KKR’s First-Quarter Profit Rises 3% as Value of Leveraged Buyouts Gain

KKR & Co., the private-equity firm managed by Henry Kravis and George Roberts, said first-quarter profit rose 3 percent as the value of its leveraged buyouts increased.

Profit excluding some costs increased to $653.8 million, or 96 cents a share, from $634.7 million, or 93 cents, a year earlier, the New York-based company said in a statement today. The results beat the 61-cent average estimate of eight analysts in a Bloomberg survey.

Kravis and Roberts’ firm and competitors Blackstone Group LP (BX) and Carlyle Group are exploiting a more stable economy to reap profits by selling some of their holdings, as well as putting money to work in new LBOs. KKR has also expanded its non-buyout activities by bulking up efforts in hedge funds, real estate and underwriting.

“KKR remains active (though selective) on the deal front, as available credit at attractive terms can offset rising valuations,” Michael Kim, an analyst at Sandler O’Neill & Partners LP in New York, wrote in a note to clients before the earnings release. The firm “remains active away from traditional buyouts” by aiming for smaller deals and transactions in debt and natural resources, as well as in overseas markets, according to Kim.

He reiterated his recommendation yesterday that investors buy KKR stock, saying he expected it to reach $23 a share within 12 months.

Private-Equity Business

Rising values of the company’s private-equity investments helped drive assets under management up 12 percent to $61 billion.

Profit in the private markets business, which includes KKR’s private-equity investments, rose 43 percent to $276.7 million from $193.7 million a year earlier.

KKR fell 36 cents, or 1.9 percent, yesterday to $18.24 at 4:15 p.m. in New York Stock Exchange composite trading. The firm, which last year listed shares in New York after combining with its publicly traded European fund, has gained 28 percent in 2011.

KKR said its private-equity investments gained 6.5 percent in the quarter as the stock market recovery continued.

Management and incentive fees increased 12 percent to $110.3 million from $98.2 million a year earlier.

Net income rose to 75 cents a share from 56 cents a year earlier. That figure doesn’t include some of the costs related to becoming a publicly listed firm and doesn’t comply with generally accepted accounting principles.

Blackstone, the world’s largest private-equity firm, last month posted its best quarter since going public almost four years ago. The New York-based firm cited a surge in values of its real estate investments as a driver of its profit.

To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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