KKR & Co., the private-equity firm run by Henry Kravis and George Roberts, plans to go public in New York in a transaction that may value it at as much as $15 billion, according to two people familiar with the matter.
The firm will buy KKR Private Equity Investors LP, its publicly traded leveraged buyout fund in Amsterdam, using new shares that will list on the New York Stock Exchange after the purchase is completed in the fourth quarter, said the people, who asked not to be identified before an official announcement. KKR, which is based in New York, won't sell shares in an initial public offering.
KKR's nontraditional route to going public comes amid the worst market for IPOs in four years and after debt funding for buyouts dried up. The firm wants publicly traded stock to use to pay for acquisitions and retain employees, said the people. The plan may be announced as early as today, according to the people. KKR spokesman David Lilly declined to comment.
“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 LLC in Fort Lee, N.J. “That's ultimately how they're going to get the best valuation.”
KKR forecasts it will post a profit of about $1.2 billion in fiscal 2009, the people said. KKR expects investors to value the company at 10 to 12 times earnings, or between $12 billion and $15 billion, they said. KKR Private Equity has a market capitalization of $2.1 billion, down 58 percent since KKR sold the shares in May 2006.
KKR raised $5 billion in the IPO of KKR Private Equity in May 2006 after drawing demand from hedge funds and institutional investors such as Franklin Resources Inc. and Fidelity Investments. The stock, which sold for $25, now trades at $10.50, according to data compiled by Bloomberg.