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Streetwise Encana-Athlon could have made private equity firm an extra half-billion

Apollo Management LP Managing Partner Leon Black speaks at the panel discussion "Global Opportunities in Private Equity" at The Milken Institute Global Conference in Beverly Hills, California May 2, 2011.

Fred Prouser/Reuters

Encana Corp.'s $5.95-billion (U.S.) purchase of Athlon Energy Inc. has likely made Athlon shareholders jump for joy, but for private equity titan Apollo Global Management LLC, there may be a touch of regret.

Apollo, co-founded by former Drexel Burnham Lambert managing director Leon Black, was an early investor in Athlon. The oil and gas liquids company's IPO in 2013 was a big win for Mr. Black's PE firm, with the share price leaping from the original price of $20 to $27 in early trading. Apollo held roughly 56 million Athlon shares, so that post-IPO surge alone added $408.8-million to its stake, for a total of $1.53-billion.

Perhaps not surprisingly, Apollo began to take profits in Athlon the following year. Had anyone at the PE firm known that Encana was interested, they might have put off the sale of 16.1 million shares on February 12, 2014 at $30.72 per share, or even the sale of 12.475 million shares on August 6 at $44.75 per share. If they had held out long enough to cash in on the Encana deal, the $1.05-billion realized from those sales would have been more like $1.66-billion – a $611-million difference.

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Then again, Apollo can't be too bummed about selling before Encana came on the scene. The PE firm still holds 25.2 million Athlon shares; at today's prices, that's a $1.47-billion stake, which is nearly as big as its original post-IPO holdings, and those pre-Encana share sales managed to extract a little over $1-billion to invest in other things. And if Apollo's new investments turn out to be anywhere as lucrative as Athlon, what's a few hundred million here and there?

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