Private Equity News & Analysis

KKR to list in Europe

The firm has temporarily abandoned plans to absorb its Euronext affiliate and list the combined entity’s managmenet company on the NYSE, opting to float first on Amsterdam’s Euronext exchange.

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Kohlberg Kravis Roberts has further delayed its long-awaited initial public offering on the New York Stock Exchange.

The mega-buyout firm said yesterday it would still absorb its listed Amsterdam-listed affiliate, KKR Private Equity Investors (KPE), but the combined entity would be floated on Amsterdam’s Euronext exchange, rather than the NYSE as KKR and KPE originally agreed in July 2008.

The reverse-merger has repeatedly been delayed due to financial market volatility. KKR originally filed for a $1.25 billion IPO of its management company in 2007, before financial conditions deteriorated.

The revised proposal allows KPE to retain its own listing on the Amsterdam exchange and gives KKR the option to seek a future NYSE listing. Should KKR fail to do this within 12 months following the combination of the businesses, KPE has the right to cause the combined entity to seek a NYSE listing.

“In some ways I find this IPO refreshing because it's not being driven by market euphoria,” Harvard Business School professor Josh Lerner told the Wall Street Journal. “It only makes sense if KKR can succeed in the years to come.”

The revised deal ups the equity KPE unit holders will receive post transaction to 30 percent – the July deal had KPE receiving 21 percent – and also eradicates the use of “non transferable contingent value interests, which provided for the delivery of between zero and 6 percent of additional equity in the combined business on the third anniversary of the closing date in certain circumstances”, KKR said in a statement

The balance of the equity will be retained by KKR executives, who will earn approximately 40 percent of the carried interest produced post-merger.

The deal’s completion is subject to certain conditions including majority approval of KPE unit holders. KKR said it has already garnered the support of 44 percent of KPE unit holders by securing the approval of institutional investors including Lexington Partners, Black River Asset Management, Putnam Investments, RS Investments and Templeton Global Advisors.