Blackstone IPO may rank among largest in the U.S.

NEW YORK — The IPO market may not be as large as it once was, but there is still expected to be plenty of room for this week's debut of private equity powerhouse Blackstone Group, likely one of the biggest initial public offerings in U.S. history.

Blackstone's IPO is expected to raise between $3.87 billion and $4.14 billion. If it comes in at the high end of the range, it will be the sixth-largest U.S. offering of all time and the biggest in nearly five years, according to Renaissance Capital and IPOHome.com.

The size of the deal has been matched only by the controversy surrounding the offering.

Blackstone first defied expectations when it said in March it would go public, having made its fortune taking companies private. It also raised eyebrows by structuring the company to hand little control to investors — instead tying their stakes to the management committee that runs the firm.

Since then, Blackstone made headlines by disclosing that Chief Executive Stephen Schwarzman made $400 million in 2006 and could walk away from the IPO with a stake in the company valued at as much as $7.7 billion.

"Everything about this deal's been unusual," said Phil Stiller, an analyst with Renaissance Capital.

The market has cooled some since its peak in the late 1990s, when there were more than 400 initial public offerings a year. The last blockbuster IPO was MasterCard Inc.'s $2.4 billion offering a little over a year ago.

But the market is ramping back up, and the number of IPOs so far this year has jumped 28 percent over the same period in 2006.

One area where the IPO market may cool, though, is among competitors to Blackstone in the private equity business. A new bill pending in the U.S. Senate would tax publicly traded partnerships that derive profits from managing other people's assets at the same tax rate as corporations, abolishing a two-decade old provision that grants the partnerships a lower tax rate.

That would effectively double the tax rates for private equity firms.

While Blackstone would get a five-year exemption (since it filed to go public before the bill was introduced), the potential for a tax hike has at least temporarily derailed the possibility of firms like the Carlyle Group, Apollo Management LP and Kohlberg Kravis Roberts & Co. following in its footsteps.

Blackstone competitor Fortress Investment Group would also get the exemption, since it is already public, but the mere suggestion of a higher tax rate has weighed on the shares of late.