-471-28108-5.
* Bin Laden Family Liquidates Holdings With Carlyle Group

[edit] External links

* The Carlyle Group home page

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