In line with its acquisition strategy, private equity firm
Kohlberg Kravis Roberts & Co. L.P
) announced a deal to acquire
KKR Financial Holdings LLC
) in an all-stock deal worth $2.6 billion. KKR Financial is
currently managed by a subsidiary of KKR Asset Management, a
subsidiary of Kohlberg Kravis.
GOLDMAN SACHS (GS): Free Stock Analysis
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According to the deal, shareholders of KKR Financial will receive
0.51 common units of Kohlberg Kravis for every common share of
KKR Financial that they hold. The exchange ratio represents
$12.79 per share of Kohlberg Kravis, reflecting a significant
premium of 35% per share of KKR Financial, based on closing price
of both the stocks as of Dec 16.
After the acquisition, KKR Financial will operate as a subsidiary
of Kohlberg Kravis. However, Kohlberg Kravis will not alter KKR
Financial's funding structure.
The purchase will be funded from a proposed new issue of 100
million shares. The deal, which is subject to a vote by
shareholders of KKR Financial, is expected to close by the first
half of 2014.
Based in San Francisco, KKR Financial was founded in 2004 as a
mortgage real estate investment trust (REIT) but later turned
into an investor in corporate debt after being hit by the
sub-prime mortgage crisis in 2007. Being a specialty
finance company, it operates a wide range of asset portfolios and
primarily invests in financial assets including private and
public equity investments, high yield bonds and distressed
According to Kohlberg Kravis, upon closure the deal is expected
to pave the way for a 2% accretion on Kohlberg Kravis'
total distribution per unit basis while its balance sheet is
expected to grow from $7.2 billion as of Sep 30,2013 to $9.3
billion. Further, it is expected that the acquisition will
enhance liquidity, increase return to shareholders and build
For Kohlberg Kravis,
The Goldman Sachs Group, Inc.
) and Simpson Thacher & Bartlett are representing the
) and Cravath Swaine & Moore are acting as independent
financial and legal advisors to the independent directors of the
company. For KKR Financial, financial and legal advisors to the
independent committee include Sandler O'Neill & Partners and
Wachtell, Lipton, Rosen & Katz.
Kohlberg Kravis has a presence in 25 industries across the U.S.,
ranging from software to healthcare. In Oct 2013, the company
proposed to acquire 10% stake in Qingdao Haier Co., Ltd. that
specializes in home appliances and is a leader in the Chinese
market for the same. Further, in Nov 2013, the company announced
a deal to acquire The Brickman Group. Ltd. LLC for $1.6 billion
from Leonard Green & Partners, L.P. and other shareholders.
Kohlberg Kravis currently carries a Zacks Rank #1 (Strong