KKR listing makes top brass look almost frugal

July 6, 2010

One of the most eagerly anticipated numbers in finance has finally been revealed. Kohlberg Kravis Roberts co-founders Henry Kravis and George Roberts collected a combined $44 million last year. That’s plenty — but a far cry from the $611 million BlackstoneĀ  founders Steve Schwarzman and Pete Peterson pocketed the year before their private equity firm’s 2007 IPO.

KKR’s path to a listing on the New York Stock Exchange has been tortuous. The firm’s original plan to follow close on Blackstone’s well-timed heels ground to a screeching halt as the credit crisis took hold. A subsequent complex plan for transforming the Amsterdam listing of one of its funds into a spot on the New York board for the whole firm delayed things further. That process was simplified last year, and the fifth and possibly final amendment to the firm’s U.S. listing document was at last filed with securities regulators on Tuesday.

The delay has produced at least one benefit. Cousins Kravis and Roberts come off looking less gaudy than their most visible rivals. Each man’s pay packet of $22 million in 2009 was more than any bank boss made, but for their position in their industry it seems relatively modest. That’s partly down to the timing. Last year wasn’t a bad one for KKR, but it also wasn’t the market apex into which Blackstone tapped.

Blackstone isn’t a perfect comparison. Still, assume KKR’s 2009 had gone as well as Blackstone’s glorious 2006 and the firm’s owners had taken home the same percentage of assets under management. Then adjust for an estimated combined pre-IPO stake of 50 percent or so for Schwarzman and Peterson, against the KKR founders’ 13 percent each, or 26 percent between them. That would mean the KKR cousins might have had to declare more ostentatious pay packets for last year — well north of $100 million apiece.

Had the KKR founders given less equity away over the firm’s 34 years, that figure would be even higher. Schwarzman and Peterson cashed out to varying degrees and raised dilutive new money in their IPO but still own a combined stake in Blackstone about the same size as the interest in KKR held by Kravis and Roberts. With no one cashing out for now, they and their relatively stock-rich colleagues can hold out for a better valuation. But it may be a while before the timing is as perfect as it was for Blackstone’s brass.

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