KKR & Co., the private-equity firm run by Henry Kravis and George Roberts, agreed to buy the publicly traded credit business KKR Financial Holdings LLC in a $2.6 billion transaction.
Investors will receive 0.51 KKR shares for each share of KKR Financial, valuing the public fund at $12.79 a share, a 35 percent premium to its closing price today, KKR said today in a statement. The transaction is subject to a vote by shareholders of KKR Financial, which is known commonly as KFN, and is expected to be completed in the first half of 2014.
KFN has fallen more than 10 percent this year as investors expressed disappointment in its strategy, according to Scott Valentin, an analyst at FBR Capital Markets & Co. William Sonneborn stepped down in July as chief executive officer of the business and was replaced by Craig Farr, a capital markets executive at New York-based KKR. Following Farr’s appointment, KFN said it would simplify its business by reducing investments in natural resources, commercial real estate, private equity and mezzanine financing, Valentin wrote in a Dec. 5 note to clients. KFN’s remaining strategies include collateralized loan obligations, opportunistic credit and specialty lending.
“We are acquiring a business with a fully invested, complementary portfolio of assets while increasing the scale and diversity of KKR’s balance sheet,” Kravis and Roberts said in today’s statement.
KKR in 2008 agreed to merge with a European listed fund, KKR Private Equity Investors LP. By moving the listing to the New York Stock Exchange, KKR’s shares began trading publicly in 2010.
Sonneborn stepped down to pursue a new challenge, KKR said in July. He joined the firm from TCW Group Inc. in 2008 to run KKR’s public-markets business and the KFN fund.