Apollo Prepares Long-Delayed IPO

NEW YORK CITY-It’s been almost three years since Leon Black’s Apollo Global Management LLC registered for an IPO, but now the private equity firm is getting ready to actually go public. Apollo announced terms for a $499-million IPO in SEC documents filed Monday, with pricing tentatively set to be finalized on March 29 and the sale of stock set to commence the next day.

Meanwhile, the London Independent reported Sunday that another New York City-based private equity kingpin, the Blackstone Group, is quietly greasing the skids for an IPO that would spin off its Hilton Hotels business, with accountants said to be reviewing the hotel chain’s books to bring them up to international financial reporting standards. The timing on such an offering is not certain, though: earlier this month, Hilton Worldwide CEO Chris Nassetta told Reuters that an IPO “is certainly something we will consider at some point. But we’re not in a rush to do an IPO.” The rationale behind making preparations now, the Independent reported, is to be ready to launch an IPO on short notice when the market warrants.

Given the uncertain climate lately for IPOs, that may take a while. In a profile of the successful IPO conducted last summer by Hudson Pacific Properties, GlobeSt.com reported that amid the European debt market crisis, more than 30 companies worldwide postponed their offerings or withdrew them outright during May and June of 2010. Five of those were REITs.

Although a burgeoning recovery in the lodging sector would seem to bode well for a Hilton spinoff, the financial markets are once again buffeted by headwinds as spring 2011 gets under way. This year, the turbulence stems from the increasingly volatile situation in the Middle East as well as uncertainty over the long-term impact the March 11 earthquake, tsunami and nuclear crisis will have on Japan’s economy.

Apollo’s own IPO plans reportedly were disrupted by the malaise in the stock market. Citing unnamed sources, the Wall Street Journal reported last week that Apollo had originally intended to set terms for its offering last Tuesday but decided to wait to see whether the markets settled down. Its decision to file terms with the SEC occurred as the news out of Japan has been somewhat more positive.

Apollo’s prospectus calls for the sale of 18 million class A shares, with a group of private owners selling another 8.3 million shares to the public. The current price range is between $17 and $19 per share. The private owners may also sell as many as 26.3 million class A shares through private or public sales. Apollo held a private placement of class A shares in August 2007 that raised $715 million, the WSJ reported.

Of course, the bulk of Apollo’s fund-raising has been done in the private equity arena. In its SEC filing Monday, Apollo noted that its latest private equity fund, Fund VII, held a final closing in December 2008, raising a total of $14.7 billion. Fund VII began investing in January 2008 and had deployed $7.8 billion of capital through Dec. 31, 2010, generating gross and net IRRs of 46% and 32%, respectively, during this period, according to Apollo’s SEC filing.

Currently, Apollo has a total of $67.6 billion in assets under management. Of that amount, the firm’s real estate holdings comprise $6.5 billion.