KKR files for IPO; seeks to raise up to $1.25 billion

NEW YORK — Private equity firm KKR & Co. LLP on Tuesday filed with the Securities and Exchange Commission to raise as much as $1.25 billion in an initial public offering, following in the footsteps of rival Blackstone Group.

A specialist in leveraged buyouts and famous for its $25.1 billion purchase of RJR Nabisco in 1988, KKR hopes to trade on the New York Stock Exchange under the ticker symbol “KKR.” The buyout firm said it expects to use the offering’s proceeds to grow its business, but it didn’t say how many units it plans to sell in the IPO.

Blackstone Group LP went public in late June. Blackstone’s units, though, have fallen 4.1 percent from their initial $31 price. For many investors, the IPO presented a rare opportunity to get in on the booming private equity industry — which buys struggling companies, turns them around, and cashes in by taking them public again or selling them to other firms.

One of the main reasons KKR said it wants to go public is to find a new currency source for possible future acquisitions.

“We believe that our strong brand name in the financial services industry will support growth through acquisitions or combinations with similarly strong franchises that will complement our existing activities,” the filing said. “By adding our products and brand to the products of acquired companies, we believe we will be well positioned to create significant value for our stakeholders.”

KKR said it doesn’t have any current acquisition plans.

KKR’s existing owners will not sell any partnership units or receive any of the offering’s proceeds. KKR said it expects to complete the proposed offering during the third or fourth quarter of 2007.

Founded in 1976, KKR has 399 employees and boasts the first $1 billion-plus leveraged buyout among its achievements. It had about $53.4 billion in assets under management as of March 31, up from $18.3 billion at the end of 2002.

In 2006, KKR said it earned $1.11 billion in full-year profit, up from $941.5 million in 2005.

Among the risk factors KKR listed in its SEC filing for the IPO, it said its earnings and cash flow are highly variable, and it doesn’t plan on providing any earnings guidance, which could make the price of its units volatile. Investors buying the units also will have no control of KKR’s managing partner and will not vote in the election or removal of its directors.

“Unlike the holders of common stock in a corporation, they will have only limited voting rights under our partnership agreement and generally will be unable to influence decisions regarding our business,” KKR said.

The offering’s underwriters include Morgan Stanley and Citigroup Global Markets.