KKR Announces New IPO Plan

KKR & Co., the leveraged-buyout firm run by cousins Henry Kravis and George Roberts, is going public after all. The company is canceling its original IPO that has been on hold since last year, when the buyout market more or less collapsed. Instead, it will by an Amsterdam-listed fund it set up in 2006, KKR Private Equity Investors LP. Once that’s done, the stock will list on the New York Stock Exchange.

According to Bloomberg, “KKR Private Equity Investors LP has left investors who bought shares in its May 2006 IPO with losses of almost 60 percent, the only fund to post a loss in KKR's 32-year history.” Despite that loss, the fund has $4.56 billion of assets, and KKR can honestly say it isn’t doing to IPO to raise cash. Long term, though, it will have that ability.

Mr. Kravis was at pains to assure investors that he and his cousin were not cashing out. “We're not cashing out or selling any equity as part of this transaction. This different from any other alternative- asset IPO. We’re long-term investors.”

Bloomberg also reported, “After earning $814.8 million in 2007, KKR had a net loss of $117.9 million in the first quarter as the value of the companies it owns fell, according to the statement released yesterday. KKR forecasts a profit of about $1.2 billion in 2009, according to the presentation. It expects investors to value the company at 10 to 12 times earnings, or between $12 billion and $15 billion. At $15 billion, KKR Private Equity would have a value of about $3.9 billion, according to the presentation.”

KKR plans to move beyond the LBO business, and into things like real estate, mezzanine loans, infrastructure assets and publicly traded shares, according to Mr. Kravis. To do that, they need more equity because bank debt just isn’t there right now. Time will tell if going public in this way was the way to get it.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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