The Abu Dhabi government agency Mubadala Development Company is buying a 7.5 per cent stake in US private equity group Carlyle. The price: $1.35 billion.

The price has been arrived at after a 10 per cent discount on a $20 billion valuation for Carlyle, which has committed itself to a floor to Mubadala''s investment — meaning that it will compensate the Arab agency if Carlyle goes public and the price of its share price plummets.

Markets are rife with rumours about a possible public issue by Carlyle and the listing of its shares. So the American fund is in the process of extracting more value from its business while at the same time raising its capacity to ramp up its investments. On the other hand, by raising $1.35 billion, Carlyle has also gained flexibility on deciding whether to go public or not, and when. Carlyle recently postponed its plans to make a flotation because of the volatility in the market caused by the US sub-prime mortgage crisis.

Mubadala is a strategic investment and development company headquartered in Abu Dhabi, capital of the United Arab Emirates. Its mission "is to create and maximise long-term returns as an engaged investor in high-performing businesses and promising new ventures".

The Abu Dhabi company has made investments in a diverse range of organisations, from Italian car maker Ferrari to Libyan oil exploration (see table below for a list of Mubadala''s investments). Its investment include Dolphin Energy, the largest natural gas project in the Gulf, and a joint venture to build and operate one of the world''s largest aluminium smelters. It has significant stakes in Dutch fleet management group LeasePlan Corporation and Swiss aircraft and engine services provider SRTechnics.

Carlyle owns many companies, including market research firm Nielsen, Dunkin'' Donuts and car seats firm Britax. Carlyle, which manages $76 billion of capital through 55 funds, is the world''s second largest private equity group after Blackstone.

The high-risk, high-gain world of American private equity funds is getting investments from investors who are supposed to be the most conservative because of their fiduciary responsibilities — sovereign governments. In May 2007 another American private equity group, Blackstone, had accepted an investment of around 10 per cent of its equity from the Chinese government. Another Abu Dhabi government agency had acquired a stake in Apollo Management in July this year.