M&A

20 November, 2009

KKR sees smaller deals, growth investments

* Portfolio marked up 18.5 pct for quarter

* Over 90 pct of its deals historically under $5 bln

* Sees opportunities for smaller, less leveraged deals

By Megan Davies

NEW YORK, Nov 20 (Reuters) - Private equity giant Kohlberg Kravis Roberts & Co (KKR.AS) said current deal opportunities include buying noncore subsidiaries from companies and providing rescue and growth capital, rather than the large public-to-privates it is known for.

"In an environment like today, with constrained credit availability and a tougher economic backdrop, we tend to make smaller investments," said partner Scott Nuttall, who hosted the New York-based private equity firm's first conference call as a public company.

Nuttall said that over 90 percent of KKR's more than 170 private equity deals have been smaller than $5 billion, and almost 80 percent of them smaller than $2 billion.

"This is in part because we have often invested in those parts of the economic cycle where credit was less plentiful," he said.

Nuttall said that instead of public-to-private deals, attention during these periods shifts to buying noncore subsidiaries from firms dealing with liquidity issues and to making growth-equity and rescue-capital investments.

"These investments tend to be made at lower valuations with less leverage and more equity," Nuttall said. "We are seeing investment opportunities like these today."

Nuttall added that during the third quarter, KKR marked its private equity portfolio 18.5 percent higher. KKR reported its third-quarter earnings on Thursday, and said economic net income was $656.6 million for the quarter ended Sept. 30.

The private equity firm closed a long-awaited deal in October to buy its Amsterdam-quoted fund, becoming a Euronext-listed company and completing the first step toward an expected move to the New York Stock Exchange.

On the conference call, KKR said it believed the prospects for a U.S. listing are attractive and it would be considering it seriously. Under the terms of its deal with the Amsterdam fund, it has the ability from February to seek a listing in New York.

KKR has been planning for two years to follow rival Blackstone Group (BX.N) in becoming a publicly traded company. (Editing by Gary Hill)

Source: http://www.reuters.com