Eric Gleacher Going Public
The
1980s M&A king files with the SEC for a $500 million sale of
Gleacher Partners.
- Will Swarts
- May 11, 2004 1:25 PM EDT
Add
Eric Gleacher to the list of 1980s Wall Street superstars to throw
his weight behind a publicly traded buyout vehicle.
Gleacher
Partners filed with the
Securities
and Exchange Commission
to
raise $500 million for a business development corporation to invest
in mezzanine financing of private companies. Gleacher, who became
famous running the mergers-and-acquisitions department of
Morgan
Stanley
,
joins his old
Drexel
rival
Leon Black and Kohlberg Kravis & Roberts in advancing private
equity's cause on public markets.
Gleacher
Partners is about the 10th private investor to set up a business
development corporation -- similar to a closed-end investment fund --
since November, when private equity firms caught on to the public
alternative to costly and slow private fundraising.
The
firm did not return calls seeking comment, though it is now in a
quiet period as it prepares the actual initial public offering.
Gleacher's best-known private investments include
California
Pizza Kitchen
,
WebMD
and
Cosi
Sandwich Bar
.
Gleacher
Investment Corp., as the publicly traded entity will be known, will
invest in debt and equity securities of privately held middle-market
companies with about $25 million to $500 million of annual revenue,
or about $5 million to $50 million of annual operating earnings,
according to the filing documents. Because of the way the law
governing business development corporations works, Gleacher can
invest up to 30% of its capital however it wishes, and must invest
the remaining 70% developing domestic companies.
KKR,
Black's Apollo Management and the Blackstone Group were among the
first to file initial public offering documents for their public
funds. They were quickly followed by smaller but similarly well-known
private investment groups such as
Evercore
Partners
,
Porticoes
Investment Management
and
Gores
Technology Group
,
prompting some concern that supply would get ahead of demand and that
later entrants to the party would fail to raise much capital.
But
the recent performance of
Apollo
Investment Corp.
probably
has investors rereading their prospectuses. All the business
development filings feature this line of bold type: "Shares of
closed-end investment companies frequently tend to trade at a
discount to their net asset value. These factors will increase the
risk of loss for purchasers in this offering."
Shares
of Apollo, which raised $930 million on strong investor interest, hit
a high last month of $15.44, were trading Tuesday at $13, just a few
weeks after they hit the market.
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