Hedge Fund Och-Ziff Considered Sale of Part of Firm

The largest publicly traded hedge-fund firm in the U.S. explored a partial sale earlier this year, yet another sign of the difficult choices facing the troubled industry.

Och-Ziff Capital Management Group LLC representatives spoke to private-equity firms and asset managers including Pacific Investment Management Co. about buying part of Och-Ziff's business, making a so-called strategic investment in the firm or pursuing a joint venture, people familiar with the matter said.

The talks are no longer active, some of the people said.

"We are not contemplating selling any part of the firm or any other strategic transactions," Och-Ziff spokesman Joe Snodgrass said. A Pimco spokeswoman declined to comment.

Och-Ziff considered the sale as it faced a five-year international bribery investigation in countries including Libya and client withdrawals. Investors have pulled billions from the firm in recent months, and Och-Ziff said in its most recent earnings report "this trend will likely continue to some extent for some period of time."

Hedge funds are under pressure from all corners, with unhappy clients demanding their money back amid years of poor performance.

Och-Ziff has additional troubles. The Wall Street Journal earlier reported that the Justice Department is pushing Och-Ziff to agree to a criminal guilty plea. The firm said in its second-quarter earnings report that it set aside more-than $400 million to resolve the bribery investigations.

Och-Ziff stock was down 37% this year through Wednesday. The stock was up nearly 7% Thursday as The Journal reported the firm's earlier consideration of a stake sale.

Och-Ziff ultimately decided to shore up support internally instead of seeking help from potential buyers or investors, a person familiar with the matter said. In its second-quarter earnings report Och-Ziff said its partners, who include chairman Daniel Och, are likely to invest up to $500 million into the firm while deferring any repayment or dividend for at least three years.

That money would be earmarked in part toward the Justice Department bribery investigation and a related Securities and Exchange Commission query, the firm said.

Mr. Och, 55, retains majority decision-making power at Och-Ziff through his 60% ownership of the company's voting shares, as he has since the firm went public in 2007. Och-Ziff has $39 billion of assets under management.

Write to Rob Copeland at [e-mail] and Sarah Krouse at [e-mail]

(END) Dow Jones Newswires

August 18, 2016 16:55 ET (20:55 GMT)

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