Political resistance and shakiness in the credit markets are not preventing hedge funds and private equity from sussing out ways to tap the U.S. public equity market.
U.K.-based hedge fund GLG Partners is selling 28% of itself in a
reverse merger with
Freedom Acquisition Holding
-- the latest move by an alternative investment shop to set its sights on a public listing. The deal comes on the heels of
$4.1 billion IPO on June 22.
In a reverse merger, a private company becomes publicly traded without having an IPO by buying enough shares in a publicly traded company.
Under terms of the $3.4 billion deal, GLG's owners will receive $1 billion cash and 230 million shares of the shell company Freedom Holdings, which equates to a 72% stake worth about $2.4 billion. Freedom Holdings, which will be renamed GLG Partners Inc. and trade under the ticker symbol GLG, was formed and funded solely for the purpose of acquiring other companies that have not yet been identified.
And GLG, which has about $20 billion under management, isn't the only big U.K. hedge fund firm trying to gain a foothold in the U.S. The world's largest listed hedge fund company, U.K.-based Man Group, with some $61 billion under management, wants to publicly offer shares in a long-short investment vehicle to be based in Chicago known as Man Dual Absolute Return Fund.
Hedge funds and private equity have been attempting to work out ways to get long-term funding from the public in order to allow long-term partners to cash out and to incentivize and retain staff.
Fortress was the first company to hold an IPO, in early February. Blackstone followed its lead with a successful sale of publicly traded partnership units, rising 13% in its debut last Friday. Other firms, including private equity shop Kohlberg Kravis Roberts, are said to be drawing up their own plans to go public as well.
This IPO frenzy has not gone unnoticed by Capitol Hill, which has issued a series of bills to tax alternative investment shops more heavily. The Senate Finance Committee is considering a bill that would increase the tax rate for those entities.
reported last Thursday that U.S. Reps. Henry Waxman (D., Calif.) and Dennis Kucinich (D., Ohio) asked
Securities and Exchange Commission
Chairman Christopher Cox to delay the IPO's pricing, saying the deal may present "investors and the public with new and undisclosed risks."
The offerings also come as concerns linger about the debt market, which has fueled growth in leveraged buyouts and, in part, hedge fund investment activity. The markets have been closely watching a pair of hedge funds run by
, which have been floundering because of investments in subprime-related structured securities.
Bear agreed last week to a $3.2 billion bailout of the funds, though the market is keeping a close eye on the saga for fear that it might drag down the broader markets.