Wednesday 31 July 2019 2:55 pm

US private equity giant Carlyle abandons partnership structure

US private equity giant Carlyle is abandoning its publicly-traded partnership structure to become a corporation in a move to improve its share price and attract new investors. 

The transition will spark an increase in the group’s tax bill, as under the partnership model it was exempt from paying corporate tax on some of its revenue. 

Read more: Blackstone reveals plan to shift to corporation structure

However, in exchange, investors will be able to purchase Carlyle stock more easily following the change over, which is expected to come into force in January next year. 

The decision follows a pattern in the private equity industry which has seen Blackstone, the world’s biggest alternative investment firm, KKR, Apollo and Ares, all transform their partnership models over the last two years.   The extra tax bill has become less of an issue for firms after the headline corporate tax rate was lowered from 35 per cent to 21 per cent last year. 

However, Carlyle has gone a step further by announcing it will be the first US private equity firm to hold shareholder votes. Carlyle founders and employees currently own 66 per cent of the company.

The move to abolish its dual-class shares means it could be included in more indices such as the Russel and the S&P.

Read more: Carlyle reshuffles top team in Europe

Carlyle Group co-chief executives Kewsong Lee and Glenn Youngkin said in a statement today: “The path we’ve chosen is differentiated and positions us in the best way to drive long-term value. 

“It improves our trading liquidity, makes us more attractive to new investors, provides a fixed dividend that enables improve capital allocation and offers an attractive yield, and enhances shareholder alignment under a new one-share one vote governance model.”