Dubai to Buy $1.26 Billion Stake in Hedge Fund Och-Ziff Capital

Date: Tuesday, October 30, 2007
Author: Elizabeth Hester and Jason Kelly, Bloomberg.com

Dubai International Capital LLC agreed to buy 9.9 percent of Och-Ziff Capital Management Group LLC in a transaction that values the New York-based hedge-fund firm at about $12.5 billion.

Dubai International, controlled by Sheikh Mohammed bin Rashid al-Maktoum, will acquire 38.1 million Class A shares for as much as $1.26 billion. That works out to $33 a share, though the final price will be the same as that paid by investors in Och-Ziff's planned initial public offering next month, the company said yesterday in a filing with the U.S. Securities and Exchange Commission.

Middle East investors are buying into U.S. asset managers to diversify holdings and get access to deals as oil trades near a record high. Carlyle Group, the Washington-based buyout firm run by David Rubenstein, agreed last month to sell a $1.35 billion stake to Mubadala Development Co. of Abu Dhabi. Similarly, China's investment arm bought $3 billion of New York-based Blackstone Group LP's shares as part of its June IPO.

``For the investors, it's a way to get advice on how to invest some of the rest of their money wisely,'' said Steven Kaplan, a professor at the University of Chicago's Graduate School of Business. ``It's access to more deals.''

Och-Ziff plans to sell 36 million shares in the IPO at $30 to $33 each. Proceeds from the Dubai sale will be used to buy the stakes of existing owners, including senior management, and will be reinvested in the funds, the filing said.

Och-Ziff, run by former Goldman Sachs Group Inc. trader Daniel Och, manages $30.1 billion.

ICICI, Daimler Stakes

Dubai International has spent more than $8 billion since 2004 taking positions in companies including India's ICICI Bank Ltd., European Aeronautic Defence & Space Co., Daimler AG and HSBC Holdings Plc. The firm said it expects to gain access to deals and seek chances to invest alongside Och-Ziff through the stake, according to a statement today.

``We are committed to making progress with the strategic aspects of our new alliance,'' Sameer Al Ansari, Dubai International's chief executive officer said in the statement.

Dubai International has invested in the private equity funds of Carlyle, KKR & Co., JPMorgan Chase & Co., TPG Inc. and 3i Group Plc, according to its Web site. It holds a $1 billion equity stake in Daimler, the German automaker.

JPMorgan Chase & Co. advised Och-Ziff on the sale along with Goldman Sachs. Skadden, Arps, Slate, Meagher and Flom LLP was the firm's legal adviser. Dubai International was advised by Merrill Lynch & Co.

To contact the reporters on this story: Elizabeth Hester in New York at ehester@bloomberg.net ; Jason Kelly in New York at jkelly14@bloomberg.net .