DealZone

from Commentaries:

Cash M&A still lifeless

Bond sales are at a record, equity markets are at year-highs, private equity firms are sitting on huge cash piles -- Blackstone alone has $29 billion -- and banks are lending to each other again.

The ingredients should all be there for a resurgence of cash-driven mergers and acquisitions. But instead, the market is in hibernation.

So far the value of all M&A deals completed this year totals $990 billion. You have to go back to 2003 -- when the total for the year was $1.23 trillion -- to find a figure this low, according to Thomson Reuters data.

Of this, some $364 billion -- just 37 percent -- were cash deals, marking a dramatic shift in the mix of recent years when cash has dominated.

The main spanner in the works is the still dire state of banks' balance sheets and the crippled syndicated loan market. This has kept a tight lid on cash bids of any size, with the mega merger or takeover a distant memory.

KKR’s latest listing missive

nysePrivate equity giant KKR’s latest document on its lengthy route to becoming a publicly-traded company makes the intriguing suggestion that it could list on either the Nasdaq or the NYSE.  

The idea all along has been for KKR, after listing on Euronext through buying its Amsterdam-listed fund KPE, to potentially list on the NYSE, so switching to Nasdaq would be quite a suprise.

Press releases up to now have pinpointed the NYSE as KKR’s possible future home. However, today’s document is a filing to unitholders rather than a statement to the press, so it is more formal and looks at all possible eventualities (such as a long section on risk factors).

KKR next buyout fund likely 2010

KKR’s next buyout fund will be a 2010 event, sources told us and peHUB – unless the market collapses again… While KKR hasn’t committed to a timeline or even started raising the fund (no documents are out), there had been an expectation it would start raising in 2009. (Private equity research group Preqin published this table in June (flip to page 13) of the funds they’re following as “on the road”. )   

However, KKR still has a sizeable chunk of its existing funds to spend (known as dry powder) – it finished raising a $17.6 billion to spend on buyouts in 2008.

Fundraising is a tough place to be right now. Blackstone is continuing to chip away raising for BCP VI, its sixth buyout fund, which according to Preqin has a $15 billion target.

Is KKR missing the boat?

Unnerved by sagging markets, storied private equity firm Kohlberg Kravis Roberts appears to be thinking of putting off its New York listing. The original plan was to buy its Amsterdam-listed fund and parlay it into a New York-listed entity.

Now, having watched Blackstone‘s stock tumble a gut-wrenching 68 percent since it went public two years ago, we hear KKR is leaning toward buying out the Dutch fund, known as KPE, but putting off the NYSE listing.

Separating the two plans would give KKR, co-founded by “buyout king” Henry Kravis (pictured left), the option of buying its Amsterdam-listed fund without the pressure of having to list at a difficult time to go public. The company could later decide to list under a different method if it desired, Megan Davies reports.

Fidelity deal would include any KKR IPO

Henry KravisA deal between KKR and Fidelity would give the mutual fund giant’s customers access to an IPO by the private equity firm itself – if KKR were to do one, a source familiar with KKR said. 
 
The source did not want to be identified because KKR is still studying the possibility of going public and has not said whether it would do an IPO or not.
 
KKR’s plans to become a publicly traded company hinge on a deal to buy an Amsterdam-listed fund, KPE. In April, it extended the deadline to buy the fund by four months.
 
KKR announced the complicated transaction last July, saying it would buy KPE, delist it from Euronext and launch the combined new company on the New York Stock Exchange under the stock symbol “KKR”. KKR had previously considered a more conventional IPO. 
 
Under the terms of the Fidelity deal, the mutual fund company will get the right to sell retail securities to its customers from IPOs of KKR companies. KKR has investments in 50 companies with a combined $200 billion of revenue.

Traditionally, retail customers had trouble getting IPO shares to buy through their brokers, since underwriters first look to wealthier customers and institutional investors to buy large numbers of the securities.

KKR releases a snapshot of its performance

Private-equity firm KKR, which usually holds its cards close to its chest, gave investors a look at its portfolio on Sunday night. The New York firm disclosed the information, including its $1.2 billion loss in 2008, to update investors on its financial condition as it evaluates buying out its Amsterdam-listed fund, KKR Private Equity Investors LP.

Also in the presentation was the value of the firm’s 10 largest portfolio companies as of March 31. The fair values of these companies may not be particularly representative of where they’d be valued today — the S&P 500 is up nearly 20 percent since March 31 — but it is an interesting snapshot of how KKR has been performing.

The Good: French industrial conglomerate Legrand, which has a fair value that is more than double its December 2002 cost; Singapore-based technology company Avago,  up 70 percent from December 2005; Nordic telecom company TDC, up more than 30 percent from February 2006; retailer Dollar General, up 30 percent from July 2007; and health care company HCA; which has held a stable value since November 2006.

Alliance Boots targets break-up of Sweden’s pharmacy market

(From Acquisitions Monthly)

Alliance Boots, the UK pharmacy giant backed by US private-equity group KKR, is understood to have made an expression of interest for some of the chemists that Sweden’s state monopoly Apoteket is selling. The shops are believed to have revenues of close to SEK 20 billion (US$2.6 billion).

The information memoranda were finally sent out this week, with several potential bidders, including Germany’s Celesio, Finland’s Tamro (which is owned by Germany’s Phoenix), plus Oriola and other private equity groups, making expressions of interest.

Alliance Boots declined to comment on what it described as market speculation, but an informed source confirmed the bid interest.  “The idea is to get a good market.  All the big ones – Celesio, Alliance Boots, Tamro, Oriola – are interested, and also private equity firms are also interested,” the person said.

Chairgate: the Economist recants

The Economist has published a correction to its earlier report that Henry Kravis, KKR’s archetypal “Barbarian at the Gate”, may have stumped up 22 million euros for a chair once owned by Yves Saint Laurent:

“Our report suggested that Henry and Marie-Josée Kravis may have been the purchasers of an early 20th-century chair designed by Eileen Gray. Mr Kravis assures us that neither he nor anyone in his family bought the chair in question. Our apologies to all concerned,” the free-trade-loving weekly says.

Our post yesterday on the Economist’s original story prompted some acerbic follow-ups elsewhere in the blogosphere and a firm denial from Kohlberg Kravis Roberts HQ.

UPDATED: KKR denies an auction victory

(This updates an earlier post with KKR’s denial).

Maybe the days of private equity paying eye-watering prices at auction really are over.

Kohlberg Kravis Roberts has firmly denied a report in the Economist’s books and arts section saying that, despite the deep economic funk, buyout doyen Henry Kravis was behind the “startling” $28 million purchase of a vintage chair at the recent Yves Saint Laurent sale in Paris:

“Who, in the current climate, were the buyers?” the Economist asked. ”Few prices were more startling than the €22m commanded by an early 20th-century chair designed by Eileen Gray. Cheska Vallois, an Art Deco dealer, won the work in the room; it is thought that she did so on behalf of Henry and Marie-José Kravis, who had already acquired examples of Gray’s work from Ms. Vallois at the Biennale des Antiquaires in Paris.”

Neuberger action moves to court

The sale of the Neuberger asset management arm of Lehman might have been agreed back in September, but it’s not quite a done deal.

The whole process has been rather messy — Lehman put a majority percentage of the prized asset management arm up for sale in August, prior to filing for bankruptcy.

The unit, one of Lehman’s best performing assets, drew interest from a number of private equity bidders such as Kohlberg Kravis Roberts, Hellman & Friedman, Blackstone, Bain Capital and Clayton Dubilier & Rice, sources previously said.