Och-Ziff Capital Management, a US hedge fund manager that has regularly made private equity-style investments, has filed for an initial public offering on the New York Stock Exchange that could value the group at around $20 billion.
The US group, one of the world’s largest hedge fund managers with assets of over $26 billion, has shrugged aside concerns about the continuing struggles of Fortress Investments and The Blackstone Group, both of which have seen their share price slide below the original offer price since their recent flotations in New York.
Goldman Sachs and Lehman Brothers have been appointed as co-lead managers for the offering, which is expected to come to market in the final quarter of this year. The group is likely to be valued at about $20 billion, based on its projected earnings for the year.
Like Blackstone, Och-Ziff plans to list as a publicly traded partnership, thus qualifying for a lower tax rate than a corporation. However, this means it could be hit by the proposed bill introduced by US senators Max Baucus and Charles Grassley, which would make such partnerships liable to pay the full corporate tax rate of up to 35 percent. Och-Ziff said it may yet abandon its plans to float if the tax situation has not been resolved by the time it comes to price its shares.
The listing will also mirror earlier structures in that investors who buy shares will have limited voting rights. The 18 existing partners will hold around 90 per cent of the publicly traded A shares, meaning they will retain effective control. The partners will re-invest most of the proceeds from the offering in Och-Ziff funds, and will be subject to a five year tie-in period.
Och-Ziff is a multi-strategy fund manager, seeking its returns through merger arbitrage, convertible arbitrage, equity restructuring, credit and distressed credit investments, real estate and also private equity. Its most notable buyout-style deal in Europe was the 2005 acquisition of Peacocks, the UK retailer which has since flourished, while it recently teamed up with Aurigo Management to buy tool hire business HSS from 3i.
The hedge fund group was founded in 1994 by former Goldman Sachs banker Daniel Och, with backing from the Ziff family, and now employs 125 investment professionals in London, Hong Kong, Tokyo and Bangalore.