Legal News

Credit Crunch, Shmedit Shmunch. We?re Going Public!

By Dan Slater

George R. Roberts and Henry R. Kravis, Dec. 2, 1988, following KKR’s successful bid for R.J. Nabisco, then the biggest private equity deal of all-time.

If it seems to you that Kohlberg Kravis Roberts & Co’s initial public offering, announced yesterday, lacks the kind of fanfare that attended last summer’s Blackstone IPO, you’re not alone.

Aside from the now-defunct credit markets, the circumstances are quite a bit different. For one thing, Blackstone’s IPO, executed at the pinnacle of the private equity bubble, resulted in its co-founders, Steve Schwarzman and Pete Peterson, reaping a combined take in excess of $9 billion. For its part, reports the WSJ today, KKR “doesn’t want the dynamic” of other financial-service-firm IPOs, where those firms’ founding and senior partners captured far greater wealth than the junior ones. KKR is setting aside about 16% of the total value of the firm — which, when listed on the NYSE, could be somewhere between $12 billion and $15 billion — to be distributed to its partners and employees in the future.

The structure of the deal is also different. KKR is offering the shareholders in its European affiliate, KKR Private Equity Investors (which raised about $5 billion when it listed in Amsterdam in 2006) 21% of the value of KKR itself in exchange for shares in the affiliate. As the Journal notes, the IPO structure means that KKR doesn’t have to find new buyers for its shares. Instead, it just has to convince current KPE holders that they’re getting a fair price for their existing holdings, which avoids the question of whether anyone out there wants to buy into private equity now. (Here are more reports on the IPO from the NYT, the FT and the Deal.)

As you might’ve guessed, legions of lawyers brought the deal off. First off, there’s David Sorkin, the former Simpson Thacher partner who went in-house at KKR last year. Simpson Thacher lawyers are representing KKR. French law firm Bredin Prat is acting as lead legal counsel to the independent directors of KPE, while Cravath is acting as their U.S. counsel. DeBrauw Blackstone Westbroek was Dutch counsel, while Ogier served as Guernsey counsel.

Full post as published by Law Blog - WSJ.com on July 28, 2008 (boomark / email).