KKR Euronext listing moves closer; sees profit

By Megan Davies

NEW YORK (Reuters) - Private equity firm Kohlberg Kravis Roberts & Co KKR.UL on Monday moved a step closer to merging with its Euronext-listed fund after receiving approval from the board of the fund to combine businesses.

Combining with KKR Private Equity Investors LP (KKR.AS) (KPE) is a roundabout way for KKR to gain a European listing, and is a step toward it following rival Blackstone Group (BX.N) in becoming a New York Stock Exchange-listed company.

KKR, one of the world's most powerful private equity firms, also gave more details on the planned combination with KPE, including a proposed equity-incentive plan.

It provided an update on its profit outlook, saying earnings for the second quarter were expected to be between $345 million and $370 million. The most recent comparison are figures it released in May, which showed a loss for 2008 of $1.2 billion.

Fee-related earnings for the three months were expected to be between $45 million and $55 million, it said.

It also said assets under management for the end of June were expected to be $50.8 billion, a 7 percent rise from the $47.3 billion it disclosed in May.

KKR, co-founded by "buyout king" Henry Kravis, has investments in numerous household names such as Toys R Us Inc TOY.UL, mattress maker Sealy Corp (ZZ.N) and asset manager Legg Mason Inc (LM.N).

The economic meltdown hit the valuations of private equity firms' portfolios, their ability to raise money from the large pension funds that invest in their funds, and their ability to do leveraged deals.

However, KPE's net asset value is expected to be $3 billion for the end of June; a 14 percent rise from the $2.6 billion reported for the end of March, the firms said.

On a per unit basis, KPE's net asset value is expected to be between $14.55 and $14.75 per unit, a 13-15 percent rise from the $12.82 reported for the end of March.

The figures are down from the same period a year earlier, however, when KPE's net asset value was $4.6 billion, or $22.25 per unit.

Valuations have been helped by a rebound in the equity markets over the last few months. Private equity firms have to value their portfolio companies as if they were selling them today; rather than years in the future. In its first-quarter figures, KKR wrote up its investments in companies including discount chain Dollar General and hospital company HCA.

KPE has investments in six KKR private equity funds.

NYSE LISTING PLANS

KKR launched plans to list on the NYSE via a traditional initial public offering in July 2007, a month after Blackstone went public and just before the markets started to tumble.