© Reuters.
By Sam Boughedda
On Thursday, The Financial Times reported that BlackRock (NYSE:) discussed pursuing a takeover of The Carlyle Group (NASDAQ:) but decided against it.
The report, citing sources, stated that BlackRock passed on a potential deal due to cultural issues, including compensation mismatches between the firms. In addition, it said that while Carlyle would boost BlackRock’s expansion into alternative assets, the deal size and turmoil at the firm were two factors that put it off.
Following the news, Credit Suisse analysts, who have an Outperform rating and $36 price target on Carlyle Group , said they are “not surprised that a potential suitor like BLK would snoop around given how inexpensive the shares are, and rising scarcity value such a platform might bring.”
“However, at current levels, we do not believe: A) the shares are trading with take-out speculation; and B) CEO search difficulty is well priced in. We also believe the article overstates underlying internal uncertainty following our catch up with CG management,” wrote the analysts.
The “most encouraging takeaway” for Credit Suisse from the article is based on the quoted internal email to employees, in which the Carlyle interim CEO noted they will have “more to share soon” on the permanent CEO search.
“We continue to believe external candidate would have best stock reaction, but at current stock price levels, an internal promotion likely would not adversely impact the shares,” the analysts added. “In our view, the longer it takes for CG to secure a permanent CEO, the greater the risk around capital raising. In our view, management missed a golden opportunity to update the “Street” in concert with 3Q results, but if the internal memo is accurate, an announcement would seemingly be forthcoming.”
