Fortress to join the listing list?

The global investment behemoth is following the example of some of its US-based buyout firms and exploring a listing, sources say. By David Snow.

When, in May, Kohlberg Kravis Roberts raised $5 billion (€3.8 billion) through a private placement and subsequent listing on the Euronext Amsterdam exchange, excited market watchers listed on one hand the likely names for such a deal. Many overlooked perhaps the most logical candidate – Fortress Investment Group, with $21 billion in equity capital under management across multiple lines of business.

The New York-based private investment giant is, in fact, exploring its options with regard to a public listing, according to several sources. A spokesperson for Fortress Investment did not return a call for this article.

According to sources, Fortress is eyeing a structure unlike KKR’s. Instead of raising a pool of capital earmarked for investment in Fortress funds, Fortress is considering listing a portion of its general partnership – the business that generates carried interest and fees from Fortress’ many investment activities.

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Kauffman: Fortress co-founder considering listing

ortress, founded in 1998, has a major, $10 billion private equity business, but also significant are its hedge fund, real estate and lending activities. The latter investment strategies generate a diverse flow of income, which public investors will find attractive. Sources did not know whether Fortress is considering a dividend-paying vehicle for the public. KKR’s Euronext vehicle does not pay dividends, but rather re-invests profits in new opportunities.

Fortress is no stranger to the public markets. Two real estate divisions, Newcastle and Eurocastle, are listed as REITs on the New York Stock Exchange and Euronext Amsterdam exchange, respectively. A third group, Northcastle Trust, is seeking a listing in Canada.

Fortress has raised its profile around the world with a string of groundbreaking deals. In May, the firm’s European team, led by Robert Kauffman, announced a deal to acquire the entire portfolio of government-owned apartments from the city of Dresden for €1.7 billion ($2 billion). The deal helped wipe out Dresden’s public debt. Fortress also made headlines in 2003 for its acquisition of loans to singer Michael Jackson from Bank of America. The deal was backed by Jackson’s valuable catalogue of The Beatles and other songs.

An IPO would be a significant monetising event for Fortress’ three co-founders, Kauffman, Wesley Edens and Randal Nardone, who met at BlackRock Financial Management.

The principals of Fortress enjoy the benefit of having seen three other private investment vehicles public in recent years: Ripplewood, KKR and Apollo Management. If this innovative group can’t come up with an elegant solution for going public, no one can.

This article originally appeared in the July/August issue of Private Equity International.