Carlyle To Snap Up Majority Stake In Funds Network Calastone; Analyst Says Buy

The Carlyle Group has agreed to snap up a majority stake in global funds network Calastone from its current shareholders, including Octopus Ventures and Accel.

Financial terms of the investment by Carlyle (CG) were not disclosed. As part of the agreement, Calastone management will retain a minority stake. The transaction is still subject to regulatory approval.

“Calastone is a global leader and innovator in the funds technology industry, a large and growing market. Since its inception, the company has achieved remarkable growth through replacing legacy and complex workflows with truly innovative solutions for its clients,” said Fernando Chueca of Carlyle’s advisory team. “We look forward to leveraging our global platform, network of relationships, and deep expertise in Financial Services and Technology to support Calastone in its next phase of growth.”

Founded in 2007, London-based Calastone has emerged as the largest global funds network and brings together the entire fund trading process, from offering automated order routing, settlement, dividend and transfer services to asset and fund managers. Today, the company has over 2,300 clients in 43 countries processing £200 billion of investment value each month.

Carlyle, which had $221 billion in assets under management as of June 30, has in recent months been on a buying spree. Earlier this month, the private equity firm together with Pacific Equity Partners have made a conditional offer to snap up Australia’s Link Administration Holdings in an all-stock deal worth A$2.76 billion. Carlyle is reportedly seeking to invest $1.5 billion-$2 billion to acquire a stake in Reliance Retail Ventures, India’s largest retail chain. In June, it bought a 20% stake in the pharmaceutical business of Indian Piramal Enterprises Ltd. for about $490 million. Also this year, it announced a majority stake investment in SeQuent Scientific, the largest Indian pure-play animal healthcare company.

Shares in Carlyle have increased 16% over the past month but are still down 14% this year, while analysts are sidelined on the stock. The Hold consensus shows 4 Holds and 1 Sell versus 2 Buys. (See Carlyle stock analysis on TipRanks)

That’s with a $31.43 average analyst price target indicating 15% upside potential in the shares in the coming 12 months.

Oppenheimer analyst Chris Kotowski recently reiterated a Buy rating on the stock with a $40 price target.

“Carlyle has earned relatively little carry in the past three years, as it has not been taking carry in its fully invested 2014 flagship fund CP VI even though the fund has returned over half its capital and is well above hurdle with a 13% net IRR,” Kotowski wrote in a note to investors. “CG gets a bit of a discount because it’s smaller cap and more narrowly focused on PE, but given that we’re only assigning a 90% relative PE to Carlyle, there is more upside as it builds out its credit platform and develops a larger and more stable base of FRE.”

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