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Published: Wednesday, 9/7/2011

ManorCare owner plans sale of stock to public

Carlyle Group wades into volatile market

ASSOCIATED PRESS
HCR ManorCare in downtown Toledo was publicly traded until the Carlyle Group, a private equity firm, purchased it in 2007. HCR ManorCare in downtown Toledo was publicly traded until the Carlyle Group, a private equity firm, purchased it in 2007.
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Carlyle Group, a private equity firm which owns HCR ManorCare Inc. of Toledo, said Tuesday that it planned to raise $100 million through an initial public stock offering.

The company wants to sell public stock even as fears about the global economy have punished the markets. Many companies canceled their IPOs in August. Only four companies went public.

Private equity firms buy companies and later try to sell them for more money. They often borrow money to fund their purchases. The business slumped during the recession, but several major firms have gone public following the revival in the stock market after the downturn.

ManorCare, which was publicly traded until Carlyle purchased it in 2007, is based in downtown Toledo and owns or operates 280 skilled nursing centers, 65 assisted living facilities, 105 hospice and home-care agencies, and 60 rehabilitation clinics. It has nearly 60,000 employees nationwide.

Chris Ullman, a spokesman for the Carlyle Group, said he could not comment on whether his firm going public would have any effect on HCR ManorCare. But Rick Rump, a spokesman for ManorCare, said the IPO was a nonissue.

"It won't have any effect on us at all. It doesn't have anything to do with us," Mr. Rump said.

Carlyle, based in Washington, did not say how many shares it plans to sell, nor when it intends to go public.

The company also didn't predict a price for its shares. While a filing with the Securities and Exchange Commission said Carlyle planned to raise as much as $100 million, the IPO's value may change as the IPO's bankers gauge demand for the stock.

Some of Carlyle's rivals have not fared well in the stock market since their IPOs, however. Blackstone Group has dropped 60 percent since its 2007 debut. Apollo Global Management has lost 36 percent since its April IPO. KKR & Co. is up 4 percent since its July, 2010 listing.

One analyst said now was a terrible time for a private equity company to go public. Investors might not be hot on the stock of a private equity firm because of the declines in rivals' shares, longtime IPO researcher Scott Sweet, the owner of IPO Boutique, said. A sliding stock market will limit the companies' abilities to sell the companies in their portfolios back to the public, he added.

But Carlyle's Dunkin' Brands Group Inc., the parent company of the Dunkin Donuts and Baskin-Robbins chains, went public in July, and investors clamored for the stock.

Carlyle's portfolio includes more than 200 portfolio companies.

For private equity firms, going public isn't necessarily about raising as much money as possible to fund their business, said Colin Blaydon, professor of private equity and entrepreneurship at Dartmouth's Tuck School of Business. Instead, the IPO allows investment firms more flexibility. They can make acquisitions with stock instead of cash.

Proceeds from the offering will be used to repay outstanding indebtedness and for general corporate purposes.

Going public also lets the private equity firm's founding partners and major shareholders cash out some of their stakes.

Carlyle was founded in 1987 in Washington by Daniel D'Aniello, David Rubenstein, and William Conway, Jr. Mr. D'Aniello is to be chairman of the publicly traded company and Rubenstein and Conway will be co-CEOs.

The company has about $153 billion in assets under management. Carlyle said revenue for 2010 was $2.80 billion, up from $1.32 billion in 2009.

Net income attributed to the company more than doubled to $1.53 billion from $694.1 million in 2009. A measure preferred by private equity firms, called economic net income, which strips out charges related to stock-based compensation, income taxes, and other charges, also more than doubled to $1.01 billion.



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