Carlyle CEO Kewsong Lee steps down in abrupt early departure

By Chibuike Oguh, Kane Wu and Anirban Sen

(Reuters) -Carlyle Group Inc Chief Govt Kewsong Lee has abruptly stepped down months earlier than the scheduled finish of his five-year contract, elevating questions on succession plans on the personal fairness agency.

Washington, D.C.-based Carlyle mentioned it mutually agreed with Lee to not renew his contract, which was as a result of expire on the finish of 2022, based on a press release on Sunday.

The agency, which reported earnings in July with out flagging potential management modifications, mentioned Lee had additionally stepped down as a board member.

Carlyle co-founder Invoice Conway, instrumental in Lee’s rise on the agency, will function interim CEO whereas the seek for a brand new candidate takes place, the corporate mentioned.

Its inventory was down almost 6% at $35.46 per share in early afternoon buying and selling on Monday, lagging different personal fairness corporations.

“The information is a shock and on some apparent degree an overhang on the inventory. That mentioned, we doubt that there’s something substantively mistaken with the corporate,” Oppenheimer analyst Chris Kotowski mentioned in a be aware to buyers on Monday.

Lee, a 21-year veteran of rival Warburg Pincus who took the helm as Carlyle’s sole CEO in 2020, declined to remark.

In accordance with an individual acquainted with the matter, his exit was triggered by negotiations on a brand new contract over which he clashed with Carlyle’s board. Lee stepped down after neither facet might come to an settlement, the sources added, requesting anonymity.

“It’s, in our thoughts, more than likely a case of the empire hanging again,” Kotowski mentioned. “All the opposite personal fairness managers that we cowl have had inside, homegrown expertise lead their transition from the founders, and that’s in all probability not an accident. It’s a enterprise the place personalities matter.”

URGENT SEARCH FOR CEO

In a memo to Carlyle’s international workers on Sunday, Conway mentioned the seek for a brand new CEO could be undertaken “with a way of urgency” and the agency should proceed to execute its marketing strategy. Lee had launched that plan final yr, aiming to double its distributable earnings and lift extra $130 billion from buyers over the subsequent 4 years.

Conway additionally mentioned the agency had arrange a CEO workplace consisting of key senior leaders, together with Chief Working Officer Chris Finn, who has delayed his beforehand introduced end-2022 retirement to assist with the transition.

A Carlyle spokesperson declined to touch upon the memo. Conway declined to remark additional past the announcement.

Lee, who turns 57 this week, was named co-CEO in 2017 alongside Glenn Youngkin, who left the agency in 2020 to launch a profitable marketing campaign to be governor of Virginia. Lee’s profile web page is not obtainable on Carlyle’s web site.

Lee’s departure comes as personal fairness corporations face a difficult macroeconomic and funding setting fraught with geopolitical dangers and sharply rising rates of interest.

Carlyle’s share value development has, nevertheless, lagged friends within the final 5 years. Blackstone’s shares have shot up greater than threefold since August 2017 whereas Carlyle’s have grown about 80%.

“Among the many huge 5 different asset managers, they have the bottom valuation a number of, and their value appreciation has lagged the friends as properly. So in some regards, we’re not shocked that he’s leaving the agency,” mentioned Piper Sandler analyst Sumeet Mody.

Carlyle has mentioned it’s elevating an eighth U.S. buyout fund and a fifth Europe expertise fund. The agency can also be exploring a brand new $8.5 billion Asia-focused buyout fund that’s aiming for its first shut within the subsequent couple months, mentioned an individual with information of the fundraising.

Carlyle additionally plans to kick off fundraising for a brand new pan-Europe buyout fund within the coming months, mentioned a second individual with information of the state of affairs.

Carlyle declined to touch upon fundraising plans. It mentioned in its second-quarter earnings report it had raised $19 billion this yr. It ended the second quarter with $376 billion in property underneath administration.

(Reporting by Jyoti Narayan in Bengaluru, Kane Wu in Hong Kong and Anirban Sen in New York; Extra reporting by Angelique Chen in New York; Enhancing by Sherry Jacob-Phillips, Kenneth Maxwell, Edwina Gibbs and Aurora Ellis)