Kohlberg Kravis Roberts said on Monday that it planned to buy a publicly traded credit investment affiliate for about $2.6 billion as it seeks to simplify its corporate structure while expanding its balance sheet.
Under the terms of the deal, KKR will issue 0.51 of a unit for each share of KKR Financial Holdings, commonly known as KFN. As of Monday’s closing price, that values the specialty finance company at about $12.79, a premium of about 35 percent.
Shares in KFN jumped 31 percent after hours, to $12.40, while those in KKR fell slightly, to $24.99.
The transaction is the second time that KKR has absorbed a separate-but-affiliated investment vehicle to expand its business. Four years ago, the investment giant bought KKR Private Equity Investors, a publicly traded vehicle that co-invested in the firm’s leveraged buyout funds. It was through that transaction that KKR became a publicly traded company, essentially swapping its stock for its affiliate’s, after plans for a traditional initial public offering became bogged down during the financial crisis.)
With the KFN deal, KKR is buying a $2.9 billion debt investment portfolio â€" among its assets are pieces of collateralized loan obligations and commercial real estate loans and bonds â€" that it already manages.
The transaction is expected to close in the first half of next year, pending approval by KFN’s shareholders and regulators.
KKR was advised by Goldman Sachs and the law firm Simpson Thacher & Bartlett, while its independent directors were advised by Lazard Ltd. and the law firm Cravath Swaine & Moore. KFN received advice from Sandler O’Neill + Partners and the law firm Wachtell, Lipton, Rosen & Katz.
