Oaktree Capital Management, one of the Southland's most successful investment firms, sold shares in itself Tuesday to an elite group of investors, in the latest move by the burgeoning private equity industry to raise money for expansion.
Los Angeles-based Oaktree and its principals took in more than $800 million selling a stake of about 14% to fewer than 50 other large investors.
The deal is another sign of the growing financial clout of private equity firms -- investment partnerships that have been buying businesses outright or acquiring significant stakes in companies at an accelerating pace. They are hungry for more and are reaching out to investors who are eager to help them finance their purchases in the hope of earning high returns.
Another major private equity firm, New York-based Blackstone Group, last weekend signed a deal for a $3-billion capital infusion from the Chinese government. Blackstone also is planning to sell shares to the public, raising as much as $4.75 billion in additional funds.
Oaktree, which manages about $40 billion in assets, specifically decided not to offer shares to the public at large. Instead, its stock offering is the first on an exclusive market created by brokerage Goldman Sachs Group Inc.
The idea behind the market is to allow private firms to raise money -- and create a way for their executives and employees to cash out some of their wealth in the business -- without taking the cumbersome route of going public.
In a memo to clients Tuesday, Oaktree partners Howard Marks and Bruce Karsh indicated that they were happy with the results as the first firm to try Goldman's market.
They said Oaktree's shares, or units, were priced at $44 apiece late Monday and began trading at $50 on Tuesday. Only institutional investors can trade the shares; the general public isn't allowed in.
"In time, we expect to see this [market] employed by a number of premier companies in other industries that wish to access liquidity and outside capital but also to remain private," Marks and Karsh said in the memo. "It makes sense that there be a way for leading companies to accomplish these dual goals."
Oaktree declined to comment further on the deal. A Goldman spokesman couldn't be reached for comment.
One key advantage of limiting a stock sale to well-heeled, sophisticated investors is that Oaktree can avoid sharing detailed information about its operations with the rest of the world. Private equity firms consider secrecy a crucial advantage as they wheel and deal for attractive investments.
