KKR puts crisis aside in surprise $10bn float

Kohlberg Kravis Roberts, one of the world's oldest and largest private equity firms, is resurrecting its plan to float on the New York Stock Exchange, despite the ravaging given to financial stocks since the credit crisis began.

A long private equity industry boom came to an abrupt halt a year ago, just as KKR was planning to follow its arch-rival Blackstone in going public. But the company has revised its plans and is now expecting to join the public markets around the end of this year, in a transaction that values it at more than $10bn (£5bn).

As part of the deal, KKR intends to acquire KKR Private Equity Investors (KPE), the affiliated investment vehicle it listed in Amsterdam two years ago and whose shares have languished well below the value of its assets – to the enduring frustration of founder Henry Kravis.

None of the partners is planning to sell shares in the flotation. The business is headed by Mr Kravis and George Roberts, two cousins who had been rising stars at the investment bank Bear Stearns in the Seventies, Mr Kravis under the tutelage of a senior corporate financier, Jerome Kohlberg.

The three men founded KKR in 1976 and pioneered the leveraged buyout, using large amounts of debt financing to buy major companies. The yellow deposit slip, opening KKR's first company account at Chemical Bank with the founders' $10,000, is still framed and on the wall at its lavish 42nd floor offices in Manhattan, overlooking Central Park.

By floating on the public markets, KKR will gain access to a potential new source of capital, at a time when raising funds in the debt markets has become more expensive and more complicated. A year ago, KKR was riding high on the boom in leveraged buyouts, spending $29bn on the credit card processing firm First Data and, in a consortium with others, $45bn on the energy group TXU. This year, however, it has not taken a single US company private.

KKR's portfolio of companies ranges from Toys R Us, the retailer, to Pages Jeunes, the French yellow pages. Last year, it also won an £11.1bn bidding war for the UK-listed Alliance Boots, the first FTSE 100 company ever to fall into private equity hands.

In its 32-year history, KKR has completed more than 160 transactions with an aggregate enterprise value of more than $410bn. Last September, its equity investments were valued at more than $86bn. KKR originally filed documents for its flotation last July but put plans on hold as the credit crisis hit. Many on Wall Street assumed the time for private equity company flotations had passed, after Blackstone shares bombed. In June 2007, Blackstone's two founders, Stephen Schwarzman and Peter Peterson, sold $2.6bn of stock at $31 per share, only for buyers to see the stock tumble to $17 now. In recent months, KKR has been quietly taking steps to resurrect its flotation, beefing up its management team and reorganising its structure.

The all-paper takeover of KPE – worth $2.15bn at close of trading on Friday – was expected to be announced to the Amsterdam stock market this morning. KPE shareholders will emerge with 20 to 21 per cent of the combined KKR business when it floats in New York. The combined entity would therefore be worth more than $10bn and perhaps as much as $15bn.