KKR's Bae, Nuttall succeed Kravis, Roberts as co-CEOs

Trading information for KKR & Co is displayed on a screen on the floor of the NYSE in New York
Trading information for KKR & Co is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., August 23, 2018. REUTERS/Brendan McDermid

Oct 11 (Reuters) - KKR & Co Inc (KKR.N) said on Monday it has elevated its co-presidents Scott Nuttall and Joseph Bae to co-chief executive officers, succeeding the storied private equity firm's billionaire co-founders Henry Kravis and George Roberts.

The transition has been in the works for years and is unlikely to surprise the firm's investors. KKR had named Bae, 49, and Nuttall, 48, as co-presidents in 2017. KKR said on Monday that Kravis, 77, and Roberts, 78, would remain involved in the running of the firm as executive co-chairmen.

KKR's shares have tripled in value and its assets under management and distributable earnings have doubled since Bae and Nuttall officially became Kravis and Roberts' top lieutenants four years ago, KKR said.

The shares were trading up 2% at $68.80 per share on Monday morning.

"We view the moves as orderly, and would not expect any breakage in assets under management or earnings," Citigroup Inc (C.N) analysts wrote in a note to investors.

Nuttall and Bae will face a challenge replicating the successful working relationship of the two cousins who started KKR 45 years ago. From having their last names as two of the three initials in KKR to fostering a close-knit culture of old-school Wall Street loyalty, Kravis and Roberts have maintained a tight grip on the firm and helped shape the leveraged buyout industry.

The move leaves Blackstone Group Inc (BX.N) CEO Stephen Schwarzman, 74, as the only founder of a major publicly listed private equity firm not to have relinquished the role of chief executive, though his No. 2, president and chief operating officer Jonathan Gray, has been in line for years to succeed him.

In 2018, Carlyle Group Inc (CG.O) CEO Kewsong Lee took over from co-founders David Rubenstein, William Conway and Daniel D'Aniello, and Ares Management Corp (ARES.N) CEO Michael Arougheti succeeded co-founder Tony Ressler. Apollo Global Management Inc (APO.N) co-founder Marc Rowan became CEO in March, replacing Leon Black who stepped down in the wake of scrutiny of his ties to the late financier and convicted sex offender Jeffrey Epstein.

Nuttall and Bae both joined KKR in 1996. Nuttall had previously spent less than two years at Blackstone, while Bae had a similarly short stint at Goldman Sachs Group Inc's (GS.N) principal investments group.

Nuttall helped take KKR public, a process that involved merging the firm with an Amsterdam-listed fund in 2009 and then moving the listing to New York in 2010. He has been a fixture on the firm's quarterly earnings call with Wall Street analysts and also ran KKR's capital markets, insurance, credit, hedge funds and fundraising initiatives.

Bae has been the main driver of KKR's expansion into Asia, making the firm one of the largest U.S. private equity investors on the continent. The Korean-American dealmaker also sat on the investment committees of KKR's global private equity business.

By attracting money from some of the world's largest institutional investors such as pension plans and sovereign wealth funds, KKR grew from a single $30 million fund in 1978 to more than $429 billion in assets under management currently. These assets span private equity, real estate, corporate credit and hedge funds.

KKR first gained widespread recognition through its $25 billion leveraged buyout of RJR Nabisco in 1988, a battle that was immortalized in the bestseller "Barbarians at the Gate". Its current investments include beauty products maker Wella AG and media group Axel Springer SE (SPRGn.S).

Kravis and Roberts have an estimated net worth of $8.6 billion and $9.1 billion, respectively, according to Forbes.

In addition to its leadership changes, KKR said on Monday it would take steps to eliminate its dual-class share structure. Carlyle was the first major publicly listed private equity firm to do this in 2019, followed by Apollo this year.

KKR said that its common shareholders will be able to vote on a one-to-one basis on all major important issues, including the election of board directors. It added that this will be achieved though a complex web of mergers of KKR entities to be completed by 2026.

Reporting by Chibuike Oguh in New York; editing by Diane Craft, Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Chibuike reports on mostly large U.S.-based private equity firms, including Blackstone, KKR, Carlyle, and Apollo. He previously worked at Bloomberg News, and holds master's degrees in journalism from New York University and Edinburgh Napier University. Contact: 332-999-6154