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Despite private equity giant Blackstone’s poor performance in stock markets, Kohlberg Kravis Roberts & Co’s (KKR) decision to go public is courageous. Buyout giant KKR has announced that it will list in New York Stock Exchange (NYSE) later this year. One of the reasons cited is that it will help the firm retain talent.
According to the plan, KKR & Co L.P. will acquire all the assets and liabilities of KKR Private Equity Investors, L.P. (KPE), its Euronext, Amsterdamlisted affiliate. It would first delist this entity and thereafter list at NYSE later this year. According to , the IPO may value KKR in the range of $15 to $19 billion.
The unit holders of KPE would receive equity interest in KKR, after which KPE would be delisted from Euronext. KKR would hold 79 per cent of the listed entity and the rest would be held by the existing shareholders of KPE.
The transaction does not involve payment of any cash or issue of any new shares. The agreement also involves a clause saying that if the shares of the new entity trade below a threshold price of $22.5 after three years, then KKR will dilute a further 6 per cent of its holding. The transaction will now seek approval of the shareholders of KPE.
The agreement would enable KKR to retain talent through ESOPs and also fasten its fund-raising process. It also provides it an increased ownership of KKR Private Equity portfolio and a capital base to launch growth initiatives.
KPE went public in May 2006 at Euronext with a $5 billion public offering. KKR, along with KPE is expected to get a valuation of about $15-19 billion. There are several other funds which are publicly listed. Blackstone, KKR’s rival, went public last June at a price $31 per share. Currently its trading on the NYSE at $17. Also another fund, AP Alternative Assets which is managed by Apollo, trades on the Euronext. India-focused real estate private equity firm Yatra Capital is also listed at Euronext. KKR had filed for an IPO a year back.
“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,” said Henry R. Kravis and George R. Roberts, co-founders of KKR.
KKR also announced today that it expects its assets under management as ofJune 30, 2008 to be approximately $60.8 billion, up from $53.2 billion onDecember 31, 2007.
Over 98 per cent of the assets under management are locked up more than 10 years. Also KKR has invested 14 per cent of its $4 billion Asia Fund. Citi is acting as sole financial advisor to KPE. Lazard is acting as financial advisor to the independent directors and Bredin Prat is acting as lead legal counsel to KPE and the independent directors.