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KKR to air its private equity in public

Jeremy Hobson Jul 4, 2007
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Tess Vigeland: The Barbarians at the Gate are about to open their doors — at least, some of them — to the investing public.

The private-equity firm Kohlberg Kravis Roberts says it’s hoping to raise $1.25 billion in an IPO. The move comes on the heels of rival Blackstone Group’s public offering of a couple of weeks ago. KKR is well-known from its leveraged-buyout streak in the 80s, which included the purchase of RJR Nabisco.

Jeremy Hobson reports from Washington on the rush to go public now.


Jeremy Hobson: KKR follows the lead of Blackstone Group, which went public two weeks ago. Its founders took home $2.5 billion.But Blackstone shares have dropped more than 4 percent since then.

Kevin Hassett, director of Economic Policy Studies at the American Enterprise Institute, says that has a lot to do with concern about new taxes being considered in Congress.

Kevin Hassett: If we took any firm, you know, be it Exxon or General Electric, and then had Congress considering a law change that specifically increased their tax rate, then you wouldn’t be surprised if their price went down.

But then why would KKR want to go public now, given all the uncertainty about taxes?

Victor Fleischer focuses on private equity at the University of Illinois law school.

Victor Fleischer: Get a valuation while the tax risk is still uncertain and before Congress acts to change the tax treatment, which would depress the valuation of the firm.

Fleischer says KKR’s owners stand to gain quite a bit if and when they cash out. The firm’s assets have ballooned to $53 billion from just $18 billion five years ago. KKR says it hopes to complete the proposed IPO later this year.

In Washington, I’m Jeremy Hobson for Marketplace.

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