APOLLO MANAGEMENT INTERNATIONAL LLP WALKER GUIDELINES DISCLOSURE DOCUMENT

Transcription

1 APOLLO MANAGEMENT INTERNATIONAL LLP WALKER GUIDELINES DISCLOSURE DOCUMENT Introduction Following a period of consultation in 2007, a UK advisory group headed by Sir David Walker published the Walker Guidelines for Disclosure and Transparency in Private Equity (the "Guidelines") which were designed to encourage greater disclosure and transparency by private equity firms investing in UK portfolio companies. The Guidelines are reviewed and monitored regularly by the Walker Guidelines Monitoring Group. Apollo Management International LLP ("AMI") has voluntarily agreed to conform on a comply or explain basis with the Guidelines as part of its commitment to incorporating environmental, social and governance issues into its investment process. AMI also seeks to promote such conformity on the part of each of its portfolio companies which fall within the scope of the Guidelines. AMI has published this document in order to provide information on its UK private equity operations as part of its ongoing commitment to transparency under the Guidelines. Apollo's history AMI was incorporated in 2005 and is a subsidiary of Apollo Global Management, LLC (together with its subsidiaries, Apollo ), a leading global alternative investment manager. Apollo is a value-oriented, contrarian investment manager in private equity, credit and real estate, with significant distressed expertise. Operating its businesses in an integrated manner, Apollo believes this helps distinguish it from other alternative investment managers. Apollo was founded in 1990 and is led by its managing partners, Leon Black, Joshua Harris and Marc Rowan, who have worked together for more than 25 years. The senior partners in Apollo's private equity business have worked together on average for 13 years and have developed deep distressed investing and credit experience. Throughout its history, Apollo has placed great importance on maintaining an active dialogue with investors of all sizes, with commitments generally ranging from $10 million to several hundred million dollars or more. Since 1990, Apollo has developed substantial expertise in nine core industries including chemicals; consumer and retail; distribution and transportation; financial and business services; manufacturing and industrial; media, cable and leisure; natural resources; packaging and materials; and satellite and wireless. Because Apollo has developed an expertise in each of these sectors, it believes that it is well positioned to identify key trends, areas of opportunities and potential risks within its targeted sectors. Over Apollo's 25 year history, a significant amount of its private equity investment management activities have involved distressed buyouts and debt investments. Apollo believes that it is a market leader in distressed investing and this is one of the key areas that differentiates it from its peers. Apollo also has extensive experience in corporate carve-outs and it believes that it is amongst the most active private equity investment managers in terms of effecting carve-out transactions from corporate parents. More details about Apollo's investment management approach can be found on the Apollo website at 1

2 Apollo anticipates that the average holding period for its private equity investments will be three to five years, but holding periods for individual investments may vary depending upon market opportunities and circumstances. AMI's UK private equity operations In respect of Apollo's private equity activities, AMI provides investment advice and arranges transactions in the context of Apollo's European private equity business. AMI is incorporated as a limited liability partnership under English law and is authorized and regulated by the UK Financial Conduct Authority with FCA registration number AMI has permission under the Financial Services and Markets Act 2000 to carry on certain regulated activities in the UK, including managing, arranging deals in and advising on certain specified investments. AMI has exercised its right to undertake a number of investment services and activities on a passported basis in other countries within the European Economic Area in accordance with the European Markets in Financial Instruments Directive. AMI's private equity team is led by Sanjay Patel and Robert Seminara. Additional biographical information in relation to each of these individuals is available on Apollo's website at Apollo's other investment activities around the globe are subject to a variety of regulatory regimes that vary from country to country. Investment case studies The information below demonstrates the practical application of Apollo's investment management approach and its industry expertise in the context of UK private equity transactions involving companies that fall (in the case of Gala Coral), or previously fell (in the case of Brit Insurance), within the scope of the Guidelines. Brit Insurance Funds affiliated with Apollo invested in Brit Insurance ("Brit") in Brit is a global specialty property and casualty insurance/reinsurance group that underwrites primarily through Lloyd's of London ("Lloyd's"), the world's most established specialty risk market. Brit is Lloyd's largest pure-play syndicate, and underwrites noncommoditized risks in property, casualty, energy and specialty lines that are not directly correlated with broader macroeconomic conditions. Brit has developed a diversified, conservative liability portfolio with primarily short-tail lines, relatively low exposure to natural catastrophes and a prudent actuarial approach to reserving. Prior to investing in Brit, in connection with Apollo's focus on the financial services industry, Apollo reviewed the property and casualty ("P&C") insurance industry for several years for suitable investment opportunities. Apollo concluded that P&C businesses gain increased flexibility under private ownership with the ability to react more nimbly to market opportunities which arise across insurance liability and asset cycles. After the investment was made in 2011, Apollo worked closely with Brit, providing direction on strategy and operational improvements in order to optimize Brit's capital allocation and to ensure that Brit's "back book" and reserves are prudent. Apollo also assisted Brit's management in improving Brit's ongoing investment strategy in order to increase Brit's investment returns. In addition, Apollo worked with Brit to attract professionals from a range of high-quality backgrounds in the insurance and reinsurance industry to assist in the operation of Brit's business. 2

3 In April 2014, Brit's shares were admitted to trading on the Main Market of the London Stock Exchange following a successful initial public offering. Funds affiliated with Apollo exited their investment in Brit in June Gala Coral Group Gala Coral ("Gala") is one of the UK's leading gaming groups with activities in bingo, licensed betting offices and online gaming. Gala is the largest private operator, and third largest operator, in the UK betting and gaming retail market. Additionally, Gala offers innovative online multi-channel products and services for its customers and operates in Italy under the Eurobet brand. In connection with Apollo's focus on the media, cable and leisure industry, in early 2008, Apollo identified a potential opportunity to restructure Gala's business and began investing in Gala's mezzanine debt. Apollo subsequently led negotiations with Gala's lenders in order to implement a comprehensive restructuring plan which resulted in Apollo funds and other mezzanine lenders acquiring equity in the business in June Apollo identified Gala as a business with an attractive asset base and an excellent market position and aimed to help the company restructure its balance sheet and improve its liquidity position in order to allow Gala to benefit from an eventual economic recovery, taking advantage of its leading industry position. As a result of the restructuring programme, Gala's leverage ratios decreased substantially. Since the investment was made in Gala, Apollo encouraged the company to initiate a strategic review of its business in order to allow Gala to capitalize on its competitive strengths inherent in its operational expertise, identifying core businesses and markets for potential future growth. In addition, Apollo used its contacts in the gaming industry to help Gala evaluate possible expansion opportunities and to assist it in developing industry relationships necessary to grow its business. In July 2015, Gala and Ladbrokes PLC jointly announced a proposed merger between Ladbrokes PLC and the Coral Group (comprising certain businesses of Gala, including Coral Retail, Eurobet Retail and Gala's online businesses) to create Ladbrokes Coral plc, a leading multi-channel and internationally diversified business. The merger process remains ongoing. In October 2015, Gala also announced the sale of Gala Retail (comprising its Gala Bingo retail division) to Caledonia Investments for 241 million and therefore funds affiliated with Apollo no longer own that part of Gala's business. Portfolio companies for the purposes of the Guidelines As at April 18, 2016, the only one of Apollo's portfolio companies which fell within the scope of the Guidelines was Gala Coral Group Limited, the parent company of Gala's group. The relevant private equity funds managed by Apollo which have invested in Gala Coral Group Limited are Apollo Investment Fund VI, L.P. and its parallel investment vehicles and Apollo Investment Fund VII, L.P. and its parallel investment vehicles. Further information in relation to Gala Coral's business is included under the "Investment Case Studies" heading above. Additional information is available on the company's website: 3

4 Other portfolio companies A list of certain significant private equity portfolio companies of the Apollo-managed funds as at December 31, 2015 which were not within the scope of the Guidelines is provided in Apollo's most recent Form 10-K filing which is available in the Investor Relations section of Apollo's website. Investor base While Apollo treats the names of specific investors in its funds as confidential, the pie charts below give an indication of the approximate composition of the breakdown of the overall investor base (excluding commitments by general partners and other entities affiliated with Apollo) for its private equity funds which invest in UK portfolio companies or have the designated capability to do so: Investor base breakdown by geography 4

5 Investor base breakdown by type Conflicts of interest Apollo recognizes that on rare occasions, conflicts of interest may arise. In order to ensure that such conflicts can be resolved in an appropriate manner, Apollo has internal policies and procedures and includes provisions in the agreements that it enters into with the limited partners of the funds it manages which set out a process for dealing with these issues, which includes, where appropriate, disclosure. Forward-Looking Statements This disclosure document may contain forward looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act ), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act ). These statements include, but are not limited to, discussions related to Apollo s expectations regarding the performance of its business, its liquidity and capital resources and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management s beliefs, as well as assumptions made by, and information currently available to, management. When used in this disclosure document, the words believe, anticipate, estimate, expect, intend and similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to its dependence on certain key personnel, its ability to raise new private equity, credit or real estate funds, market conditions generally, its ability to manage its growth, fund performance, changes in its regulatory environment and tax status, the variability of its revenues, net income and 5

6 cash flow, its use of leverage to finance its businesses and investments by its funds and litigation risks, among others. Apollo believes these factors include but are not limited to those described under the section entitled Risk Factors in Apollo's Form 10-K filed with the United States Securities and Exchange Commission ( SEC ) on February 29, 2016, as such factors may be updated from time to time in its periodic filings with the SEC, which are accessible on the SEC s website at These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this disclosure document and in other filings. Apollo undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law. Date of Preparation The information in this document is current as at April 18,