Apollo picks IPO price range, delays launch: sources

NEW YORK Tue Mar 15, 2011 7:00pm EDT

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NEW YORK (Reuters) - Private equity firm Apollo Global Management LLC has delayed a planned $500 million initial public offering until stock markets calm down, in what could be a sign the crisis in Japan hurt the U.S. IPO market.

Fears of a nuclear crisis in Japan following a massive earthquake and tsunami have spread jitters among investors. U.S. stocks have tumbled, raising questions about the sustainability of the hot U.S. IPO market.

"It's enough to affect the psychology of the market," said one equity capital markets banker. "It probably just takes the focus, on the margin, a little bit away from (IPO) calendar and puts it more on the macro calendar."

Apollo's IPO has been in the works since 2008. The company planned to file more detailed terms with regulators and begin talking to investors about the deal on Tuesday, but is now waiting for a better time, people familiar with the situation told Reuters.

The decision is being made "day by day," the sources said.

When the IPO happens, Apollo will join Kohlberg Kravis Roberts & Co (KKR.N) and Blackstone Group (BX.N) as one of the few publicly traded private equity firms.

A successful offering will signal private equity firms have recovered from the financial crisis. When stock and bond markets collapsed in 2008, private equity firms struggled to finance new investments and to exit existing investments.

An Apollo IPO will also clear the way for other alternative asset managers such as Carlyle Group CYL.UL, TPG Capital and Oaktree Capital Management to eventually go public.

Apollo and its shareholders are planning to sell 26 million shares for $18 to $20 each, the sources said.

With interest rates low, investors have been willing to take more risk to earn higher returns, heating up the U.S. IPO market, which so far this year has raised the most proceeds since 2000.

Historically, investors have been wary of buying companies from private equity sellers, which are sometimes adept at selling at the top of the market.

But investors have so far this year been more than willing to buy IPOs backed by private equity firms. A group including Bain and KKR, for example, recently sold $4.34 billion worth of shares of HCA Holding Inc (HCA.N).

Fed officials have warned a buyout bubble could be forming as cheap debt fuels high-priced deals. In the latest sign of buyout shops' revival, Apollo rival KKR said it has more than $11 billion available to buy companies and expand globally.

Apollo's management does not plan to sell shares in the IPO, a source familiar with the situation said and that could help Apollo.

Often the cash-out by "smart money" is what worries investors in buyout deals, said Christopher Karras, a corporate and securities lawyer at Dechert LLP who works with private equity firms.

When Blackstone went public in 2007, it was widely seen as having sold near the top of the market.

Reuters reported on Monday that Apollo, with $67.6 billion in assets under management, planned to update its IPO registration paperwork with detailed terms.

About 69 percent of the shares sold in the IPO will be new shares, one source told Reuters. The information is not public and the sources declined to be named.

Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Bank of America Merrill Lynch Corp (BAC.N) are leading IPO underwriters, sources told Reuters. Citigroup Inc (C.N), Credit Suisse Group AG (CSGN.VX), Deutsche Bank AG (DBKGn.DE) and UBS AG (UBSN.VX) (UBS.N) are also in the syndicate, sources said.

In 2007, Apollo chose to list on Goldman Sachs' private stock exchange known as GSTrUE, despite the expected price discount and lower trading volumes.

Apollo raised $828 million in August 2007 in an underwritten private offering, led by Goldman, Credit Suisse and JPMorgan.

Using a regulatory exemption, Apollo was able to avoid lengthy reviews required for a traditional public listing and offer shares privately to big, select investors.

The offering agreement required Apollo to register shares publicly within 240 days.

(Additional reporting by Megan Davies and Robert Sherwood; editing by Dave Zimmerman, John Wallace, Andre Grenon, Phil Berlowitz)

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