KKR to go public

Posted on July 4, 2007

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Will investors bite into Kohlberg Kravis Roberts & Co’s plan to go public and start trading on the New York Stock Exchange by the third or fourth quarter of this year?

KKR says it plans to raise $1.25 billion in its IPO to expand and fund deals. The amount is frankly peanuts, considering the kind of mergers and acquisitions deals it handles, which run into tens of billions. In the past 12 months, KKR has handled $200 billion of leveraged buyouts, according to Bloomberg.

Much anticipation surrounded the share offering of KKR’s arch rivals, Blackstone, last month. But it had performed disappointingly, its shares having fallen 4.1 per cent since its $4.75 billion offering.

Investors might not be rushing as quickly having been burnt by the Blackstone episode. They could be further deterred by Congress’ push to introduce tougher tax rates on private-equity firms, which currently enjoy a 15 per cent capital gains tax rate, as it is organized as a partnership. That could go up to 35 per cent if legislators had their way, as these firms would be classified as corporations and likewise be forced to cough up taxes at those rates.

Would-be investors in KKR will face the same restrictions on their share-holding as those on Blackstone shares — KKR will continue controlling the company.

At the same time, there’s a feeling of investors suffering from investment fatigue in buyout firms.

The New York Times says deals to take private equity and hedge funds public “are now happening at a frenzied pace, suggesting that these funds might see a limited window in which to gain access to the public markets.”

As competition between KKR and Blackstone continues unabated, it would be paramount for KKR to do well in its IPO, even as it didn’t disclose the number of units it plans to sell or their targeted price.

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Posted in: business, US