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The Green Sheet Online Edition

August 11, 2008 • Issue 08:08:01

Private equity giant going public

Kohlberg Kravis Roberts & Co. LP, one of the world's largest alternative asset managers, and KKR Private Equity Investors LP (KPE), an equity trust limited partnership that invests its assets in private equity and investment opportunities identified by KKR, signed an agreement in which KKR will acquire all assets and assumption of liabilities of KPE.

In conjunction with this transaction, KKR will become publicly listed on the New York Stock Exchange under the symbol KKR. Industry sources indicate the initial public offering (IPO) could generate between $12 billion and $15 billion.

Under the agreement, KPE investors will turn over their KPE assets to KKR in exchange for equity interests in KKR; KPE will be delisted from the Euronext Amsterdam stock exchange. This move comes less than a year after KKR made some of the largest acquisitions in the company's 32-year history, including a $29 billion deal for First Data Corp. and a $45 billion merger agreement and privatization of Dallas-based TXU Corp., in the summer of 2007.

As of Sept. 30, 2007, KKR's equity investments were valued at over $86 billion. KKR has 46 companies in its portfolio in which it invested over $39 billion.

Executives exempt from profit

When the merger is completed, current KPE investors will own 21 percent of the equity in the newly combined business. The remaining 79 percent will be retained by KKR executives. Additionally, none of KKR's existing owners will be allowed to sell shares of KKR or otherwise receive any net proceeds or cash in connection with the IPO for six to eight years.

In a released statement, Henry R. Kravis, co-founder of KKR, said, "This transaction offers substantial benefits for KPE unitholders, and it builds KKR for the long-term.

"Going forward, KPE unitholders will benefit by being owners in a diversified asset management business that generates regular distribution of cash earnings.

"For KKR, this transaction provides us with additional capital for our business.

"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."

Partnership promotes liquidity

When asked how he thought its portfolio of companies would benefit by KKR's IPO, George R. Roberts, KKR's other co-founder, added, "Through our listing on the New York Stock Exchange, KPE holders will have access to a broader investor base in a significantly more liquid market ... and unitholders will benefit from a far more diverse income stream than they do today."

KPE was created in May 2006 to enable certain public market investors, including financial institutions and qualified individuals, to participate in certain KKR investments.

The independent directors of KPE said this transaction "will create a partnership with a more diverse asset base in terms of strategies, geographies and companies ... and facilitate the purchase and sale of stock in a more liquid market."

KKR expects to complete the transaction during the fourth quarter 2008.

Until then, KPE shares will continue to trade on Euronext. KKR said this transaction will have no effect on KKR's strategy or operations, or on how the firm works with its portfolio companies. end of article

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