Administration April 10, 2002

Reports: KKR Might Sell Stake to State Pension Funds

October 4, 2002 (PLANSPONSOR.com) - One of the nation's largest and best-known leveraged buyout companies is thinking about selling minority stakes to two public pension funds to generate more capital, according to reports quoted by Reuters.
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According to the Reuters account, the New York-based Kohlberg Kravis Roberts & Co., (KKR) may sell up to a 15% stake to the Washington State Investment Board and the Oregon Investment Council for about $1 billion. The Reuters source cautioned that talks on the proposed deal are at an early stage.

Both potential buyers invest for their state’s public pension funds among other public programs.

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If completed, such a move would follow similar actions by competing private equity firms, which are investment partnerships that buy and sell companies that are generally privately held.

For instance, according to the Reuters story:

  • insurance giant American International Group in 1998 bought a 7% stake in Blackstone Group for $150 million and agreed to invest another $1.2 billion more in Blackstone’s funds
  • in 2001, the California Public Employees Retirement System (CalPERS) bought a 5.5% stake in the Washington, DC-based Carlyle Group for $175 million
  • the Boston-based Thomas H. Lee Co. has a similar arrangement with Putnam Investments.

Such moves benefit the public funds by giving them a direct stake in the often-lucrative returns that private equity firms can generate. And the buyout firms benefit by having strong financial backers at a time when their senior partners may be looking to retire, Reuters said.

However, the Reuters source said lead partners Henry Kravis and George Roberts aren’t contemplating selling their own stakes to the Washington and Oregon funds.

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