The legendary firm of New York buyout experts insists that going public is the best strategy
Kohlberg Kravis Roberts, the fabled US private equity group, is to go public in a deal which will see it merge with one of its listed funds and float on the New York Stock Exchange.
KKR, whose founders include cousins Henry Kravis and George Roberts, will own 79 per cent, with 21 per cent belonging to KKR Private Equity, the investment fund it listed on Euronext two years ago. The deal is expected to value the group at anywhere between $12bn and $15bn (£6bn and £7.5bn).
A spokesman for KKR said the listing was a “crystallisation of value”, rather than an offloading of shares along the lines of Blackstone Group’s flotation, which saw some of the group’s partners sell shares.
The spokesman described the listing as “a straight stock swap”, in which KPE holders would get a stake in KKR.
In a statement issued late last night, Kravis and Roberts said, “This transaction offers substantial benefits for KPE unitholders, and it builds KKR for the long-term. Going forward, KPE unitholders will benefit by being owners in a diversified asset management business that generates regular distributions of cash earnings. For KKR, this transaction provides us with additional capital for our business. Moving forward with a public listing will allow KKR to do what we do best – grow companies around the world and produce solid returns for our investors from a larger platform and a deeper capital base.”
The independent directors of KPE said they supported the transaction.
The flotation brings to an end a saga that began in July last year, when KKR announced its intention to list, transforming itself from a buyout specialist to a fully fledged alternative asset manager.
KKR hoped to raise $1.25bn (£625m) from its stock market listing, but its plans were sunk by the credit crisis.
Kravis dubbed the period “the golden age of private equity” when a float looked likely.
Since then, KKR has been actively buying up large public firms, such as credit card issuer First Data and Danish telecom firm TDC.
In the UK, where it employs Labour peer Clive Hollick, KKR is probably best known for the £11.1bn Alliance Boots takeover last year, when it beat off competition from Wellcome Trust and Terra Firma Capital Partners. Hollick’s presence at KKR has prompted speculation that the group might bid for ITV.
KKR will be hoping to avoid the fate that has befallen Blackstone since floating last year and it will attempt to provide more details on its thinking in a conference call with analysts today.
Blackstone, which sold a stake of 12.3 per cent at the time of its float, saw its shares decline from the $31 a share offer price to just $13.40 in March this year in the week that Bear Stearns was rescued.