Private equity firm Kohlberg Kravis Roberts plans to go public by the end of the year as part of the purchase of its Amsterdam-listed buyout...
Private equity firm Kohlberg Kravis Roberts plans to go public by the end of the year as part of the purchase of its Amsterdam-listed buyout fund.
The move comes more than a year after KKR first said it would go public. The sagging economy and credit markets delayed those plans.
The firm will now buy KKR Private Equity Investors using new shares that will list on the New York Stock Exchange, the companies said Sunday. It won’t sell shares as part of the transaction.
KKR, whose takeover in the late 1980s of RJR Nabisco was chronicled in the book “Barbarians at the Gate,” is trying to expand its business beyond private equity to become a much broader asset manager.
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“For KKR, this transaction provides us with additional capital for our business,” Henry R. Kravis and George Roberts, the cousins who founded the firm, said Sunday. “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.”
KKR’s nontraditional route to going public comes amid the worst market for initial public offerings in four years and after debt funding for buyouts dried up.
“It’s clear that the deal is coming in that manner because the U.S. equity markets are so difficult, particularly for anyone doing leveraged transactions,” said Dan Veru, who helps manage $2.8 billion at Palisade Capital Management in Fort Lee, N.J.
KKR forecasts it will post a profit of about $1.2 billion in 2009, said two people familiar with the transaction. It expects investors to value the company at 10 to 12 times earnings, or between $12 billion and $15 billion, said the people, who asked not be named because the information isn’t public.
KKR Private Equity has a market capitalization of $2.1 billion, a drop of 58 percent since it raised $5 billion in May 2006. The stock, which sold for $25, now trades at $10.50.
After buying the Amsterdam unit, shareholders of KKR Private Equity will own 21 percent of the combined firm, with KKR executives and employees holding 79 percent, according to the statement.
“It’s complicated but creative to use the permanent capital that’s already out there,” said Benjamin Phillips, managing director of strategic analysis at Putnam Lovell, a unit of Jefferies Group in New York.
“They are using a security that already has a defined price so they have a little more control about how they’ll go public rather than have to go out and find shareholders that they might find it difficult to find.”
Kravis and Roberts, both 64, filed for an initial public offering in New York more than a year ago. The cousins, who started the firm in 1976 with their Bear Stearns Cos. colleague Jerome Kohlberg, put the plan on hold as stock markets dropped and credit dried up.
Announced private-equity deals dropped more than 70 percent to $163.1 billion in the year through July 25 from the same period in 2007, data compiled by Bloomberg show.
Information from The New York Times was included in this report.