KKR Cancels Planned $500 Million Share Sale, Citing `Unfavorable' Market

KKR & Co., the private-equity firm that moved its shares to the New York Stock Exchange last month, canceled a plan to raise $500 million in a stock sale and said second-quarter profit fell as investment income dropped.

The firm applied to withdraw a registration for the sale, citing “unfavorable market conditions,” it said yesterday in a regulatory filing. KKR reported a 29 percent decrease in economic net income as lower unrealized investment gains led to a decline in carried interest, or the portion of profit it gets from successful holdings, the firm said in an e-mailed statement from New York.

KKR has fallen almost 6 percent since it started trading in New York last month. The firm, along with larger competitor Blackstone Group LP, is expanding its non-buyout businesses to capture more fees and cope with a smaller and less-profitable deal market.

“Economic net income could be very lumpy quarter over quarter due to the distributions and realizations on investments, which will dramatically affect carried interest,” Ryan Roebuck, an analyst at M Capital Partners Inc. in Toronto, said in a telephone interview. “They didn’t realize as much carried interest this quarter.”

Economic net income, a measure of profit that excludes some costs, fell to $433.1 million in the second quarter from $613.5 million a year earlier on a pro forma basis, KKR said.

William Katz, an analyst at Citigroup Inc. in New York, expected a loss on that basis of $124 million. He rates the shares “buy” and predicted they would reach $14 in 12 months.

New York Move

KKR made the announcement after the end of trading in New York. The shares rose 0.3 percent to $9.89 as of 4 p.m. KKR shifted its listing to New York from Amsterdam on July 15 after combining with its publicly traded European fund last year.

Investment income fell 34 percent from a year earlier to $370.6 million. Fee-related earnings climbed 19 percent to $63.3 million. Assets under management rose 16 percent to $54.4 billion.

The firm filed in May to raise money for acquisitions, shortly after it said it would complete a planned move to the New York Stock Exchange from Amsterdam.

Since its switch to the NYSE, the S&P 500 has gained 3 percent and Blackstone has risen 11 percent.

Founded by Henry Kravis and George Roberts in 1976, KKR has participated in several of the biggest buyout deals, such as the 2007 takeover of energy producer TXU Corp. for $43.2 billion including assumed debt.

Deals of that magnitude haven’t happened since the global credit crisis crippled financing markets for more than two years. KKR has sought to sell or take companies public to distribute profits to investors. The firm has filed for initial public offerings for hospital operator HCA Inc. and retailer Toys “R” Us.

Kravis and Roberts have bulked up businesses that use the firm’s expertise, including a capital-markets unit to underwrite stock and debt offerings for companies it owns.

To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net; Cristina Alesci in New York at Calesci2@bloomberg.net

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