KKR and Fidelity ink distribution deal

As the muted market for IPOs shows some tentative signs of life, buyout house KKR has unveiled an agreement with Fidelity to open up new retail distribution possibilities.

Kohlberg Kravis Roberts has entered into an agreement with one of the world’s largest retail fund management groups, Fidelity Investments, to give retail investors access to initial public offerings (IPOs) of KKR portfolio companies.

Under the agreement, Fidelity's retail and institutional customers will have exclusive access to shares allocated to KKR in all US-based public offerings for which KKR Capital Markets – a division of the buyout firm – is acting as underwriter.

In a statement this morning, Mark Haggerty, president of Fidelity’s trading division Fidelity Capital Markets, said the agreement would allow the firm’s clients “potential for more meaningful allocations in [KKR] offerings”.

In return, KKR will have a new retail distribution channel through which to market its IPOs.

The IPO market has effectively been closed since the onset of the global financial crisis, a development which is illustrated by KKR’s own plans to list on the New York Stock Exchange (NYSE), which are currently under review.

Co-founders Henry Kravis and George Roberts had originally intended to list the firm in 2007, but their plans were put on hold when the credit crisis struck in August of that year. History then repeated itself in 2008 when the firm announced plans to de-list KKR Private Equity Investors – the Euronext-listed investor in KKR funds – and re-list the combined entity on NYSE. The intensification of the financial crisis then caused the firm to once again reconsider its options.

The public markets have, however, shown some recent signs of life with a handful of private equity-backed IPOs in the last two months.

In April ABS Capital Partners and Norwest Equity Partners floated language software company Rosetta Stone. At $18 a share, it was the first listing since May 2008 to price its shares above their projected range.

In the same month Warburg Pincus-backed Bridgepoint Education raised $142 million, although this fell below the $216 million originally targeted.

More recently, two formerly venture-backed businesses – online reservations service OpenTable and network management software company SolarWinds –were both subject to successful listings.