Apollo Management is following the lead of its larger US rival Kohlberg Kravis Roberts by seeking to raise $1.5bn-$2.5bn by selling shares in an investment vehicle that will trade on Euronext’s Amsterdam exchange.
KKR this month raised $5bn for its Amsterdam-listed investment vehicle, more than three times its original $1.5bn target, following strong demand from institutional investors, hedge funds and wealthy individuals.
The move blurred yet further the distinctions between the public and private equity markets. It also allowed a buy-out group to exploit its brand name to secure a permanent source of capital.
Excluding privatisations, the initial public offering of KKR Private Equity Investors was the largest capital raising in Europe since the 2001 launch of Orange, the telecoms group, that raised $5.7bn, according to Thomson Financial.
The Apollo and KKR IPOs are being closely followed by rival buy-out firms Blackstone, Carlyle, and Texas Pacific Group, all of which are understood to be in talks with investment bankers.
Euronext Amsterdam is attractive to the buy-out groups because of a favourable regulatory and tax environment.
The IPOs of blind pools of capital are less vulnerable to current volatility in world markets because the value of the shares initially mirrors the amount of cash raised by the vehicle, less fees.
Apollo, founded by Leon Black, a former Drexel Burnham Lambert banker, specialises in large buy-outs as well as distressed debt. It recently closed a private equity fund of just over $10bn.
Its sales pitch to investors is likely to emphasise these twin disciplines, with investors in the shares gaining exposure via Apollo’s funds as well stand alone investments.
Some industry observers expect activity in the distressed debt market to increase significantly later this year, partly as a result of the boom in heavily leveraged buy-outs.
KKR PEI provides a window for public company investors to participate in the performance of KKR’s private equity funds in the same way as traditional investors in the asset class.
Citigroup, Credit Suisse, Goldman Sachs and JPMorgan are understood to be joint bookrunners on the Apollo IPO.
Apollo declined to comment on its latest IPO initiative.