Carlyle Closes Euro Internet Fund at $730M –

Nobody can accuse the Carlyle Group of being lazy.

The Washington, D.C., firm has a plethora of funds in the works worldwide, and most recently closed last month on a E730 million ($730 million) European Internet fund.

Carlyle is also preparing an Asian Internet Fund, a Japan buyout fund, and a Latin America buyout fund for upcoming launches.

Carlyle Internet Partners Europe will invest between t5 million and E30 million per deal in the high-technology infrastructure, telecommunications and business-to-business sectors.

With the final close of the fund, Jacques Garailde, former managing partner of the Boston Consulting Group’s Paris and Brussels offices, became one of three managing directors in Carlyle’s London office. He and the other managing directors will focus on keeping in close contact with the entrepreneurs in the local markets as well as making collegial decisions on where to invest, Garailde said.

Carlyle has already added almost 10 investment professionals and expects to have between 20 to 30 professionals in total. “The challenge we have is to have a team communicating well together so we have the ability to figure out what the good deals are. . . and at the same time we need to be present in the market [throughout Europe],” said Garailde. “You need to be close to the entrepreneurs to understand their needs and to be able to select the good deals and to run the best deal process.”

Carlyle Internet Europe, launched six months ago, closed on more than double its target of Euro 300 million. Garailde said the fervent investor interest could be explained by the strong potential of the Internet world and Carlyle’s brand name in Europe. “Carlyle is already present in Europe with a management buyout fund and I think Carlyle is now known by the European professional community for its professionalism and ability to run business,” he said.

Merrill Lynch & Co. was a placement agent for the fund.

In the Pipeline

Carlyle currently is planning a similar Asia Internet fund, which it expects to launch in May, said Jim Griffin, vice president at the Carlyle Group. The fund will seek investments from its existing L.P. base before seeking investors globally, he said. The target is still under discussion, he said.

In the meantime, the firm is still raising funds for Carlyle Capital Partner III LP, a domestic buyout fund targeted at $2.5 billion – the largest domestic buyout fund launched in late 1999. The fund had a first close and is driving towards a second close by the end of the month and a final close during the summer, said Griffin. He would not disclose the current value of the fund, but reports have indicated that at least $1.9 billion has been raised.

The firm plans to invest Fund III in the same sectors as the $1.33 billion Fund II, namely aerospace, defense, electronics, telecommunications and consumer product goods (BUYOUTS September 13, 1999, page 1). The key managers of the fund include Bill Conway, David Rubenstein, and Daniel D’Aniello. Griffin said more professionals would be added but he would not elaborate.

Carlyle invested C$200 million (US$134 million) of Fund III in Videotron Telecom, a subsidiary of Canadian communications conglomerate Le Groupe Videotron ltee, in one of the largest private equity investments in Canada (BUYOUTS December 20, 1999, page 18). The third fund also invested $402 million in a 93% stake in Panolam Industries International Inc., a laminate manufacturer.

Carlyle is presently assembling a team of professionals for its upcoming Japan buyout fund with a launch due in June or July, said Griffin.

The firm will also launch a Latin America buyout fund later this year.

Last month reports suggested that the Carlyle Group is in talks with the Aerospace manufacturing giant, Northrop Grumman Corp., concerning the acquisition of the commercial-jet-parts unit for an estimated $1.41 billion. Griffin would not comment on whether they are in talks, but said that Carlyle is interested. The acquisition would include facilities in Los Angeles and Dallas that produce parts of various Boeing airplanes, including the 747 jet.

Carlyle has over $10 billion of capital under managment. The firm has approximately 450 investors from over 50 countries including California Public Employees’ Retirement System, General Motors Corp.’s pension fund, American Airlines Fixed Benefit Pension Plan, Richard King Mellon Foundation, Dresdner Bank, BT Capital Corp., Soros Capital, the government of Singapore and the World Bank.