Hedge-fund firm readies IPO
WASHINGTON --Hedge-fund manager Och-Ziff Capital Management Group LLC is gearing up to launch its initial public offering, despite recent market turmoil and lackluster performance of alternative asset managers' stocks.
Och-Ziff has made a flurry of regulatory filings this month leading up to its market debut in mid-November. The company plans to sell 36 million Class A shares and will be listed on the New York Stock Exchange under the symbol OZM. Och-Ziff aims to raise $1.1 billion from an expected price range of $30 to $33 a share.
Och-Ziff's debut comes as private-equity firm Blackstone Group LP's stock continues to trade below its June IPO price. In addition, alternative asset manager Fortress Investment Group LLC has lost the majority of its first-day gains from its February debut.
The offering also comes amid continuing unease in the markets after this summer's credit crisis, which led to losses for many hedge funds, and precipitated the collapse of two Bear Stearns Cos. funds.
But filings made with the Securities and Exchange Commission on Monday show that Och-Ziff made it through the third quarter relatively unscathed, which bodes well for its offering. Its assets under management grew and the company saw net inflows to its funds.
"They may be worried that things could get even worse than they are now. They don't want to wait and see the window shut completely" for public offerings in their sector, says Mayiz Habbal, managing director of the securities and investments practice of Celent LLC, a research and consulting firm.
Och-Ziff was founded in 1994 by Goldman Sachs Group Inc.'s former co-head of U.S. equity trading, Daniel Och, and Ziff Brothers Investments, which made its fortune in publishing and media properties.
The New York City company had $30.1 billion in assets under management for more than 700 fund investors at the end of September, up from $29.1 billion at the end of June. The company's fund investors range from pension funds to university endowment funds.
In the third quarter, the company saw net inflows of $1.2 billion to its funds -- meaning more people invested money with Och-Ziff than pulled their money out -- but the value of the assets it managed depreciated by $146.5 million.
The company has warned that negative publicity surrounding some hedge-fund losses during the quarter could reduce demand for any type of hedge fund, even though "the performance of our funds was not materially adversely affected by these conditions in the periods presented."
Although investors in Och-Ziff's IPO aren't directly participating in its funds, they benefit indirectly from those funds' performance.
In the first nine months of the year, Och-Ziff's total revenue rose 11 percent to $731.8 million, compared with the same period in 2006, and it reported a net loss of $140.5 million, compared with net income of $135 million in the year-ago period. Higher expenses, particularly for compensation, pulled the company into the red.
The IPO is being used to buy a portion of its owners' stakes in the company. The company's partners plan to then invest all of their after-tax proceeds from the IPO into the company's funds, where they will be locked up for five years.
The company warns that it expects to report losses in future periods as it racks up higher compensation expenses, as well as charges related to the purchase of its prior owners' shares and a $750 million loan that is being used to make distributions to those owners.
The Och-Ziff offering is being managed by Goldman Sachs and Lehman Brothers Holdings Inc.
