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Carlyle Plans to Announce Conversion to C-Corp With Earnings

Carlyle Plans to Announce Conversion to C-Corp With Earnings

(Bloomberg) -- Carlyle Group LP is planning to announce that the private equity firm will convert to a corporation when it reports second-quarter earnings, according to people with knowledge of the matter.

The shares rose 4.1%, the biggest one-day jump since April.

The Washington-based firm would be the last of the private-equity giants to switch from a partnership to a corporation, known as a C-corp -- a move designed to bring more investors into the stock. KKR & Co., Blackstone Group Inc., Apollo Global Management LLC and Ares Management Corp. all have seen their share prices jump since they made the change, which enables them to be included in indexes, mutual funds and exchange-traded funds.

Carlyle, which hasn’t announced its earnings release date, has been exploring the move for several months. A representative for the firm declined to comment.

“The pain of converting from a tax point-of-view is negligible and the benefits are substantial,” said Robert Willens, an independent tax consultant. “We’ve seen the stocks of these companies increase since their conversions, proving the theory that motivated them was a valid one.”

Carlyle has mostly lagged behind its rivals since KKR announced in May 2018 that it would convert. Carlyle’s shares are up about 18% since then, less than KKR and Apollo. Blackstone has been the best performer, jumping about 50%.

Carlyle Plans to Announce Conversion to C-Corp With Earnings

“The benefits we’ve seen from the conversions have not gone unnoticed,” Carlyle co-Chief Executive Officer Kewsong Lee said in a May conference call with investors. “There are many complex operational moving parts in connection with a conversion, and we intend to conclude our thinking with a decision in the not too distant future.”

Carlyle Plans to Announce Conversion to C-Corp With Earnings

Private equity executives, who have a lot of their personal wealth in company stock, have long complained that their businesses are being undervalued by public investors. The catalyst for the switch was the new tax law in December 2017, which slashed the corporate rate to 21% from 35%.

--With assistance from Melissa Karsh.

To contact the reporter on this story: Heather Perlberg in Washington at hperlberg@bloomberg.net

To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Vincent Bielski, Josh Friedman

©2019 Bloomberg L.P.