KKR Private Equity Investors to Come to the NYSE
September 3rd, 2008
The weekend has been pretty quiet when discussing market related news, until I was boarding my train and received an alert titled “KKR Plans to Go Public on NYSE.” Initially I brushed it off, but as I have thought about it, the more surprised I became. I was sitting on the train, Blackberryless, but was assured that the guys at KKR had a reason for this unforeseen tender. However, before I proceed any further, let me introduce you to Kohlberg Kravis Roberts & Co.
Meet KKR
Respectfully referred to as KKR by the Street, Kohlberg Kravis Roberts & Co has grown itself to be one of the most respected private equity firms around. The 32 year old PE shop has been involved in some of the largest buyouts in history including the RJR Nabisco takeover in 1989. The company now has operations all over the world including the Americas, Europe, and Asia. The firm has caused waves in the calm IPO pond this year with it’s latest statement.
IPO? Now? Why?
Management came out and has stated that it plans to file an IPO where KKR will be valued between $12 billion and $15 billion and listed on the NYSE. Kravis and Roberts are for this move as the company seeks to help out its European arm- KKR Private Equity Investors which has seen a significant decline in its share price due to worries about its assets. The move comes a year after Blackstone BX went IPO and has since not reaped the benefits often associated with an IPO. KKR offers attractive terms to it’s European shareholders who must approve the offer before the company goes public. Under the set terms, investors in the European group will get additional shares if the stock does not appreciate in a set number of years. In addition to this, the company has several terms for its executives who are involved in the process.
I am very nervous for the team at KKR during this time, I think the timing is very poor and the risks are far greater than the rewards. The European arm does seem to be undervalued according to the street, and a move by the parent to buy now could yield rewards in the future. KKR Private EquiBlackstone Stock Chartty Investors has seen its net asset value shrink in the latest quarter as foreign currency exposure and poor investments dealt sizable blows. Understanding the needs of the company, it is still hard to fathom an IPO right now. The markets have no appetite for a large IPO, and one in private equity? Lets get serious. The Blackstone Group has seen its shares decline by over 50%, however at least BX will not stand alone as investors look on with much ambivalence.
I think the current environment is not suitable for an IPO and KKR may get hit heavily by an ill timed move. I hope that the company sees success, but is this truly the time for an offer so large? Deteriorating conditions can continue to erode away investments further and expose balance sheets that investor will consider before buying into the offer. It may make more sense to shore up the European operations some other way without having to expose the company to the poor investor sentiment that Blackstone and the rest of the market has experienced in the last 12 months.
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