Directorship | Boardroom Intelligence » kkr

KKR to Hold IPO of Dollar General

News Editor — Fri, 21 Aug 2009 10:35:10 +0000

Dollar General, a discount retailer owned by private equity firm Kohlberg Kravis Roberts & Co., has to sell stock through an initial public offering. The Tennessee chain–which sells bargain-bin items–has been the most successful of KKR’s investments made during the buyout boom in 2006 and 2007, when the firm also acquired stakes in Texas utility TXU and media-research firm Nielsen. According to The Wall Street Journal, Dollar General plans to sell as much as $750 million in stock; the registration amount is used solely to calculate SEC filing fees, so the total the company actually raises could be different. If it does come close to selling that amount, however, Dollar’s deal would be the largest operating-company IPO so far this year. In connection with the deal, KKR will pay itself and its investors a $200 million dividend. The New York private-equity firm will also be one of the underwriters on the deal, helping sell off the shares and earning extra fees for itself in the process. The firm recently struck a deal to distribute its IPO to clients of Fidelity Investments, the mutual-fund giant. The IPO comes as KKR prepares for its own long-awaited public listing in October. Discounters like Dollar General have done well in the recession as customers trade down to cheaper merchandise.

Senate Probes Banks for Mortgage Fraud

News Editor — Thu, 30 Jul 2009 11:47:56 +0000

A Senate panel has subpoenaed financial institutions, including Goldman Sachs and Deutsche Bank seeking evidence of fraud linked to the mortgage meltdown, reported the Wall Street Journal. The congressional investigation appears to focus on whether internal communications, such as email, show bankers had private doubts about whether mortgage-related securities they were putting together were as financially sound as they suggested. According to people familiar with the matter, the Senate Permanent Subcommittee on Investigations also has issued a subpoena to Washington Mutual, a Seattle thrift that was seized by regulators in last year’s financial crisis and is now largely owned by J.P. Morgan Chase. It appears likely that several other financial institutions also have received subpoenas.

Tech Still Tough for Private Equity

Joseph McCafferty — Thu, 01 Jan 1970 00:00:00 +0000

When a consortium of private equity firms, including Blackstone, Carlyle, and TPG, took Freecale Semiconductor private in 2006, it was hailed as a landmark deal that opened the doors of the technology industry to private equity. These days, the deal serves as more of a lesson on why tech firms make poor targets for private equity.

In fact, the BusinessWeek article says Freescale is shaping up to be “one of the ugliest buyouts in history.”

When the deal was completed for $17.6 billion, many observers noted that technology firms were no longer off-the-table for private equity firms. And indeed, a number of tech firms were then taken private during the private-equity boom.

For a long time, the technology sector had been thought to be a poor feeding ground for private equity firms. They require massive research and development investments that crimp the cash outflow model of most private equity firms. They can be highly volatile, especially in the boom and bust world of semiconductors.

How the Freescale deal has gone is an indication that these warnings are founded. According to an article in BusinessWeek, sales started to declinejust months after the deal’s close. Freescale’s biggest customer, former parent Motorola,cut orders, and revenues for 2007 slipped 10 percent, to $5.7 billion, even as the industry’s increased 5 percent. In fact, the BusinessWeek articlesays Freecale is shaping up to be “one of the ugliest buyouts in history.” Things are so bad that Freescale’s owners have written down their $7 billion equity stake by 15 percent or $1billion.

Certainly the buyout business is tough all over these days with the credit crunch making it tough to get financing at favorable terms. But technology deals done in the heydays of private equity appear to be the most troubled. Bonds of First Data, purchased by KKR in 2007, now trade at 83 cents on the dollar. David Bailin, president of alternative investment solutions at Bank of America told BusinessWeek: “Tech buyouts are where the land mines are.”

Freescale may be the poster child for how tough technology can be more private equity buyouts, but there are likely to be many more lessons.

KKR Hires Qantas Chairman as Advisor

Joseph McCafferty — Thu, 01 Jan 1970 00:00:00 +0000

Kohlberg Kravis Roberts said today that it has hired the chairman of Qantas, Leigh Clifford, as a senior advisor to help bolster the private equity firm’s Australian operations, according to a statement.

Clifford previously worked as CEO of Tio Tinto as part of a 37-year career at the giant mining company. He will be based in Melbourne.

“K.K.R. has a proven track record of building long-term, sustainable value in the enterprises in which it invests while also delivering solid returns for investors,” Mr. Clifford said in a statement. “Given the demand for both capital and operational expertise right now, I am proud to join a team equipped to deliver both, and I look forward to helping identify opportunities for investors while partnering with managers to strengthen businesses in Australia.”

Clifford joins KKR’s expanding global network of senior advisors, including: Sanhjiv Ahuja, Sir John Bond, John E. Bryson, Liu Chuanzhi, David Cote, Bruce W. Duncan, George M.C. Fisher, Joe W. Forehand, Yoshiharu Fukuhara, Paul M. Hazen, R. Clint Johnstone, Paul Norris, Gianemilio Osculati, Lee R. Raymond, and Edward Tian Suning.