Today, its plan for an initial public offering reflects the troubled times roiling the investment industry: KKR is selling the shares in part to take over its struggling European affiliate, KKR Private Equity Investors, which trades in Amsterdam. In effect, KKR is offering shareholders in its European affiliate 21% of the value of KKR itself in exchange for shares in the affiliate, which has lost value as investors fretted about declining values of private-equity assets.
From KKR's perspective, the move is an elegant solution to shoring up the affiliate while also giving KKR access to the public markets. The firm has argued for months that the affiliate, KPE, was undervalued relative to its asset values. By that standard, KKR is buying KPE at a discount -- which long-term could prove to be a wise purchase.
Still, it has its risks given that the buyout business has hit such a rough spot. Several big-name competitors, including Blackstone Group and Fortress Investment Group, have seen their shares hammered as financial-market turmoil makes it tougher for them to pull off big corporate buyouts, their bread and butter. But KKR and its founders, Henry Kravis and George Roberts, still wanted to go public and have quietly hired a battery of executives in recent months, creating an organization chart that looks remarkably similar to that of a public company.
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Watch the trailer for the movie of the book that cemented Kohlberg Kravis' name in the post-80's popular lexicon:
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