KKR Files for $1.25 Billion IPO

Private equity group Kohlberg Kravis Roberts [KKR] submitted a filing with the SEC Tuesday for a $1.25 billion IPO. The firm plans to expand its business by using funds for debt investments and minority stakes in public companies, and is constructing a capital-markets business through which it will syndicate out to investors much of the debt and equity it uses in its LBOs. The Wall Street Journal explains that the "self-contained financing ecosystem" which KKR says will reduce its reliance on "third-party sources of capital" is a means of positioning it as a competitor to the investment banks from which it had previously sourced funding. KKR's $200 billion LBO tally over the past 12 months exceeds that of its two strongest competitors, Blackstone and the Carlyle Group. Blackstone went public last month, and hedge fund Och-Ziff filed for an IPO earlier this week. The recent flurry of interest in public offerings among private equity and hedge fund managers is seen by some analysts to signal a private equity market top. KKR founders Henry Kravis and George Roberts will not sell shares at the offering, distinguishing this IPO from that of Blackstone, whose founder Stephen Schwarzman pocketed $677 million from his IPO's proceeds. Blackstone's 2006 net income was $2.27 billion against KKR's $1.1 billion; its annual return after fees is 22.6% vs. KKR's 20.2%.

Sources: KKR's filing with the SEC, Wall Street Journal I, II, Bloomberg, Financial Times, Reuters
Commentary: Och-Ziff Hedge Fund Files for IPO • Apollo Management Said to Be Considering IPO • Blackstone's Bad Week: Stock Loses 11.5% Since IPO
Stocks/ETFs to watch: Competitors: Blackstone Group LP (BX), Fortress Investment Group LLC (FIG). ETFs: streetTRACKS KBW Capital Markets (KCE)
Conference call transcripts: Fortress Investment Group Q1 2007

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