by former Reagan administration defense secretary
Frank Carlucci, The Carlyle Group is a $13 billion
private equity firm based just a few blocks away
from the White House on Pennsylvania Avenue in
principals include former British Prime Minister
John Major, former secretary of state, James A.
Baker III, and former chairman of the Securities
and Exchange Commission, Arthur Levitt. Former
President George Bush holds the official title
of senior advisor to the Carlyle Asia Advisory
Board and gives speeches at events.
kinds of ties to the elites of Washington and
beyond have combined with adroit defense investments
to make for some spectacular IPOs of late. The
offerings have evoked memories of the dot-com
era as well as providing fodder for conspiracy
theorists focused on the close ties between former
government officials and the defense industry.
companies for investment, the Carlyle Group has
taken part in several IPOs over the years including
VarsityBooks.com, orthodontic firm Align Technology
and high speed Internet firm NorthPoint Communications.
in the wake of Sept. 11 and heightened defense
priorities, military-flavored IPOs have taken
a front seat.
That's good news for Carlyle, which, with ready
access to folks like Secretary of Defense Donald
Rumsfeld and Vice President Dick Cheney, is a
significant force as one of the biggest military
contractors in the country.
IPOs have surfaced from several players including
last Tuesday's Anteon International (ANT: news,
chart, profile), Integrated Defense Technologies
(IDE: news, chart, profile), ManTech International
(MANT: news, chart, profile) and upcoming information
technology specialist Veridian.
$400 million United Defense Industries IPO was
the first to debut in the latest salvo of stock
debutantes by defense contractors.
Carlyle Group purchased a majority stake in United
Defense Industries (UDI: news, chart, profile)
in 1997 in the midst of the slowdown in U.S. military
spending following the end of the Cold War.
the maker of the Bradley Fighting Vehicle and
other military hardware went public in December,
the IPO debuted at $19 per share and has since
risen to more than $26 per share.
owned 45,000 shares at an average insider cost
of $4.44 per share, according to the company's
IPO filings. His tidy paper profit of about $1
million doesn't include the added dollar value
of whatever his stake is in The Carlyle Group,
which retained 55 percent, or 27.6 million shares,
of United Defense Industries, after the IPO.
there are lockup periods governing when insiders
can sell their shares, but in this time of post
dot-com meltdowns and a mostly barren IPO landscape,
it's amazing to see that such big profits are
its latest move Carlyle filed a $160 million IPO
last Wednesday for U.S. Marine Repair, a Norfolk,
Va. specialist in maintaining and refurbishing
the IPO market may soon tire of all these military
deals, this one should do fairly well and provide
another healthy return for The Carlyle Group,
mostly because of the underlying strength of the
Carlyle Group spokesman Chris Ullman pointed out
that the company purchased both United Defense
and U.S. Marine Repair several years ago when
President Clinton was in office.
to five years into an investment, Carlyle begins
to gauge the most appropriate exit strategy,"
Ullman said. "The success or failure of an IPO
is market-driven, with investors deciding what
is in their best interest."
it's just good business to buy low and sell high,
but the Carlyle Group makes it look especially
easy with all the insiders they have on their
Such coziness between government and the private
sector is not terribly unusual in the defense
sector. After all, President Eisenhower warned
of the dangers of the "military industrial complex"
more than 40 years ago.
ties between individuals on one side or the other
of the equation are almost unavoidable because
the two rely so closely on each other. The government
needs military hardware for defense, and the industry
needs to grow business.
it's only recently that the IPOs have been deployed
in the business mix by the Carlyle Group and others.
Insofar as the defense IPOs have delivered some
lucrative returns both for company insiders and
IPO investors, they may be positive.
But they also present new areas of concern for
watchdog groups and Congressional oversight committees,
especially as defense spending ramps up.
Meanwhile the upside moves in military IPOs will
likely continue, at least until the sector gets
too saturated, or peace breaks out.
Use Notice: This site contains copyrighted material
the use of which has not always been specifically authorized by the copyright
owner. We are making such material available in our efforts to advance understanding
of environmental, political, economic, democratic, domestic and international
issues, etc. We believe this constitutes a 'fair use' of any such copyrighted
material as provided for in section 107 of the US Copyright Law. In accordance
with Title 17 U.S.C. Section 107, the material on this site is distributed without
profit to those who have expressed a prior interest in receiving the included
information for research and educational purposes. For more information go to:
If you wish to use copyrighted material from this site for purposes of your own
that go beyond 'fair use', you must obtain permission from the copyright owner.