Blackstone, an investment firm that was founded in 1985 with a $400,000 balance sheet and visions of a conflict-free and client-focused environment, announced Friday morning that it is separating its financial advisory arm in pursuit of that original vision. Citing the conflicts of interest that can arise in trying to grow what is now a nearly-$300 billion asset managing business and a financial advisory business, Blackstone said that it will spin its advisory business off into a new publicly-traded entity.
The financial advisory segment — which in the twelve months ending on July 30 had generated $380 million in revenue — along with Blackstone’s restructuring and reorganization advisory services and its Park Hill fund placement businesses, are to be combined with PJT Partners, an independent financial advisory firm founded by Paul Taubman. These businesses will form a new publicly-traded entity of which Taubman will serve as CEO.
“As the largest alternative asset manager in the world, and with our investing areas considerably broader and larger than even a few years ago, we have not been free to aggressively grow our advisory businesses further out of concern for potential conflicts,” Blackstone’s billionaire co-founder and CEO Stephen Schwarzman said in a statement Friday morning. “The separation of our investing and advisory areas will create new growth opportunities for both businesses.”
Added Taubman: “By eliminating the potential conflicts that existed as part of the world’s largest alternative asset manager, these three businesses will now be positioned for significant growth. The new enterprise will include the leading restructuring franchise on the Street, a market-leading fund placement business and a strategically important advisory practice. By combining resources, we have an opportunity to establish a new leader in the advisory space and the premier destination for talent.”
Upon the completion of the spinoff — which is expected to close in 2015 — Blackstone’s existing shareholders will own 65% of the new advisory entity. Current employees of the Blackstone advisory arm will roll their Blackstone shares into the new company and, combined with Taubman and his partners, will initially own approximately 35% of the new company, Blackstone said Friday morning. The deal should be tax free to Blackstone shareholders.
Following the announcement of the spinoff, Blackstone shares vacillated between positive and negative territory in early Friday trading, gaining 1% and then falling 1% all before the opening bell. The stock opened 1% higher than its Thursday close and is currently up 1.03%. Year-to-date, shares of the asset manager are down more than 4%.
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