Private Equity’s Biggest Win Ever
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The Fiscal Times
June 25, 2013

Apollo Global Management, the publicly traded investment firm run by Leon Black, has scored the biggest profit ever made on a private-equity investment, according to Bloomberg Markets magazine. How did it do that? One word: plastics.

Apollo’s total profit, on paper at least: $9.6 billion. That, according to Bloomberg, tops the $7 billion that KKR & Co. made from the 1986 takeover of supermarket chain Safeway and a similar gain that another group made in taking over a Japanese bank.

It wasn’t an easy win. Apollo invested more than $1.4 billion in the debt of LyondellBasell Industries (NYSE: LYB), the world’s largest maker of polypropylene, and kept buying as the company suffered from the global slowdown in the wake of the financial crisis. LyondellBasell filed for bankruptcy in 2009 – a move that, among other things, allowed it to avoid $4.75 billion in fines levied by the Environmental Protection Agency because of alleged polluting at 23 sites. Apollo converted its debt into equity as part of the bankrupt company’s reorganization, and it kept betting on the company by buying more stock.

LyondellBasell emerged from Chapter 11 in April 2010 and began trading on the New York Stock Exchange in October of that year. Since then, its stock has soared as an improving economy lifted cash flow and earnings. The company last month authorized a stock buyback of up to 10 percent of its shares and hiked its interim dividend by 25 percent. Apollo, with $114 billion in total assets under management, has been exiting its stake in LyondellBasell and other successful investments. What had been a 30 percent stake as of March 2012 was down to 15.2 percent as of March 31, 2013. Apollo has reportedly also been gathering new cash for another large buyout fund.

Helped along by its big bet on plastics, among other investments, Apollo’s stock has led those of all publicly traded private-equity firms. It has gained 73 percent over the last 12 months, and about 29 percent so far in 2013.

If only Dustin Hoffman had listened.

 APO Chart

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Executive Editor Yuval Rosenberg oversees coverage of business, the economy, technology and Wall Street. A former web editor at WNYC, Fortune and Newsweek, he also writes on a wide range of subjects.