US buyout firm Kohlberg Kravis Roberts is to acquire and de-list its Euronext-traded fund, KKR Private Equity Investors, and list the combined entity on the New York Stock Exchange later this year.
The firm revealed the surprise agreement with KKR Private Equity Investors (KPE) Sunday evening, quashing persistent speculation it would abandon prior plans to go public given tougher market conditions and the falling share prices of fellow mega-firms The Blackstone Group and Fortress Investment Group.
KKR co-founders Henry Kravis and George Roberts pointed to the deal’s merits in a statement.
“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,” Kravis and Roberts said.
“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.”
We're not cashing out.
In a meeting with analysts, Kravis said: “We're not cashing out or selling any equity as part of this transaction. This is different from any other alternative asset IPO. We're long-term investors. We're all personally disappointed in KPE's stock price.”
His partner and cousin, Roberts, cited the lack of trading in the stock, the low dividends the fund paid out, and the stock's decline.
KKR will acquire all assets and liabilities of KPE, which earlier this year suffered a wave of fair-value write downs.
In connection with the deal, the firm will begin trading under the ticker KKR on the NYSE, post-transaction.
KPE investors will receive KKR equity interests, which post-transaction will account for 21 percent of the combined business’ equity, and the Euronext fund will be dissolved and de-listed.
KKR executives will hold the remaining 79 percent equity in the combined firm, which has an estimated vale of up to $18 billion (€11.4 billion).
The deal does not include any cash component or issuance of securities, nor will KKR executives sell any equity interests.
Subject to unitholder approval, the transaction is expected to complete in the fourth quarter 2008.
KKR first registered for a $1.25 billion IPO in July 2007, just as the corporate credit markets began to shift, substantially slowing activity in the private equity industry’s mega-buyout segment.
The firm said it expects its assets under management as of 30 June to be about $60.8 billion, up from $53.2 billion on 31 December 2007.