Even hedge funds seek public equity as cost of debt rises

GLG Partners to List Shares Through Reverse Takeover (Update1)
By Andrei Postelnicu

June 25 (Bloomberg) -- GLG Partners LP, Europe's third-largest hedge fund manager, agreed to be taken over by Freedom Acquisition Holdings Inc. for $3.4 billion in cash and stock to gain U.S. investors and a Wall Street listing.

Freedom, a special purpose vehicle which went public on the American Stock Exchange last year, will borrow as much as $570 million to finance the takeover and use the $512 million raised in its stock sale, GLG said in a statement today.

The transaction will make GLG, whose bets on emerging markets, bonds and European stocks helped its funds return twice as much as rivals last year, the first U.S.-listed asset manager exclusively focused on hedge funds, following Fortress Investment Group LLC, which also manages private-equity funds.

``This strategic transaction is an important step in building GLG's global business, affording us the opportunity to increase brand awareness and expand in major targeted markets, including the U.S., Middle East and Asia,'' Noam Gottesman, GLG's founder, managing director and co-chief executive officer, said in the statement.

GLG, Europe's third-largest hedge fund manager according to Institutional Investor's Alpha magazine, says it's the continent's biggest independent hedge fund manager, running about 40 funds. It was founded in 1995 by Gottesman, Pierre LaGrange and Jonathan Green as a unit of Lehman Brothers Holdings Inc.

GLG's $2.5 billion Market Neutral fund, which uses arbitrage and fixed-income investments to limit its correlation with stocks, returned 9.5 percent for this year's first four months, according to its April 30 update for clients. That compares with 2.9 percent for the average hedge fund investing in bonds, according to Hedge Fund Research Inc.

New Listing
The combined company, to be called GLG Partners Ltd., will transfer its listing to the New York Stock Exchange upon completion of the deal, expected in the fourth quarter.

Hedge funds are mostly private and unregulated pools of capital where managers can buy or sell any assets, participating substantially in the profits of the money invested. Special-purpose vehicles are companies set up for specific transactions such as acquisitions.
The world's over 9,000 hedge funds manage about $1.6 trillion in assets, more than double the amount five years ago. They tend to charge investors a 2 percent management fee and keep 20 percent of any money they make.

Perella Weinberg Partners advised GLG on the deal and Citigroup Inc. advised Freedom. Chadbourne & Parke LLP were GLG's lawyers while Greenberg Traurig PA were Freedom's.