Apollo's investors and founders to sell shares

NEW YORK Tue May 7, 2013 10:57pm EDT

Apollo Management LP Managing Partner Leon Black speaks at the panel discussion ''Global Opportunities in Private Equity'' at The Milken Institute Global Conference in Beverly Hills, California May 2, 2011. REUTERS/Fred Prouser

Apollo Management LP Managing Partner Leon Black speaks at the panel discussion ''Global Opportunities in Private Equity'' at The Milken Institute Global Conference in Beverly Hills, California May 2, 2011.

Credit: Reuters/Fred Prouser

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NEW YORK (Reuters) - Apollo Global Management LLC's (APO.N) cornerstone investors and two of its founders are selling a slice of their shares, demonstrating how going public makes it easier for dealmakers at alternative asset managers to cash out on their holdings.

Cashing out, even in part, can be a sensitive issue among some private equity investors, who pay attention to how much fund managers earn and how they are remunerated because their interests are best aligned when both sides make a lot of money when deals work out. Part of how much fund managers make and their long-term commitment to the firm hinge on their ownership.

Cornerstone investors Abu Dhabi Investment Authority (ADIA) and California Public Employees' Retirement System (CalPERS), which invested a combined $1.2 billion in Apollo in 2007, have each registered to sell stakes currently worth up to $203.4 million, a Tuesday filing with the U.S. Securities and Exchange Commission showed.

Marc Rowan and Joshua Harris, who together with Chief Executive Leon Black founded Apollo in 1990, have registered to sell stakes currently worth up to $120.1 million and $60.1 million respectively, the filing shows.

The stock sales, which in total amount to up to 24.3 million shares or about 6.5 percent of Apollo's total equity, come as Apollo's shares ended trading on Tuesday near an all-time high, buoyed by the rising value of its funds and asset sales that have allowed it to boost dividends.

Apollo went public in March 2011, following stock market flotations by peers Blackstone Group LP (BX.N) in 2007 and KKR & Co LP (KKR.N) in 2010. Although its founders face restrictions on when they can sell shares, the initial public offering has made it easier for them to cash out should they wish to do so.

Rowan, 51, and Harris, 48, took $114.5 million apiece in 2012 dividends thanks to their individual 15.8 percent stakes in Apollo.

If their ownership is reduced significantly, they will get less of the profits when deals work out for their investors, though this is not immediately on the horizon as their planned share sales will only reduce their stakes marginally to as low as 14.6 percent and 15.2 percent respectively.

Rowan, Harris, Black and other Apollo employees have committed a combined $1 billion of their own money to the company from its inception through the end of last year.

An Apollo spokesman declined to comment on behalf of Rowan, Harris and the firm.

Still the sales may focus the minds of investors on future share sales. The registration of shares for sale on Tuesday was possible because a two-year lock-up on Apollo's partners for selling up to 7.5 percent of their equity expired in March 2013. Rowan registered on Tuesday to sell all of the equity he was allowed to do so while Harris used about half of his allowance.

The next lock-up, that applies to 15 percent of the equity, expires in March 2014. Following the expiration of two more lock-ups, Apollo's dealmakers will be allowed to sell all their stakes by March 2017. Black, who is Apollo's largest shareholder with a 24.9 percent stake, did not register to sell any of his shares on Tuesday. Nine other Apollo partners and one Apollo director did.

A lock-up also applies to the stakes of ADIA and CalPERS. On Tuesday they each registered to sell up to a quarter of their 8 percent stakes in Apollo. Following the expiration of two more lock-ups by March 2017 they will also be allowed to sell all of their stakes.

Apollo had $114.3 billion of assets under management as of the end of March. Its assets include corporate loans and bonds, private equity investments and real estate holdings.

Rowan and Harris each had an estimated net worth of $2.1 billion as of the end of March, according to Forbes. Black was worth $4.3 billion.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co and Morgan Stanley & Co LLC are acting as joint book-running managers for the offering. The co-managers for the offering are Bank of America Merrill Lynch, Barclays Capital Inc, Deutsche Bank Securities Inc, UBS Securities LLC, Wells Fargo Securities, LLC and Apollo Global Securities LLC.

(Reporting by Greg Roumeliotis in New York; Editing by Edwina Gibbs)

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