Apollo Management, the buyout firm run by billionaire Leon Black, is seeking about $1.5 billion in an initial public offering for a private equity fund, three people with direct knowledge of the situation said.
Apollo is following Kohlberg Kravis Roberts & Co., the world's largest buyout firm, which raised $5 billion three weeks ago in an IPO for a similar fund. New York-based Apollo will use proceeds from its offering to finance takeovers and buy stocks and bonds, said the sources, who declined to be identified before plans about the sale are officially disclosed.
Buyout firms, including Blackstone Group and Carlyle Group, are considering similarly structured investment vehicles. By selling shares in funds, the firms can gain more firepower to complete bigger deals.
"I would be shocked if many other firms weren't doing the same," said Kevin Albert, a New York-based partner at buyout firm Elevation Partners.
Apollo spokesman Steve Anreder declined to comment.
The fund would be Apollo's second foray into the public markets. Two years ago, the firm sold $930 million of shares in Apollo Investment Corp., a fund that invests mainly in debt securities rather than buyouts. Since then, the stock has risen 36%, compared with the 21% return of the benchmark Russell 2,000 index.
The publicly traded fund will add to a $10-billion offering that Apollo put together last year. Apollo's investments include theater chain AMC Entertainment Inc. and luggage maker Samsonite Corp.
Institutional investors, including pension funds and university endowments, put $67 billion into private-equity funds this year, a faster pace than 2005's record $134 billion, according to London-based Private Equity Intelligence Ltd. Money is pouring in because investors are expecting higher returns than what they can get from the stock-and-bond markets.