UPDATE 4-KKR to merge with Euronext fund, NYSE still eyed

* KKR to merge into Amsterdam-listed fund

* Fund to own 30 pct of new company, KKR remainder

* KKR still keen to list in New York -- source

* NYSE IPO could be as early as spring 2010 - source

* Withdraws previously filed IPO plans - filing (Adds details from source about potential IPO timing in paragraph 7, adds bullet point)

By Megan Davies

NEW YORK, June 24 (Reuters) - Private equity firm Kohlberg Kravis Roberts & Co announced plans on Wednesday to merge into its Amsterdam-listed fund, a roundabout way of gaining a European listing, while holding the door open for a possible move to the New York Stock Exchange.

KKR, one of the world's most powerful private equity firms, has been trying for two years to follow rival Blackstone Group LP (BX.N) and become a publicly traded company.

Under the deal proposed on Wednesday to merge with KKR Private Equity Investors LP (KKR.AS) (KPE), KKR plans to keep the Amsterdam fund listing -- a divergence from previous plans to delist it. KPE would own 30 percent of the combined business, an increase from the original 21 percent proposed to KPE shareholders.

"I view this as an in-between step," said Michael Kim, an analyst at Sandler O'Neill & Partners.

Kim thought the ultimate goal for KKR remains a NYSE listing.

KKR, which 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), remains very eager to pursue a listing in New York, a source close to the company said on Wednesday. The source said the new proposal gives it more freedom on the timing.

At the earliest, an IPO in New York could come in spring 2010, that source said.

KPE has no ability to force KKR into a listing for a year after the close of the deal. After that, if KKR has not sought a listing within 12 months of the deal's closing, KPE has the right to require the combined company to list in New York.

New York-based KKR launched plans to list on the NYSE in July 2007, a month after Blackstone went public and just before the markets started to tumble.

The firm, co-founded by "buyout king" Henry Kravis, had planned a traditional initial public offering. But it later proposed a complex method to go public, by combining with KPE, delisting the fund from Amsterdam and listing in New York.

The original deal gave an implied value for KPE shareholders of $16 to $19.20 a share, according to a KKR presentation at the time. It is unclear what the implied value is under the new deal.

KPE's shares closed at $5.70 in Amsterdam on Wednesday.

The deal has to be approved by KPE's shareholders, and KKR said it has already secured support from institutional investors holding about 44 percent of outstanding shares.

Investors backing the deal include Black River Asset Management LLC, Lexington Partners, Putnam Investments, RS Investments and Templeton Global Advisors Ltd, KKR said.

While the ownership for KPE increases to 30 percent, a previous offer of an additional 6 percent of equity if shares trade below a certain threshold is no longer included.

ULTIMATE GOAL?

KKR previously said a public listing would allow it to have a more permanent capital base, use stock to retain and attract staff and have a currency to make acquisitions.

While Wednesday's deal saw it retreat from definite plans to list in New York, it kept the door open for such a move, saying it had the ability to seek a listing in the future. The firm formally withdrew its previously filed IPO plans.

The deal to which KKR agreed in July 2008 was far clearer with regards to the NYSE listing. KKR had then said it would combine with KPE, delist it from Euronext and debut on the NYSE under the ticker symbol "KKR."

But the markets and economy have deteriorated dramatically since then, making a listing far less attractive.

Blackstone, the first major U.S. private equity firm to go public, also suffered. It launched in June 2007 at $31 a share, but is currently trading at around a third of that. In trading on Wednesday, it closed 16 cents higher at $11.20. (Reporting by Megan Davies; editing by Andre Grenon)