Blackstone Unit to Buy Stake in Rival Buyout Firm BC Partners

Blackstone Group
Inc.


BX -4.48%

is taking a stake in BC Partners, the latest in a string of deals for slices of buyout firms.

Blackstone’s Strategic Capital Group, which buys stakes in other private-equity firms, is investing €500 million ($560 million) in BC Partners for a 10% to 15% stake, according to people familiar with the matter. The deal may be announced as early as Tuesday.

Closely held BC Partners, a big European-U.S. buyout firm, will invest more than half of the money back into its business as it expands in real estate and credit and prepares to begin raising a new flagship private-equity fund, the people said.

With big, established platforms for investing in real estate, credit and private equity, Blackstone can help the firm build key relationships and understand best practices, BC Partners Chairman Raymond Svider said in a recent interview. BC Partners will also get access to Blackstone’s purchasing group, allowing companies it owns to save money on goods and services, he said.

The deal will provide BC Partners with so-called permanent capital, which it can use for long-term investment in the business, and, unlike most of the money raised from its fund investors, doesn’t ultimately need to be returned.

“In the context of growing the firm for the next 50 years, what you really want is permanent capital,” Mr. Svider said.

As is typical with stake sales, the deal doesn’t give Blackstone any voting rights or say in BC Partners’ investment decisions, but requires key investment professionals to remain with BC Partners over an extended period of time. Managers typically commit 1% to 2% of the capital in a fund, which could mean a hefty sum given that BC Partners is likely to attempt to raise more than its current €7 billion fund, and Blackstone’s investment will help the firm’s partners pay for their share, the people said.

For private-equity firms, selling a stake has become a popular way to finance growth and to pave the way for succession planning by enabling younger partners to buy out older ones. Indeed, most of the remaining portion of Blackstone’s investment will go to former BC partners.

Blackstone is one of the three leading players in the business alongside Neuberger Berman Group LLC’s Dyal Capital Partners and Goldman Sachs Group Inc.’s Petershill LP.

Blackstone also owns stakes in private-equity firms New Mountain Capital LLC, Leonard Green & Partners LP, Rockpoint Group LLC and Kohlberg & Co., among others. It raised $3.3 billion in 2014 for its debut fund dedicated to buying such stakes.

Established in 1986 and with offices in London, New York, Hamburg and Paris, BC Partners manages more than €22 billion in assets. The firm is best known for leveraged buyouts including the 2012 acquisition of Suddenlink Communications, now owned by

Altice USA
Inc.,

and the 2015 purchase of PetSmart Inc. Last week, it announced a deal to buy a majority stake in Garda World Security Corp., the largest private security-services company in the world.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com and William Louch at william.louch@wsj.com

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