Apollo Global Management LLC is mulling a potential corporate structure change but has yet to come to a decision on the best path forward.
Senior Managing Director Josh Harris confirmed on a fourth-quarter 2017 earnings call that the company has begun to analyze how recently enacted federal tax reform will impact its earnings. Harris said that had the Tax Cuts and Jobs Act been effective for 2017, pro forma economic income for full year 2017 would have been $3.68 per share, or 11 cents higher than its reported results.
But if the publicly traded partnership had been a corporation at the beginning of that year, economic net income would have come in 57 cents per share lower than what it actually achieved. Harris did say that there could have been positives that partially or totally offset the earnings dilution, including expansion in valuation multiples.
Harris cautioned that the company is "still early" in its thought process and needs to look at how the reduced corporate tax rate will impact the company, especially as it projects that management fees will become a greater portion of its earnings. Apollo Global will also pay attention to what its competitors are doing in terms of changing their structures or holding pat.
"Given the very recent changes to the tax code and the complexities involved, we are continuing to assess the best path forward for Apollo, including how investors value different structures on a sustainable basis," he said.
