KKR & Co. L.P. (formerly known as
Kohlberg Kravis Roberts & Co.
KKR & Co. L.P. (formerly
known as Kohlberg Kravis Roberts & Co.) (NYSE: KKR) is an American-based global private equity
firm, specializing in leveraged buyouts, based in New York. The
firm sponsors and manages private equity investment funds. Since
its inception, the firm has completed over $400 billion of
private equity transactions and was a pioneer in the leveraged
buyout industry. In March 2010, KKR filed to list its shares on
the New York Stock Exchange (NYSE), with trading commencing on
July 15, 2010.
The firm was founded in 1976 by Jerome Kohlberg, Jr., and
cousins Henry Kravis and George R. Roberts, all of whom had
previously worked together at Bear Stearns, where they completed
some of the earliest leveraged buyout transactions. Since its
founding, KKR has completed a number of landmark transactions
including the 1989 leveraged buyout of RJR Nabisco, which was
the largest buyout in history to that point, as well as the 2007
buyout of TXU, which is currently the largest buyout completed
to date. KKR has completed investments in over 160 companies
since 1977, completing at least one investment in every year
except 1982 and 1990.
KKR is headquartered in New York City with thirteen additional
offices in the US, Europe and Asia. In October 2009, KKR listed
shares in the company, through KKR & Co. an affiliate that
holds 30% of the firm's ownership equity, with the remainder
held by the firm's partners.
The firm
KKR is operated by its managing partners Henry Kravis and George
R. Roberts and a team of approximately 140 investment
professionals and 400 total employees, organized into industry
focused groups. KKR is headquartered in the Solow Building at 9
West 57th Street in New York City and has offices in Menlo Park,
San Francisco, Houston, Washington, DC, London, Paris, Hong
Kong, Tokyo, Beijing, Mumbai, Dubai, Seoul and Sydney.
KKR invests primarily through leveraged buyouts as well as
growth capital investments (including "PIPE" investments in
public companies). It specializes in private equity investments
with a focus on specific industry sectors where the firm has
created nine dedicated investment groups. The industries in
which KKR has developed a specialization include:
- Chemicals
- Consumer products
- Energy & natural resources
- Financial services
- Health care
- Industrial
- Media and communications
- Retail
- Technology
The professionals in each of KKR's industry-focused groups are
expected to have developed a proficiency in the respective
industry.
Investment funds and other affiliates
Private equity funds
KKR has historically relied primarily on private equity funds,
pools of committed capital that are raised from a broad array of
institutional investors (e.g., pension funds, insurance
companies, investment Banks, commercial Banks, endowments, fund
of funds, high net worth individuals, sovereign wealth funds).
As of the end of 2008, KKR had completed fund-raising for
approximately 14 traditional investment funds in the US, Europe
and Asia with total committed capital of approximately US$58
billion:
|
Fund
|
Vintage
Year
|
Committed
Capital ($m)
|
|
KKR Fund 1976
|
1977 |
$31 |
|
|
KKR Fund 1980
|
1980 |
$357 |
|
|
KKR Fund 1982
|
1982 |
$328 |
|
|
KKR Fund 1984
|
1984 |
$1,000 |
|
|
KKR Fund 1986
|
1986 |
$672 |
|
|
KKR Fund 1987
|
1987 |
$6,130 |
|
|
KKR Fund 1993
|
1993 |
$1,946 |
|
|
KKR Fund 1996
|
1997 |
$6,012 |
|
|
KKR European Fund
|
1999 |
$3,085 |
|
|
KKR Millennium Fund
|
2002 |
$6,000 |
|
|
KKR European Fund II
|
2005 |
€4,500 |
|
|
KKR Fund 2006
|
2006 |
$17,642 |
|
|
KKR Asia Fund
|
2007 |
$4,000 |
|
|
KKR European Fund III
|
2008 |
€6,000 |
Source: Preqin, SEC Filings
KKR Financial
|
|
Type
|
Public company (NYSE: KFN)
|
|
Founded
|
2004 |
|
Website
|
www.kkrfinancial.com |
KKR Financial (NYSE: KFN) is a
real estate investment trust (REIT) and specialty finance
company that invests in residential and commercial mortgage
loans and mortgage-backed securities as well as corporate loans
and debt securities, asset-backed securities and equity
securities. KFN was founded in 2004 raising $795 million in a
private placement and raised $849 million in a June 2005 initial
public offering, increasing the size of the offering from an
original $600 million target. KKR had initially considered
structuring KFN as a business development company like Apollo
Management's Apollo Investment Corporation but chose to pursue
the REIT structure to capitalize on the strength in REIT
valuations at the time.
KFN was an early casualty of the subprime mortgage crisis and in
September 2007, Henry Kravis and George Roberts injected $270
million into the company. On February 20, 2008, KFN was once
again forced to delay the repayment of billions of dollars of
commercial paper, and began a new round of talks with creditors.
In April, KFN sold a controlling interest in a real estate
subsidiary to an investment firm to raise cash and entered an
agreement with the noteholders of certain secured commercial
paper issued by two asset-backed entities. Following the
transaction, KFN converted from a REIT to a limited liability
company. KKR Financial is a debt investment vehicle and does not
invest in KKR's private equity transactions.
KKR Private Equity Investors
|
|
Type
|
Public company (Euronext: KPE)
|
|
Founded
|
2006 |
|
Website
|
www.kkrpei.com |
KKR Private Equity Investors (Euronext: KPE) is a publicly traded private equity fund that invests as
a fund of funds in KKR private equity funds. KPE also co-invests
in transactions alongside KKR's private equity funds. KPE was
founded in 2006. In May 2006, KKR raised $5 billion in an
initial public offering for a KPE to serve as a new permanent
investment vehicle listing it on the Euronext exchange in
Amsterdam. KKR raised three times more than it expected, as many
of the investors in KPE were hedge funds seeking exposure to
private equity but could not make long term commitments to
private equity funds. Because private equity had been booming in
preceding years, investing in a KKR fund was attractive to
investors.
However, KPE's first-day performance was lackluster, trading
down 1.7% and trading volume was limited. Initially, a handful
of other private equity firms and hedge funds had planned to
follow KKR's lead but shelved those plans when KPE's performance
continued to falter after its IPO. KPE's stock declined from an
IPO price of €25 per share to €18.16 (a 27% decline) at the end
of 2007 and a low of €11.45 (a 54.2% decline) per share in Q1
2008.
KPE disclosed in May 2008 that it had completed approximately
$300 million of secondary sales of selected limited partnership
interests in, and undrawn commitments to, certain KKR-managed
funds in order to generate liquidity and repay borrowings.
History
History of private equity
and venture capital
|
|
Early history
(Origins of modern private equity)
•
The 1980s
(LBO boom)
•
The 1990s
(LBO bust and the VC bubble)
•
The 2000s
(Dot-com bubble to the credit crunch)
|
|
|
Founding and early history
Running the corporate finance department for Bear Stearns in the
1960s and 1970s, Jerome Kohlberg and later with protégés Henry
Kravis and George Roberts completed a series of what they
described as "bootstrap" investments beginning in 1964-65. They
targeted family-owned businesses, many of which had been founded
in the years following World War II which by the 1960s and 1970s
were facing succession issues. Many of these companies lacked a
viable or attractive exit for their founders as they were too
small to be taken public and the founders were reluctant to sell
out to competitors and so a sale to a financial buyer could
prove attractive.
Their acquisition of Orkin Exterminating Company in 1964 is
among the first significant leveraged buyout transactions. In
the following years the three Bear Stearns bankers would
complete a series of buyouts including Stern Metals (1965),
Incom (a division of Rockwood International, 1971), Cobblers
Industries (1971), and Boren Clay (1973) as well as Thompson
Wire, Eagle Motors and Barrows through their investment in Stern
Metals. Although they had a number of highly successful
investments, the $27 million investment in Cobblers ended in
bankruptcy.
By 1976, tensions had built up between Bear Stearns and
Kohlberg, Kravis and Roberts leading to their departure and the
formation of Kohlberg Kravis Roberts & Co. in that year.
Most notably, Bear Stearns executive Cy Lewis had rejected
repeated proposals to form a dedicated investment fund within
Bear Stearns and Lewis took exception to the amount of time
spent on outside activities.
The new KKR completed its first buyout, that of manufacturer
A.J. Industries, in 1977. KKR raised capital from a small group
of investors including the Hillman Family and First Chicago
Bank. By 1978, with the revision of the ERISA regulations, the
nascent KKR was successful in raising its first institutional
fund with over $30 million of investor commitments. In 1981, KKR
expanded its investor base significantly when the Oregon State
Treasury's public pension fund invested in KKR's acquisition of
retailer Fred Meyer, Inc. Oregon remains an active investor in
KKR funds more than 25 years later.
KKR closed out the 1970s completing the public-to-private buyout
of Houdaille Industries in 1979, probably the largest
take-private of a public company to that point. As the 1980s
began, KKR was among the most prominent practitioner of
leveraged buyouts and would prove the most prolific of the
private equity investors in the 1980s. Among the firm's most
notable acquisitions during the 1980s buyout boom were the
following:
|
Investment
|
Year
|
Company Description
|
Ref.
|
|
Malone & Hyde
|
1984 |
KKR completed the first buyout of a public company by
tender offer, by acquiring the food distributor and
supermarket operator together with the company's chairman
Joseph R. Hyde III.
|
|
Wometco Enterprises
|
1984 |
KKR completed the first billion-dollar buyout transaction
to acquire the leisure-time company with interests in
television, movie theaters and tourist attractions. The
buyout comprised the acquisition of 100% of the
outstanding shares for $842 million and the assumption of
$170 million of the company's outstanding debt.
|
|
Beatrice Companies
|
1985 |
KKR sponsored the $6.1 billion management buyout of
Beatrice, which owned Samsonite and Tropicana among other
consumer brands. At the time of its closing in 1985,
Beatrice was the largest buyout completed.
|
|
Safeway
|
1986 |
KKR completed a friendly $5.5 billion buyout of Safeway to
help management avoid hostile overtures from Herbert and
Robert Haft of Dart Drug. Safeway was taken public again
in 1990.
|
|
Jim Walter Corp.(later Walter
Industries)
|
1987 |
KKR acquired the company for $3.3 billion in early 1988
but faced issues with the buyout almost immediately. Most
notably, a subsidiary of Jim Walter Corp (Celotex) faced a
large asbestos lawsuit and incurred liabilities that the
courts ruled would need to be satisfied by the parent
company. In 1989, the holding company that KKR used for
the Jim Walter buyout filed for Chapter 11 bankruptcy
protection.
|
Barbarians at the Gate - KKR's leveraged buyout of RJR Nabisco
Main articles: RJR Nabisco and Barbarians at the Gate: The Fall
of RJR Nabisco
After the 1987 resignation of Jerome Kohlberg at age 61 (he
later founded his own private equity firm, Kohlberg & Co.),
Henry Kravis succeeded him as senior partner. Under Kravis and
Roberts, the firm was responsible for the 1988 leveraged buyout
of RJR Nabisco. RJR Nabisco proved to be not only the largest
buyout in history to that time, at $25 billion ($31.1 billion,
including assumed debt) as well as a high water mark and sign of
the end of the 1980s buyout boom. The RJR Nabisco, which would
remain the largest buyout for the next 17 years, was chronicled
in the book, Barbarians at the Gate: The Fall of RJR Nabisco, and later made into a television movie starring James Garner.
In 1988, F. Ross Johnson was the President and CEO of RJR
Nabisco, formed in 1985 by the merger of Nabisco Brands and R.J.
Reynolds Tobacco Company, a leading producer of food products
(Shredded Wheat, Oreo cookies, Ritz crackers, Planters peanuts,
Life Savers, Del Monte Fruit and Vegetables, and Snickers
Chocolate) as well as Winston, Camel and Salem cigarettes. In
October 1988, Johnson proposed a $17 billion ($75 per share)
management buyout of the company with the financial backing of
investment bank Shearson Lehman Hutton and its parent company,
American Express.
Days later, Kravis, who had originally suggested the idea of the
buyout to Johnson, presented a new bid for $20.3 billion ($90
per share) financed with an aggressive debt package. KKR also
had the support of significant equity co-investments from
leading pension funds and other institutional investors. Among
KKR's investors included, the Coca-Cola, Georgia-Pacific and
United Technologies corporate pension funds as well as the
Massachusetts Institute of Technology endowment, the Harvard
University endowment and the New York State Common Retirement
Fund However, KKR also faced criticism from existing investors
over the firm's use of hostile tactics in the buyout of RJR.
KKR proposed to provide a joint offer with Johnson and Shearson
Lehman but was rebuffed and Johnson attempted to stonewall KKR's
access to financial information from RJR. Rival private equity
firm, Forstmann Little & Co. was invited into the process by
Shearson Lehman but attempted to provide a bid for RJR with a
consortium of Goldman Sachs Capital Partners, Procter &
Gamble, Ralston Purina and Castle & Cooke. Ultimately the
Forstmann consortium came apart and did not provide a final bid
for RJR. Many of the major banking players of the day, including
Shearson Lehman Hutton, Drexel Burnham Lambert, Morgan Stanley,
Goldman Sachs, Salomon Brothers and Merrill Lynch were actively
involved in advising and financing the parties.
In November 1988, RJR set guidelines for a final bid submission
at the end of the month. The management and Shearson group
submitted a final bid of $112, a figure they felt certain would
enable them to outflank any response by Kravis and KKR. KKR's
final bid of $109, while a lower dollar figure, was ultimately
accepted by the board of directors of RJR Nabisco. KKR's offer
was guaranteed, whereas the management offer lacked a "reset",
meaning that the final share price might have been lower than
their stated $112 per share. Additionally, many in RJR's board
of directors had grown concerned at recent disclosures of Ross
Johnson' unprecedented golden parachute deal. TIME magazine
featured Ross Johnson on the cover of their December 1988 issue
along with the headline, "A Game of Greed: This man could pocket
$100 million from the largest corporate takeover in history. Has
the buyout craze gone too far?". KKR's offer was welcomed by the
board, and, to some observers, it appeared that their elevation
of the reset issue as a deal-breaker in KKR's favor was little
more than an excuse to reject Ross Johnson's higher payout of
$112 per share. F. Ross Johnson received $53 million from the
buyout. KKR collected a $75 million fee in the RJR takeover.
At $31.1 billion of transaction value (including assumed debt),
RJR Nabisco was by far the largest leveraged buyout in history.
In 2006 and 2007, a number of leveraged buyout transactions were
completed that for the first time surpassed the RJR Nabisco
leveraged buyout in terms of nominal purchase price. The deal
was first surpassed in July 2006 by the $33 billion buyout of
U.S. hospital operator Hospital Corporation of America, in which
KKR also participated, though the RJR deal was larger, adjusted
for inflation. However, adjusted for inflation, none of the
leveraged buyouts of the 2006–2007 period would surpass RJR
Nabisco. The RJR transaction benefited many of the parties
involved. Investment bankers and lawyers who advised KKR walked
away with over $1 billion in fees, and Henry Kravis and George
Roberts attracted unprecedented amount of publicity that turned
the cousins into instant celebrities. Unfortunately for KKR,
size would not equate with success as the high purchase price
and debt load would burden the performance of the investment.
KKR was able to overcome the RJR Nabisco investment, raising a
new investment fund and continuing to invest throughout the
1990s.
Early 1990s: The aftermath of RJR Nabisco
The buyout of RJR Nabisco was completed in April 1989 and KKR
would spend the early 1990s focused on the task of repaying the
RJR's enormous debt load through a series of asset sales and
restructuring transactions. After the RJR Nabisco deal, KKR did
not complete a single investment in 1990, the first year with no
new investment activity since 1982. In fact, KKR did not
complete another major leveraged buyout transaction for over
three years, due largely to the shutdown of the high yield bond
market and the collapse of Drexel Burnham Lambert which filed
for bankruptcy in February 1990. Instead, KKR focused primarily
on its existing portfolio companies acquired in the late 1980s
buyout boom. Six of KKR's portfolio companies completed IPOs in
1991, including RJR Nabisco and Duracell.
As the new decade began, KKR was immediately active in
restructuring RJR. In January 1990, KKR completed the sale of
RJR's Del Monte fruits and vegetables business to a group led by
Merrill Lynch. KKR had originally identified a group of
divisions that it could sell to reduce debt. Over the coming
years, RJR would pursue a number of additional restructurings,
equity injections and public offerings of stock to provide the
company with additional financial flexibility. KKR contributed
$1.7 billion of new equity into RJR in July 1990 to complete a
restructuring of the company's balance sheet that appeased
unhappy bondholders. KKR's equity contribution as part of the
original leveraged buyout of RJR had been only $1.5 billion.
Later, in December 1990, RJR announced an exchange offer that
would swap debt in RJR for a new public stock in the company,
effectively an unusual means of taking RJR public again and
simultaneously reducing debt on the company. RJR issued
additional stock to the public in March 1991 to further reduce
debt, resulting in an upgrade of the credit rating of RJR's debt
from junk to investment grade.
KKR would begin to reduce its ownership in RJR, when in 1994,
its stock in RJR was used as part of the consideration for its
leveraged buyout of Borden, Inc., a producer of food and
beverage products, consumer products, and industrial products,
in a highly complex and unprecedented transaction. The following
year, in 1995, KKR would divest itself of its final stake in RJR
Nabisco when Borden sold a $638 million block of stock.
While KKR no longer had any ownership of RJR Nabisco by 1995,
its original investment would not be fully realized until KKR
finally exited the last of its investment in 2004. After sixteen
years of efforts that included contributing new equity, taking
RJR public, asset sales and exchanging shares of RJR for the
ownership of Borden, Inc., KKR had finally sold the last
remnants of its 1989 investment. In July 2004, KKR agreed to
sell its stock in Borden Chemical to Apollo Management for $1.2
billion.
Early 1990s: Investments
In the early 1990s, the absence of an active high yield market
prompted KKR to change its tactics, avoiding large leveraged
buyouts in favor of industry consolidations through what were
described as leveraged buildups or rollups. One of KKR's largest
investments in the 1990s was the leveraged buildup of Primedia
in partnership with former executives of Macmillan Publishing,
which KKR had failed to acquire in 1988. KKR created Primedia's
predecessor, K-III Communications, a platform to buy media
properties, initially completing the $310 million divisional
buyout of the book club division of Macmillan Publishing
(publisher of The Weekly Reader) and the assets of magazine
publisher Intertec Publishing Corporation in May 1989.
Throughout the early 1990s, K-III continued to acquire
publishing assets, including a $650 million acquisition from
News Corporation in 1991. K-III went public, however instead of
cashing out, KKR continued to make new investments in the
company in 1998, 2000 and 2001 to support acquisition activity.
Ultimately, in 2005, Primedia redeemed KKR's preferred stock in
the company but KKR was estimated to have lost hundreds of
millions of dollars on its common stock holdings as the price of
the company's stock collapsed.
In 1991, KKR partnered with Fleet/Norstar Financial Group in the
1991 acquisition of the Bank of New England, from the US Federal
Deposit Insurance Corporation. In January 1996, KKR would
exchange its investment for a 7.5% interest in Fleet Bank. KKR
also completed the 1992 buyout of American Re Corporation from
Aetna as well as a 47% interest in TW Corporation, later known
as The Flagstar Companies and owner of Denny's in 1992. Among
the other notable investments KKR completed during the early
1990s included World Color Press (1993–95), RELTEC Corporation
(1995) and Bruno's (1995).
1996–1999
By the mid 1990s, the debt markets were improving and KKR had
moved on from the RJR Nabisco buyout. In 1996, KKR was able to
complete the bulk of fundraising for what was then a record $6
billion private equity fund, the KKR 1996 Fund. However, KKR was
still burdened by the performance of the RJR investment and
repeated obituaries in the media. KKR was required by its
investors to reduce the fees it charged and to calculate its
carried interest based on the total profit of the fund (i.e.,
offsetting losses from failed deals against the profits from
successful deals).
KKR's activity level would accelerate over the second half of
the 1990s making a series of notable investments including
Spalding Holdings Corporation and Evenflo(1996), Newsquest
(1996), KinderCare Learning Centers (1997), Amphenol Corporation
(1997), Randalls Food Markets (1997), The Boyds Collection
(1998), MedCath Corporation (1998), Willis Group Holdings
(1998), Smiths Group (1999) and Wincor Nixdorf (1999).
KKR's largest investment of the 1990s, would unfortunately also
be among its least successful. In January 1998, KKR and Hicks,
Muse, Tate & Furst agreed to the $1.5 billion buyout of
Regal Cinemas. KKR and Hicks Muse had initially intended to
combine Regal with Act III Cinemas, which KKR had acquired in
1997 for $706 million and United Artists Theaters, which Hicks
Muse had agreed to acquire for $840 million in November 1997.
Shortly after agreeing to the Regal takeover, the deal with
United Artists fell apart, ultimately impacting the strategy to
eliminate costs by building a larger combined company. Just two
years later, Regal encountered significant financial issues and
was forced to file for bankruptcy protection and the company
would pass to investor Philip Anschutz.
2000–2005
At the start of the 21st century, the landscape of large
leveraged buyout firms was changing. Several large and storied
firms, including Hicks Muse Tate & Furst and Forstmann
Little & Company were dragged down by heavy losses in the
bursting of the telecom bubble. Although, KKR's track record
since RJR Nabisco was mixed, losses on such investments as Regal
Entertainment Group, Spalding, Flagstar and Primedia (previously
K-III Communications) were offset by successes in Willis Group,
Wise Foods, Inc., Wincor Nixdorf and MTU Aero Engines, among
others.
Additionally, KKR was one of the few firms that was able to
complete large leveraged buyout transactions in the years
immediately following the collapse of the Internet bubble,
including Shoppers Drug Mart and Bell Canada Yellow Pages. KKR
was able to realize its investment in Shoppers Drug Mart through
a 2002 IPO and subsequent public stock offerings. The
directories business would ultimately be taken public in 2004 as
Yellow Pages Income Fund, a Canadian income trust.
In 2004 a consortium comprising KKR, Bain Capital and real
estate development company Vornado Realty Trust announced the
$6.6 billion acquisition of Toys "R" Us, the toy retailer. A
month earlier, Cerberus Capital Management, made a $5.5 billion
offer for both the toy and baby supplies businesses. The Toys
'R' Us buyout was one of the largest in several years. Following
this transaction, by the end of 2004 and in 2005, major buyouts
were once again becoming common and market observers were
stunned by the leverage levels and financing terms obtained by
financial sponsors in their buyouts.
The following year, in 2005, KKR was one of seven private equity
firms involved in the buyout of SunGard in a transaction valued
at $11.3 billion. KKR's partners in the acquisition were Silver
Lake Partners, Bain Capital, Goldman Sachs Capital Partners, The
Blackstone Group, Providence Equity Partners, and Texas Pacific
Group. This represented the largest leveraged buyout completed
since the takeover of RJR Nabisco in 1988. SunGard was the
largest buyout of a technology company until the Blackstone-led
buyout of Freescale Semiconductor. The SunGard transaction is
also notable in the number of firms involved in the transaction,
the largest club deal completed to that point. The involvement
of seven firms in the consortium was criticized by investors in
private equity who considered cross-holdings among firms to be
generally unattractive.
Since 2005 and the Buyout Boom
In 2006, KKR raised a new $17.6 billion fund the KKR 2006 Fund,
with which the firm began executing a series of some of the
largest buyouts in history. KKR's $44 billion takeover of
Texas-based power utility, TXU, in 2007, proved to be the
largest leveraged buyout of the mid-2000s buyout boom and the
largest buyout completed to date. Among the most notable
companies acquired by KKR in 2006 and 2007 were the following:
|
Investment
|
Year
|
Company Description
|
Ref.
|
|
HCA
|
2006 |
KKR and Bain Capital, together with Merrill Lynch and the
Frist family (which had founded the company) completed a
$31.6 billion acquisition of the hospital company, 17
years after it was taken private for the first time in a
management buyout. At the time of its announcement, the
HCA buyout would be the first of several to set new
records for the largest buyout, eclipsing the 1989 buyout
of RJR Nabisco. It would later be surpassed by the buyouts
of Equity Office Properties, TXU and BCE (announced but as
of the end of the first quarter of 2008 not yet
completed).
|
|
NXP Semiconductors
|
2006 |
In August 2006, a consortium of KKR, Silver Lake Partners
and AlpInvest Partners acquired a controlling 80.1% share
of semiconductors unit of Philips for €6.4 billion. The
new company, based in the Netherlands, was renamed NXP
Semiconductors.
|
|
TDC A/S
|
2006 |
The Danish phone company was acquired by KKR, Apax
Partners, Providence Equity Partners and Permira for €12.2
billion ($15.3 billion), which at the time made it the
second largest European buyout in history.
|
|
Dollar General
|
2007 |
KKR completed a buyout of the chain of discount stores
operating in the U.S.
|
|
Alliance Boots
|
2007 |
KKR and Stefano Pessina, the company’s deputy chairman and
largest shareholder, acquired the UK drug store retailer
for £12.4 billion ($24.8 billion) including assumed debt,
after increasing their bid more than 40% amidst intense
competition from Terra Firma Capital Partners and Wellcome
Trust. The buyout came only a year after the merger of
Boots Group plc (Boots the Chemist), and Alliance UniChem
plc.
|
|
Biomet
|
2007 |
The Blackstone Group, KKR, TPG Capital and Goldman Sachs
acquired the medical devices company for $11.6 billion.
|
|
First Data
|
2007 |
KKR and TPG Capital completed the $29 billion buyout of
the credit and debit card payment processor and former
parent of Western Union. Michael Capellas, previously the
CEO of MCI Communications and Compaq was named CEO of the
privately held company.
|
|
TXU (Energy Future
Holdings)
|
2007 |
An investor group led by KKR and TPG Capital and together
with Goldman Sachs completed the $44.37 billion buyout of
the regulated utility and power producer. The investor
group had to work closely with ERCOT regulators to gain
approval of the transaction but had significant experience
with the regulators from their earlier buyout of Texas
Genco. TXU is the largest buyout in history, and retained
this distinction when the announced buyout of BCE failed
to close in December 2008. The deal is also notable for a
drastic change in environmental policy for the energy
giant, in terms of its carbon emissions from coal power
plants and funding alternative energy.
|
Other non-buyout investments completed by KKR during this period
included Legg Mason, Sun Microsystems, Tarkett and Seven
Network. In October 2006, KKR acquired a 50% stake in Tarkett, a
France-based distributor of flooring products, in a deal valued
at about €1.4 billion ($1.8 billion). On November 20, 2006 KKR
announced it would form a AU$4 billion partnership with the
Seven Network of Australia. On January 23, 2007, KKR announced
it would invest $700 million through a PIPE investment in Sun
Microsystems. In January 2008, KKR announced that it had made a
$1.25 billion PIPE investment in Legg Mason through a
convertible preferred stock offering.
In addition to its successful buyout transactions, KKR was
involved in the failed buyout of Harman International
Industries (NYSE: HAR), an upscale
audio equipment maker. On April 26, 2007, Harman announced it
had entered an agreement to be acquired by KKR and Goldman
Sachs. As the financing markets became more adverse in the
summer of 2007, the buyout was on tenuous ground. In September
2007, KKR and Goldman backed out of the $8 billion buyout of
Harman. By the end of the day, Harman's shares had plummeted by
more than 24% on the news.
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Selected Kohlberg Kravis Roberts 2006-2008 Investments
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Hospital Corporation of America
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Initial public offering
In 2007, KKR filed with the Securities and Exchange Commission
to raise $1.25 billion by selling an ownership interest in its
management company. The filing came less than two weeks after
the initial public offering of rival private equity firm
Blackstone Group. KKR had previously listed its KPE vehicle in
2006, but for the first time, KKR would offer investors an
ownership interest in the management company itself. The onset
of the credit crunch and the shutdown of the IPO market dampened
the prospects of obtaining a valuation that would be attractive
to KKR and the flotation was repeatedly postponed, and finally
called off by the end of August.
The following year, in July 2008, KKR announced a new plan to
list its shares. The plan called for KKR to complete a reverse
takeover of its listed affiliate KKR Private Equity Investors in
exchange for a 21% interest in the firm. In November 2008, KKR
announced a delay of this transaction until 2009. Shares of KPE
had declined significantly in the second half of 2008 with the
onset of the credit crunch. KKR has announced that it expects to
close the transaction in 2009. In October 2009, KKR listed
shares in KKR & Co. on the Euronext exchange, replacing KPE
and anticipates a listing on the New York Stock Exchange in
2010. The public entity represents a 30% interest in Kohlberg
Kravis Roberts. In October 2010, KKR acquired bout nine members
of Goldman Sachs Group proprietary trading team after
entertaining offers from investment firms such as Perella
Weinberg and Blackrock. With Goldman shutting down its
proprietary trading operations, its executives, led by Bob
Howard, will help KKR expand beyond leveraged buyouts into areas
such as hedge funds.
Notable current and former employees
Over the years, KKR has seen the departure of many of its
original partners, the most notable being the most senior of its
three co-founders, Jerome Kohlberg. After a leave of absence due
to an illness in 1985, Kohlberg returned to find increasing
differences in strategy with his partners Kravis and Roberts. In
1987, Kohlberg left KKR to found a new private equity firm
Kohlberg & Company. Kohlberg & Company returned to the
investment style that Kohlberg had originally practiced at Bear
Stearns and in KKR's earlier years, acquiring smaller,
middle-market companies.
As of 1996, general partners of KKR included Henry Kravis,
George R. Roberts, Paul Raether, Robert MacDonnell, Jose
Gandarillas, Michael Michelson, Saul Fox, James Greene, Michael
Tokarz, Clifton Robbins, Scott Stuart, Perry Golkin and Edward
Gilhuly. Among those who left were Saul Fox, Ted Ammon, Ned
Gilhuly, Mike Tokarz and Scott Stuart who were instrumental in
establishing KKR's reputation and track record in the 1980s. KKR
remains tightly controlled by Kravis and Roberts. The issue of
succession has remained an important consideration for KKR's
future as an ongoing institutionalized firm.
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Saul A. Fox left KKR in 1997 to found Fox Paine & Company,
a middle market private equity firm with over $1.5 billion of
capital under management
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Clifton S. Robbins left KKR to join competitor General
Atlantic Partners in 2000 and later founded Blue Harbour
Group, a private investment firm based in Greenwich, CT.
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Edward A. (Ned) Gilhuly and Scott Stuart left KKR in 2004 to
launch Sageview Capital. Prior to this, Gilhuly was the
managing partner of KKR's European operations, based in London
and Stuart managed KKR's energy and consumer products industry
groups.
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Ted Ammon, started several new ventures including Big Flower
Press, which printed newspaper circulars, and Chancery Lane
Capital, a boutique private equity firm, before being murdered
in October 2001.
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Paul Hazen, served as chairman and CEO of Wells Fargo
(1995–2001). Hazen would later return to KKR serving as
chairman of Accel-KKR, a joint venture with Accel Partners and
later as chairman of KKR's publicly listed affiliate, KKR
Financial (KFN).
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Clive Hollick, Baron Hollick, CEO of United News and Media
(1996–2005)
Works about KKR
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Anders, George (1992). Merchants of Debt: KKR and the Mortgaging of American
Business. New York: BasicBooks.
ISBN 978-0-465-04522-8.
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Baker, George; Smith, George (1998). The New Financial Capitalists: KKR and the Creation of
Corporate Value. New York: Cambridge University Press.
ISBN 978-0-521-64260-6.
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Bartlett, Sarah (1991). The Money Machine: How KKR Manufactured Power &
Profits. New York: Warner Books.
ISBN 978-0-446-51608-2.
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Burrough, Bryan (1990). Barbarians at the Gate. New York: Harper & Row
more: http://www.referenceforbusiness.com/knowledge/Kohlberg_Kravis_Roberts.html#ixzz5FLLi1I5m
