The New York Times reports that Kohlberg Kravis and Roberts (KKR), the most famous of the private equity firms, is now ready to part with its private status -- a year after it watched Blackstone Group (NYSE: BX) go public and promptly lose half its value.
The Times reports that KKR already has a public affiliate, KKR Private Equity Investors, which is listed on the Euronext in Amsterdam. KKR will buy that for $3.9 billion. This complex deal will value KKR at between $12 billion and $15 billion. The deal will put 21% of the firm's shares in public hands while KKR executives will own the other 79%.
How do we know that KKR's IPO won't lose half its value as Blackstone's did? We don't. But KKR executives won't be able to sell their shares at the offering -- according to the Times, KKR executives will have a "six- to eight-year vesting period compared with Blackstone's three- to four-year period." And once KKR is public, independent directors will control it; whereas inside directors run Blackstone.
I look forward to seeing the prospectus for this deal. Until then it's hard to know whether I would want to buy into it. The Times reports that KKR executives think the deal will be worth "10 to 12 times 2009 earnings of $1.2 billion." But the deal is coming at a time when private equity is way below its peak. Bloomberg News reports that announced private-equity deals dropped 70% to "$163.1 billion in the year through July 25 from the same period in 2007."
So we'll see how investors feel about KKR's valuation.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
7-27-2008 @ 8:17PM
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