KKR to set double record with €8.3bn Philips deal

US buyout firm KKR is re-writing the record books with Europe’s largest single equity investment to fund the buyout of Philips’s semiconductor unit, underwritten by Europe’s biggest junk bond sale.

Kohlberg Kravis Roberts, one of the world’s biggest buyout firms, will set two European records in its buyout of Philips Semiconductors, a European chip maker.

The firm is planning a record €4.5 billion ($5.79 billion) high-yield bond issue in support of Europe’s largest equity investment, according to media reports. The Philips deal will outstrip the $2.4 billion junk bonds sale by Ineos Group a UK petrochemical company, on 31 January, Bloomberg said.

KKR and its buyout consortium of Silver Lake Partners and AlpInvest Partners, are buying 80.1 percent of the unit from electronics group Philips for €3.4 billion in equity. The sale is valued at €8.3 billion including debt and Philips’s €900-million stake.

According to Financial News, KKR alone is set to invest €2.8 billion to fund the deal, the largest equity investment by a single firm in Europe. It said Morgan Stanley, Deutsche Bank and Merrill Lynch are arranging a €4.5 billion bridge loan to pay for the buyout.

Buyout firms have generated $26 billion of junk bond sales in Europe this year, compared with a record $28 billion in 2005, as they finance $291 billion of acquisitions, according to data compiled by Bloomberg, a newswire.

Philips’s junk bonds will be marketed to investors in about September or October.