Private Equity News & Analysis

KKR files for $1.25bn listing

Kohlberg Kravis Roberts will become the latest alternative asset manager to raise funds on the public market, after revealing plans for a $1.25 billion initial public offering on the New York Stock Exchange before the end of the year.

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Kohlberg Kravis Roberts has filed a registration statement with the US Securities and Exchange Commission for a proposed initial public offering on the New York Stock Exchange, following in the footsteps of its great rival The Blackstone Group.

KKR expects to use the net proceeds from the IPO, which will raise up to $1.25 billion, to grow its business, make additional capital commitments to its funds and portfolio companies and for general corporate purposes, the buyout firm said in a statement. It insisted the listing was not intended to enrich the current owners, who: “will not sell any common units or otherwise receive any of the net proceeds from the offering.”

The filing revealed that KKR’s investment gains were $3 billion last year, while net income was $1.16 billion, up from $100 million in 2002. Its net assets totalled $56 billion.

KKR’s move to list comes amid concerns that the cheap credit that has fuelled the rise and rise of private equity may be starting to dry up, with a number of recent US deals failing to attract financing – encouraging firms to seek new sources of funding.

The firm is following in the footsteps of its rival Blackstone, which floated on the NYSE last month. However, Blackstone’s subsequent performance has not been encouraging. Its shares debuted at $31 and rose 13 percent on the first day of trading, but have since slipped back below the offer price, closing on $29.72 yesterday.

Another cause for hesitation may have been a proposed change to the tax laws, introduced by US senators Max Baucus and Charles Grassley. Like Blackstone, KKR plans to list as a public partnership, which currently qualifies it for a lower tax rate of about 15 percent – but this status is under threat from the Baucus-Grassley bill, which would make partnerships liable for the full corporate tax rate. It is the latest example of the increased scrutiny the industry is facing from politicians and regulators on both sides of the Atlantic.

Morgan Stanley and Citigroup are the lead underwriters for the offering, which KKR expects to complete during the third or fourth quarter of 2007.