Four top executives of Fortress Investment Group LLC (FIG), the first publicly traded private-equity and hedge-fund manager in the U.S., will sell 25.7 million Fortress shares and operating units, about 10 percent of their interest, in an underwritten public stock sale.
The planned offering, disclosed yesterday in a regulatory filing by the New York-based company, is the first large disposal of shares by Fortress insiderssince the firm went public seven years ago. Co-founders Wesley R. Edens and Randal A. Nardone and senior executives Peter L. Briger Jr. and Michael E. Novogratz stand to collect about $215 million in the sale based on Fortress’ closing price yesterday of $8.37.
The Fortress executives are joining peers at Carlyle Group LP, Apollo Global Management LLC (APO) and Oaktree Capital Group LLC (OAK) in selling stakes in their companies after a five-year rally in U.S. stocks. Fortress shares have surged almost nine-fold from their 2008 low through yesterday.
Fortress, a 26-year-old firm that managed $61.8 billion in assets as of Dec. 31, first sold shares to the public in February 2007, beating Blackstone Group LP (BX) to the public market by four months. KKR & Co., Apollo, Carlyle and Oaktree have since followed suit, creating a mechanism for the firms’ founders to exit their stakes in addition to giving the companies a currency to expand.
Carlyle said this month that co-founders William E. Conway Jr. and Daniel A. D’Aniello would sell 7.5 million shares. Oaktree Chairman Howard Marks and President Bruce Karsh sold a fraction of their holdings in that firm last May and again this month, according to filings. Apollo co-founders Joshua Harris and Marc Rowan sold some of their company shares last year.
Fortress is the only U.S.-listed company trading below its IPO price among firms that run private-equity funds. The stock fell 4.8 percent to $7.97 at 9:36 a.m. in New York. It is down 57 percent since Fortress sold shares at $18.50 apiece in the IPO.
Edens, 52; Nardone, 58; Novogratz, 49; and Briger were among a small number of Fortress insiders that received more than $1.7 billion through distributions and stock sales from Fortress in the months preceding the IPO, according to a regulatory filing. Japanese brokerage Nomura Holdings Inc. provided half the amount when it bought a 15 percent stake in the firm just before Fortress went public.
In February, Fortress said it repurchased a 12 percent interest from Nomura for $363.4 million.
According to yesterday’s filing, Fortress will sell 23.2 million newly issued Class A shares in the offering, with proceeds used to buy Fortress operating group units from the insiders. The executives and other employees also will sell 5.1 million Class A shares.
Underwriters led by Citigroup Inc. and Credit Suisse Group AG will have an option to buy 4.2 million shares from Fortress insiders if the offering is oversubscribed.
The offering will reduce the senior executives’ combined holdings to 226 million shares and units, Fortress said in the filing. Other insiders will sell about 2.6 million shares and units.
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