Blackstone set for $4 bn share sale

The $4 billion offering is a role reversal for an industry that has long espoused the benefits of private ownership and has acted as a haven for public companies seeking to escape the pressure of meeting quarterly earnings estimates as well as the scrutiny of regulators.

That allure, and the huge war chests of cash raised from pension funds and other big investors, have allowed private equity to go on a record spending spree, acquiring some $600 billion worth of publicly traded companies last year.

It is also an extraordinarily profitable business, as borne out by a preliminary prospectus that Blackstone has filed. Blackstone’s private equity business, which has $31.1 billion in assets under management, has booked annual returns of 30.8 per cent since the firm began in 1987. (After Blackstone took its fees, it still had a robust annualised return of 22.8 per cent.)

Last year, the private equity business reported income before taxes of $1 billion. Its real estate business had an annual return of 38.2 per cent and pre-tax income of $903 million in 2006.