U.S. hedge fund Och-Ziff Capital Management Group said it is selling a 9.9 percent stake to a Dubai fund for up to $1.26 billion, marking another investment in the financial sector by wealthy Middle East state-owned funds.
Och-Ziff, which also plans to raise about $1.1 billion in an initial public offering, said it has signed an agreement with Dubai International Capital and its unit, DIC Sahir, to sell 38.14 million Class A shares to DIC Sahir.
That will work out to 9.9 percent of outstanding Class A shares of the firm on the closing date of the public offering, Och-Ziff said in a regulatory filing.
Dubai International Capital, part of Dubai Holding, is the international investment arm focusing primarily on private equity. Its portfolio includes a stake in European plane-maker Airbus parent EADS, among others.
"We believe that Och-Ziff is uniquely positioned to take advantage of the anticipated strong growth in the alternative asset space based upon its global platform and experienced management team," Sameer Al Ansari, executive chairman and chief executive officer of Dubai International, said in a statement.
Och-Ziff, which hopes to price its offering between $30 and $33 per share, said the price of the stake sale to the Dubai fund will de dependent on the final pricing of the offering but will not exceed $33 per share.
The $30.1 billion hedge fund was founded in 1994 by former Goldman Sachs trader Daniel Och and the Ziff family.
Asian and Middle Eastern sovereign funds have been actively seeking overseas investments to house their growing surpluses. Private equity firm Blackstone earlier this year sold a $3 billion stake to China Investment Corp.
But the state-owned funds' rise has raised concerns among U.S. regulators. Only last week, U.S. Securities and Exchange Commission Chairman Christopher Cox said their growth "challenged our regulatory model".
J.P. Morgan Securities acted as Och-Ziff's lead financial advisor and Goldman Sachs, also advised Och-Ziff. Affiliates of Merrill Lynch acted as DIC's sole financial advisor.