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Datum nieuwsfeit: 28-07-2008
KKR Private Equity Investors and KKR & Co. Agree to Business Combination
( BW)(KKR-PR/KKR)(KPE.AS) KKR Private Equity Investors and KKR & Co.
Agree to Business Combination
Business Editors
GUERNSEY, Channel Islands--(BUSINESS WIRE)--July 27, 2008--
Investment Community Briefing Set for Monday, July 28 at 8 A.M.
EDT via Webcast on KKR and KPE's web sites
KKR Private Equity Investors, L.P. (Euronext Amsterdam: KPE) and
KKR & Co. L.P. (collectively with its consolidated affiliates, "KKR")
announced today that they have entered into an agreement providing for
the acquisition of all of the assets, and assumption of all of the
liabilities, of KPE by KKR. In conjunction with this transaction, KKR
will become publicly listed on the New York Stock Exchange (the
"NYSE") under the symbol KKR.
Under the terms of the agreement, KPE unitholders and related
depositary units would receive equity interests in KKR, after which
KPE would be dissolved and delisted from Euronext Amsterdam. Upon
completion of the transaction, those interests would constitute 21% of
the equity in the combined business. The remaining 79% of the equity
in the combined entity would be retained by KKR executives. In
addition, KPE unitholders would receive a contingent value interest
providing consideration of up to an additional 6% of the equity in the
combined company as of the completion of the transaction to the extent
that KKR units trade below a specified threshold, tied to KPE's June
30, 2008 net asset value, three years after completion of the
transaction.
The transaction does not involve the payment of any cash
consideration or involve an offering of any newly issued securities
directly to the public for cash. KKR executives are not selling any
equity interests in the transaction.
The agreement was unanimously approved by the board of directors
of KPE's general partner, acting upon the unanimous recommendation of
the directors of KPE's general partner who are independent of KKR
under NYSE standards. Completion of the transaction is subject to
approval by KPE unitholders holding a majority of KPE's common units
(excluding for such purpose units whose vote is controlled by KKR and
its affiliates) and other customary closing conditions.
Henry R. Kravis and George R. Roberts, co-founders of KKR, said,
"This transaction offers substantial benefits for KPE unitholders, and
it builds KKR for the long-term. Going forward, KPE unitholders will
benefit by being owners in a diversified asset management business
that generates regular distributions of cash earnings. For KKR, this
transaction provides us with additional capital for our business.
Moving forward with a public listing will allow KKR to do what we do
best -- grow companies around the world and produce solid returns for
our investors from a larger platform and a deeper capital base."
The independent directors of KPE issued the following statement
relating to the transaction: "KPE's independent directors unanimously
approve this transaction and we believe that it is in the best
interests of KPE unitholders. The transaction will create a
partnership with a more diverse asset base in terms of strategies,
geographies and companies; allow for the regular distribution of cash
earnings; and facilitate the purchase and sale of stock in a more
liquid market. Through the transaction, KPE unitholders will benefit
from direct access to KKR's entire business as it builds upon its
private equity foundation, while retaining significant participation
through the contingent value interests should there be a shortfall in
the expected value of the combined company."
Preliminary unaudited pro forma segment information for the
combined business for the twelve months ended December 31, 2007 and
the three months ended March 31, 2008, which pro forma information
gives effect to the KPE transaction and related internal restructuring
transactions and which also includes an expected range of economic net
income for KKR's total reportable segments on a historic basis for the
six months ended June 30, 2008, is set forth on Annex A to this press
release. KKR also announced today that it expects its assets under
management as of June 30, 2008 to be approximately $60.8 billion, up
from $53.2 billion on December 31, 2007. Separately today, KPE
publicly announced its financial results for the quarter and six
months ended June 30, 2008.
Additional details regarding the terms and conditions of the
transaction are set forth on Annex B to this press release. In
addition, the presentation made available by KPE and KKR announcing
the transaction is set forth on Annex C to this press release.
Completion of the transaction is expected to occur during the
fourth quarter of 2008. Until then, KPE units will continue to trade
on Euronext Amsterdam. Solicitation of consents from KPE unitholders
is anticipated to commence during the fourth quarter of 2008.
Citi is acting as sole financial advisor to KPE. Lazard is acting
as financial advisor to the independent directors and Bredin Prat is
acting as lead legal counsel to KPE and the independent directors.
Citi and Lazard have each delivered to the independent directors their
respective opinions to the effect that, as of the date of such opinion
and based upon and subject to the qualifications and assumptions
disclosed in such opinion, the exchange ratio of the number of KKR
common units and contingent value interests to be received in the
transaction for each KPE common unit is fair, from a financial point
of view, to the holders of KPE common units (other than KKR and its
affiliates). The full texts of each written opinion will be disclosed
in the consent solicitation materials provided to holders of KPE
common units.
Goldman Sachs and Morgan Stanley are acting as financial advisors
to KKR and Simpson Thacher & Bartlett LLP is acting as lead legal
counsel to KKR.
Information for Investors - Teleconference and Webcast
KPE and KKR will discuss this business combination on a
teleconference to be broadcast live on the Internet on Monday, July
28, 2008 at 2:00 p.m. CET (Amsterdam) / 1:00 p.m. GMT
(Guernsey/London) / 8:00 a.m. EDT (New York City). A webcast (listen
only) of the teleconference can be accessed via the Investor Relations
section of KPE's website at www.kkrprivateequityinvestors.com as well
as on KKR's website at www.kkr.com.
About KPE
KKR Private Equity Investors, L.P. (Euronext Amsterdam: KPE) is a
Guernsey limited partnership that seeks to create long-term value by
participating in private equity and opportunistic investments
selected, evaluated, structured, monitored and exited by investment
professionals of Kohlberg Kravis Roberts & Co. ("KKR"). As of June 30,
2008, over 90% of KPE's $5.4 billion portfolio was comprised of
limited partner interests in six KKR private equity funds,
co-investments in 13 companies alongside the private equity funds and
negotiated equity investments. The remainder of KPE's portfolio as of
June 30, 2008 was invested in opportunistic and temporary investments.
KPE is governed by its general partner's board of directors, which has
a majority of independent directors, and makes its investments as the
sole limited partner of another Guernsey limited partnership, KKR PEI
Investments, L.P.
The common units and related restricted depositary units of KPE
are subject to a number of ownership and transfer restrictions.
Information concerning these ownership and transfer restrictions is
included in the Investor Relations section of KPE's website at
www.kkrprivateequityinvestors.com.
About KKR
Established in 1976, KKR is a leading global alternative asset
manager. The core of the firm's franchise is sponsoring and managing
funds that make private equity investments in North America, Europe,
and Asia. Throughout its history, KKR has brought a long-term
investment approach to portfolio companies, focusing on working in
partnership with management teams and investing for future
competitiveness and growth. Additional funds that KKR sponsors include
KKR Financial (NYSE: KFN) and the KKR Strategic Capital Funds, which
make investments in debt transactions. KKR has offices in New York,
Menlo Park, San Francisco, Houston, London, Paris, Hong Kong, Tokyo,
Beijing and Sydney. More information about KKR is available at:
www.kkr.com.
Forward-Looking Statements
This release contains certain forward-looking statements.
Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical
facts. The forward-looking statements are based on KPE's and KKR's
beliefs, assumptions and expectations of their future performance,
taking into account all information currently available to them. These
beliefs, assumptions and expectations can change as a result of many
possible events or factors, not all of which are known to KPE and KKR
or are within their control. If a change occurs, KPE's and KKR's
business, financial condition, liquidity and results of operations may
vary materially from those expressed in the forward-looking
statements. The following factors, among others, could cause actual
results to vary from the forward-looking statements: general
volatility of the capital markets; changes in KPE's and KKR's business
strategy; availability, terms and deployment of capital; availability
of qualified personnel and expense of recruiting and retaining such
personnel; changes in the asset management industry, interest rates or
the general economy; underperformance of KKR's investments and
decreased ability to raise funds; increased rates of default and/or
decreased recovery rates on KPE's investments; and the degree and
nature of KPE's and KKR's competition. Neither KPE nor KKR undertakes
any obligation to update any forward-looking statements to reflect
circumstances or events that occur after the date on which such
statements were made except as required by law. In addition, KKR's and
KPE's business strategy is focused on the long-term and financial
results are subject to significant volatility. Historically
year-to-year results have varied dramatically and have not be subject
to reliable forecasting. Additional factors that could cause
performance, returns or results to differ materially from the
forward-looking statements can be found in KKR's Registration
Statement on Form S-1 (file no. 333-144335) filed with the Securities
and Exchange Commission.
Additional Information About the Transaction and Where to Find It
This release is being made in respect of the proposed transaction
involving KKR and KPE. In connection with the proposed transaction,
KKR will file with the SEC an amendment to its existing Registration
Statement on Form S-1 (file no. 333-144335) and will be filing other
documents regarding the proposed transaction with the SEC. INVESTORS
AND SECURITY HOLDERS OF KPE ARE URGED TO READ THE REGISTRATION
STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR
ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The final
prospectus contained in the registration statement will be mailed or
otherwise disseminated to the holders of KPE's common units. Holders
of KPE's common units will be able to obtain free copies of the final
prospectus (when available) and other documents filed with the SEC by
KKR through the web site maintained by the SEC at www.sec.gov. Free
copies of the final prospectus (when available) and other documents
filed with the SEC can also be obtained by directing a request to KKR,
9 W. 57th Street, Suite 4200, New York, New York 10019
Annex A
PRELIMINARY UNAUDITED PRO FORMA SEGMENT INFORMATION
The following preliminary unaudited pro forma segment information
for the year ended December 31, 2007 and the three months ended March
31, 2008 gives effect to:
-- the acquisition by KKR & Co. L.P. ("KKR") of all of the
outstanding limited partner interests in KKR PEI Investments,
L.P. (the "Acquired Partnership") from KKR Private Equity
Investors, L.P. ("KPE") and the assumption by KKR of all of
the liabilities of KPE in exchange for newly issued common
units and contingent value interests in KKR (the
"Acquisition"); and
-- certain aspects of the internal restructuring transactions
that have been or will be effected by the KKR Group prior to
the completion of the Acquisition (the "Restructuring
Transactions").
This preliminary unaudited pro forma segment information is based
on historical segment information of the accounting predecessor of KKR
(the "KKR Group") and historical financial information of the Acquired
Partnership and gives effect to the aspects of the Restructuring
Transactions and the Acquisition described herein as if they had
occurred on January 1, 2007 by applying the adjustments described in
the accompanying notes. Such adjustments are based on information that
is currently available and determinable and on assumptions that
management believes are reasonable in order to reflect, on a pro forma
basis, the impact of the transaction aspects described herein on the
historical segment financial information of the KKR Group.
This preliminary unaudited pro forma segment information is
included for informational purposes only and is preliminary in nature
due to the fact that not all information relating to the Restructuring
Transactions and the Acquisition is currently available and
determinable. This information does not purport to show the pro forma
impact of any transactions or arrangements relating to the
Restructuring Transactions and the Acquisition other than those
specifically described herein or the pro forma impact of any
transactions or arrangements on the financial condition of the
reportable business segments of the KKR Group or the combined
statement of financial condition and statements of income of the KKR
Group presented in accordance with generally accepted accounting
principles in the United States ("GAAP"). In addition, this
information does not purport to show the actual segment or financial
statement results that the KKR Group would have had if the
Restructuring Transactions and the Acquisition had occurred on the
date indicated, or had KKR operated as a public company during the
periods presented, or for any future period.
This preliminary unaudited pro forma segment information is
subject to change as additional information concerning the
Restructuring Transactions and the Acquisition becomes available or
determinable. This information will also differ from any pro forma
financial information of the KKR Group that gives effect to the impact
of the Restructuring Transactions and the Acquisition on the face of
the combined financial statements of the KKR Group that are presented
in accordance with GAAP. See "Reconciliation of Segment Reporting to
Financial Statement Reporting and Net Income," "Basis of
Presentation," "Notes to Preliminary Unaudited Pro Forma Segment
Information -- Transactions and Adjustments Excluded from Pro Forma
Presentation." You are cautioned not to place undue reliance on this
information.
Basis of Presentation
Financial Statements
The KKR Group is considered the predecessor of KKR for accounting
purposes and its historical combined financial statements will be the
historical financial statements of KKR following the completion of the
Restructuring Transactions and the Acquisition. In accordance with
GAAP, the historical combined financial statements of the KKR Group
consolidate a number of funds that are sponsored by the KKR Group,
despite the fact that the KKR Group has only a minority economic
interest in those entities. This consolidation is due to the
substantive controlling rights and operational discretion that the KKR
Group maintains over such entities through its general partner or
managing member interests and the fact that non-controlling interest
holders do not hold any substantive rights that would enable them to
impact the ongoing governance and operating activities of such
entities. These consolidated entities, which include the Acquired
Partnership, are collectively referred to as the "Consolidated
Entities."
As a result of the consolidation of the Consolidated Entities, the
combined financial statements of the KKR Group reflect the assets,
liabilities, revenues, expenses and cash flows of the Consolidated
Entities on a gross basis. The majority of the economic interests in
the Consolidated Entities, which are held by third-party investors,
are reflected as non-controlling interests. Substantially all of the
management fees and certain other amounts that the KKR Group earns
from the Consolidated Entities are eliminated in combination. However,
because those amounts are earned from non-controlling interest
holders, the KKR Group's allocable share of the net income from the
Consolidated Entities is increased by the amounts eliminated.
Accordingly, the consolidation of the Consolidated Entities does not
have a net effect on the amounts of income before taxes, net income or
partners' capital that are reported by the KKR Group.
While the consolidation of the Consolidated Entities does not have
a net effect on the amounts of income before taxes, net income or
partners' capital reported by the KKR Group, the consolidation does
significantly impact other aspects of the combined financial statement
presentation of the KKR Group. This is due to the fact that the
assets, liabilities, income and expenses of the Consolidated Entities
are reflected on a gross basis while the allocable share of those
amounts that are attributable to non-controlling interest holders are
reflected as single line items. The single line items in which the
assets, liabilities, income and expense attributable to
non-controlling interest holders are recorded consist of
"non-controlling interests in consolidated entities" in the statement
of financial condition and "non-controlling interests in income of
consolidated entities" in the income statement.
Segment Information
The historical segment financial information of the KKR Group is
presented as a supplemental disclosure for the reportable business
segments of the KKR Group in accordance with Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). This standard is
based on a management approach, which requires segment presentation
based on the financial reporting used by management to make operating
decisions, assess performance and allocate resources. The KKR Group
currently operates through two reportable business segments: Private
Equity and Fixed Income. All inter-segment transactions are eliminated
in the segment presentation.
Management of the KKR Group makes operating decisions, assesses
performance and allocates resources based on financial and operating
data and measures that are presented without giving effect to the
consolidation of any of the Consolidated Entities. As a result, unlike
the reporting in the combined financial statements of the KKR Group,
the KKR Group's segment reporting does not give effect to the
consolidation of the Consolidated Entities. The exclusion of the
Consolidated Entities in segment reporting results in the inclusion of
management fees and incentive fees in fee income that would otherwise
be eliminated in combination, the exclusion of investment income and
expenses that are attributable to non-controlling interests held by
third-party investors and the exclusion of corresponding charges and
credits that are accounted for as non-controlling interests in the
income of consolidated entities.
Given the differences between the combined financial statement
presentation and the segment reporting of the KKR Group, the
preliminary unaudited pro forma segment information presented in this
document, including the adjustments described in the accompanying
notes, will differ from pro forma financial information of the KKR
Group that gives effect to the impact of the Restructuring
Transactions and the Acquisition and related adjustments on the KKR
Group's combined financial statements. This preliminary unaudited pro
forma segment information should not be considered as a substitute for
pro forma financial information of the KKR Group that gives effect to
the impact of the Restructuring Transactions and the Acquisition and
related adjustments on the KKR Group's combined financial statements
or for the combined financial statements of the KKR Group presented in
accordance with GAAP. For a reconciliation of management's reporting
of the historical segment information of the KKR Group and preliminary
unaudited pro forma segment information of KKR to the historical
combined operating results of the KKR Group and the preliminary
unaudited pro forma combined operating results of KKR, see
"Reconciliation of Segment Reporting to Financial Statement Reporting
and Net Income."
Restructuring Transactions
Acquisition of Non-Controlling Interests in Fixed Income Segment
In the historical combined financial statements, the KKR Group
held all of the equity interests in the parent of the management
companies for the KKR Group's credit strategy funds other than certain
non-controlling interests that allocated 35% of the net income
generated by the parent company to the non-controlling interest
holders. On May 30, 2008, the KKR Group entered into an agreement to
acquire all of these non-controlling interests for cash consideration
(the "KFI Acquisition"). As a result of the KFI Acquisition, the KKR
Group now owns all of the equity interests in the parent of the
management companies for its credit strategy funds and is entitled to
all of the net income and cash flows generated by the management
companies.
Conversion into a Holding Partnership Structure
Prior to the completion of the Acquisition, the business of the
KKR Group will be reorganized under two new partnerships (the "Group
Partnerships") of which KKR will serve as the ultimate general
partner. The reorganization will involve a contribution of equity
interests in the KKR Group that are held by KKR principals in exchange
for newly issued Group Partnership units. No cash will be received in
connection with such exchanges. As a result of these transactions, the
Group Partnerships will hold all of the controlling and
non-controlling interests in the entities that are consolidated in the
historical combined financial statements of the KKR Group other than:
-- controlling and economic interests in the 1996 Fund and such
fund's general partners, which interests will not be
contributed to the Group Partnerships due to the fact that the
general partners of those funds are not expected to receive
meaningful proceeds from further realizations of investments;
-- non-controlling economic interests in the KKR Group that will
allocate to a former KKR principal and such person's designees
an aggregate of 1% of the carried interest received by general
partners of the KKR funds and 1% of any other earnings of the
KKR Group until a future date;
-- non-controlling economic interests in the KKR Group that will
allocate to former KKR principals and their designees a
portion of the carried interest received by the general
partners of the KKR Funds with respect to investments made
during the tenure of such former KKR principals with KKR; and
-- non-controlling economic interests in the KKR Group that will
allocate to current and former KKR principals all of the
capital invested by or on behalf of the general partners of
the KKR funds before the completion of the Restructuring
Transactions and the Acquisition and any profits thereon.
The controlling and economic interests in the 1996 Fund and the
general partners of the 1996 Fund described above will no longer be
reflected in the combined financial statements of the KKR Group
following the completion of the Restructuring Transactions and the
Acquisition, due to the fact that such interests will not be acquired
by the Group Partnerships. The other non-controlling economic
interests described above (the "Other Interests") are currently
reflected in the partners' capital of the KKR Group, but will be
accounted for as non-controlling interests in consolidated entities
from and after the completion of the Restructuring Transactions,
because such interests will be held at a subsidiary level. The
allocable share of income and expense attributable to the Other
Interests will be accounted for as non-controlling interests in income
of consolidated entities. The allocable share of capital attributable
to the Other Interests will be accounted for as non-controlling
interests in consolidated entities.
Acquisition
In connection with the Acquisition, KKR will acquire all of the
assets of KPE, including the limited partner interests of the Acquired
Partnership and assume all of the liabilities of KPE in exchange for
newly issued common units and contingent value interests ("CVIs") in
KKR. The common units of KKR issued to KPE unitholders will represent
21% of the outstanding limited partner interests in KKR upon the
completion of the Acquisition, assuming that all Group Partnership
units indirectly held by current KKR principals are exchanged for
newly-issued KKR common units on a one-for-one basis and excluding any
equity grants made under KKR's equity incentive plan. KKR principals
will hold their Group Partnership units through KKR Holdings, L.P.
("KKR Holdings"). See "Note (IV) under Transactions and Adjustments
Excluded from Pro Forma Presentation" for a description of the
exchangeability of Group Partnership units for KKR common units.
The CVIs issued by KKR reflect the terms of a purchase price
adjustment mechanism (the "PPAM") embedded in KKR's interests in the
Group Partnerships. Under the PPAM, KKR will be entitled to a variable
amount of newly issued Group Partnership common units or cash, at the
election of KKR Holdings, on the third anniversary of the issue date
in the event that the trading price of a KKR common unit over an
averaging period plus the cumulative distributions paid on a KKR
common unit from the issue date are less than $22.25. Any
consideration required to be delivered by the Group Partnerships to
KKR will be paid by KKR to the CVI holders as follows:
-- If the PPAM is settled by the Group Partnerships with
newly-issued Group Partnership common units, KKR will issue an
equivalent number of its own additional common units to CVI
holders in settlement of the CVIs. A corresponding number of
Group Partnership units held by KKR principals through KKR
Holdings will then be cancelled.
-- If the PPAM is settled by the Group Partnerships with cash,
KKR principals will through KKR Holdings contribute cash to
the Group Partnerships in an amount equal to the cash
settlement price of the CVIs. The Group Partnerships will
distribute such cash to KKR, which will then deliver the cash
to CVI holders in settlement of the CVIs.
The consideration payable under the PPAM will be subject to a cap,
such that the maximum consideration delivered in respect of the PPAM
(and ultimately to the CVI holders) will not exceed 0.2857 common
units per CVI or $4.94 of cash per CVI. The actual amount of
consideration delivered under the PPAM (and ultimately to the CVI
holders), if any, may be lower and will ultimately depend on the
trading price of KKR common units and the amount of distributions made
thereon.
Upon completion of the transactions described above, KKR will
directly or indirectly contribute all of the limited partner interests
in the Acquired Partnership (and in certain cases direct assets of the
Acquired Partnership) to the Group Partnerships in exchange for newly
issued partner interests in the Group Partnerships ("Group Partnership
units"). Units in one of the Group Partnerships will be held through
an intermediate holding company that will be taxable as a corporation
for U.S. federal income tax purposes. See Note (III) under
"Transactions and Adjustments Excluded from Pro Forma Presentation."
The Group Partnership units will provide KKR with a 21% economic
interest in each of the Group Partnerships and allow KKR to share
ratably in the assets, liabilities, profits, losses and distributions
of the Group Partnerships. The balance of the Group Partnership units
will be held by current KKR principals through their interests in KKR
Holdings and will be accounted for in the consolidated financial
statements of KKR as non-controlling interests in consolidated
entities.
All amounts in the following tables and notes to preliminary
unaudited pro-forma segment information are in thousands ($000s).
-0-
*T
KKR Group Historical Total Reportable Segment Information
Three Months Ended March 31, 2008
(e)
Acquired
Total Partnership
Private Fixed Reportable Historical
Equity Income Segments Information
---------- -------- ----------- -----------
Management Fees $ 78,833 $16,127 $ 94,960 $ --
Advisory Fees 37,740 3,333 41,073 --
Incentive Fees -- -- -- --
---------- -------- ----------- -----------
Total Fee Income 116,573 19,460 136,033 --
---------- -------- ----------- -----------
Employee Compensation and
Benefits 43,412 4,651 48,063 --
Other Operating Expenses 48,561 4,154 52,715 14,748
---------- -------- ----------- -----------
Total Expenses 91,973 8,805 100,778 14,748
---------- -------- ----------- -----------
Fee Related Earnings 24,600 10,655 35,255 (14,748)
Investment Income (Loss) (148,310) (85) (148,395) (253,287)
Non-Controlling Interests 65 3,805 3,870 --
---------- -------- ----------- -----------
Economic Net Income (Loss) $(123,775) $ 6,765 $(117,010) $(268,035)
========== ======== =========== ===========
*T
-0-
*T
KKR Group Total Reportable Segment Pro Forma Information
After Adjustments for the Restructuring Transactions and the
Acquisition
Three Months Ended March 31, 2008
Total
Reportable Adjustments for
Segments Restructuring
Historical Transactions
------------- -----------------
Management Fees $ 94,960 $ --
Advisory Fees 41,073 --
Incentive Fees -- --
--------- --------
Total Fee Income 136,033 --
--------- --------
Employee Compensation and Benefits 48,063 (17,585) (d)
Other Operating Expenses 52,715 (21) (a)
--------- --------
Total Expenses 100,778 (17,606)
--------- --------
Fee Related Earnings 35,255 17,606
Investment Income (Loss) (148,395) 14,437 (a)
Non-Controlling Interests 3,870 (41,665) (b) (c)
--------- --------
Economic Net Income (Loss) $(117,010)(1) $ 73,708
========= ========
Acquired
Partnership Total Total
and Reportable Reportable
Adjustments Segments Allocation to Segments
for As Adjusted KKR Holdings Pro forma
Acquisition (100%) (79%) (21%)
-------------- ----------- -------------- -----------
Management Fees $ (13,470) (f) $ 81,490 $ -- $ 81,490
Advisory Fees -- 41,073 -- 41,073
Incentive Fees -- (f) -- -- --
--------- ---------- --------- ----------
Total Fee Income (13,470) 122,563 -- 122,563
--------- ---------- --------- ----------
Employee
Compensation and
Benefits -- 30,478 -- 30,478
Other Operating
Expenses 1,278 (f) 53,972 -- 53,972
--------- ---------- --------- ----------
Total Expenses 1,278 84,450 -- 84,450
--------- ---------- --------- ----------
Fee Related
Earnings (14,748) 38,113 -- 38,113
Investment Income
(Loss) (252,755) (g) (386,713) -- (386,713)
Non-Controlling
Interests (2,676) (h) (40,471) (243,423) (i) (283,894)
--------- ---------- --------- ----------
Economic Net
Income (Loss) $(264,827) $(308,129) $ 243,423 $ (64,706)
========= ========== ========= ==========
*T
(1) For the six months ended June 30, 2008, Economic Net Income
for the total reportable segments of the KKR Group on a historical
basis is expected to be between $80 million and $120 million. See
"Forward-Looking Statements" in the press release to which this Annex
is attached.
-0-
*T
KKR Group Private Equity Pro Forma Information
After Adjustments for the Restructuring Transactions and the
Acquisition
Three Months Ended March 31, 2008
Private Adjustments for Adjustments
Equity Restructuring for
Historical Transactions Acquisition
------------ --------------- ---------------
Management Fees $ 78,833 $ -- $ (12,817) (f)
Advisory Fees 37,740 -- --
Incentive Fees -- -- --
----------- ---------- ---------
Total Fee Income 116,573 -- (12,817)
----------- ---------- ---------
Employee Compensation
and
Benefits 43,412 (16,194) (d) --
Other Operating Expenses 48,561 (21) (a) --
----------- ---------- ---------
Total Expenses 91,973 (16,215) --
----------- ---------- ---------
Fee Related Earnings 24,600 16,215 (12,817)
Investment Income (Loss) (148,310) 14,437 (a) 3,355 (g)
Non-Controlling
Interests 65 (37,979) (b) (95) (h)
----------- ---------- ---------
Economic Net Income
(Loss) $ (123,775) $ 68,631 $ (9,367)
=========== ========== =========
Private
Equity Private
As Allocation to Equity
Adjusted KKR Holdings Pro-Forma
(100%) (79%) (21%)
---------- ------------- ----------
Management Fees $ 66,016 $ -- $ 66,016
Advisory Fees 37,740 -- 37,740
Incentive Fees -- -- --
--------- -------- ---------
Total Fee Income 103,756 -- 103,756
--------- -------- ---------
Employee Compensation and
Benefits 27,218 -- 27,218
Other Operating Expenses 48,540 -- 48,540
--------- -------- ---------
Total Expenses 75,758 -- 75,758
--------- -------- ---------
Fee Related Earnings 27,998 -- 27,998
Investment Income (Loss) (130,518) -- (130,518)
Non-Controlling Interests (38,009) (50,964) (i) (88,973)
--------- -------- ---------
Economic Net Income (Loss) $ (64,511) $ 50,964 $ (13,547)
========= ======== =========
*T
-0-
*T
KKR Group Fixed Income Pro Forma Information
After Adjustment for the Restructuring Transactions and the
Acquisition
Three Months Ended March 31, 2008
Adjustments
Fixed for Adjustments
Income Restructuring for
Historical Transactions Acquisition
---------- ------------- -----------
Management Fees $16,127 $ -- $(653) (f)
Advisory Fees 3,333 -- --
--
Incentive Fees -- -- (f)
--------- -------- ------
Total Fee Income 19,460 -- (653)
--------- -------- ------
Employee Compensation and
Benefits 4,651 (1,391) (d) --
Other Operating Expenses 4,154 -- --
--------- -------- ------
Total Expenses 8,805 (1,391) --
--------- -------- ------
Fee Related Earnings 10,655 1,391 (653)
Investment Income (Loss) (85) -- --
Non-Controlling Interests 3,805 (3,686) (c) (7) (h)
--------- -------- ------
Economic Net Income (Loss) $ 6,765 $ 5,077 $(646)
========= ======== ======
Fixed
Fixed Income Allocation to Income
As Adjusted KKR Holdings Pro-Forma
(100%) (79%) (21%)
--------------- -------------- -----------
Management Fees $ 15,474 $ -- $ 15,474
Advisory Fees 3,333 -- 3,333
Incentive Fees -- -- --
-------------- ------------- ----------
Total Fee Income 18,807 -- 18,807
-------------- ------------- ----------
Employee Compensation and
Benefits 3,260 -- 3,260
Other Operating Expenses 4,154 -- 4,154
-------------- ------------- ----------
Total Expenses 7,414 -- 7,414
-------------- ------------- ----------
Fee Related Earnings 11,393 -- 11,393
Investment Income (Loss) (85) -- (85)
Non-Controlling Interests 112 8,844 (i) 8,956
-------------- ------------- ----------
Economic Net Income (Loss) $ 11,196 $ (8,844) $ 2,352
============== ============= ==========
*T
-0-
*T
KPE Partnership Pro Forma Information
After Adjustments for the Restructuring Transactions and the
Acquisition
Three Months Ended March 31, 2008
(e) Adjustments
Acquired for Adjustments
Partnership Restructuring for
Historical Transactions Acquisition
------------ ------------- -------------
Management Fees $ -- $-- $ --
Advisory Fees -- -- --
Incentive Fees -- -- --
----------- ------------- --------
Total Fee Income -- -- --
----------- ------------- --------
Employee Compensation and
Benefits -- -- --
Other Operating Expenses 14,748 -- (13,470) (f)
----------- ------------- --------
Total Expenses 14,748 -- (13,470)
----------- --------
Fee Related Earnings (14,748) -- 13,470
Investment Income (Loss) (253,287) -- (2,823) (g)
Non-Controlling Interests -- -- (2,574) (h)
----------- ------------- --------
Economic Net Income (Loss) $(268,035) $-- $ 13,221
=========== ============= ========
(e)
Principal Allocation to Principal
As Adjusted KKR Holdings Pro-Forma
(100%) (79%) (21%)
------------ --------------- ------------
Management Fees $ -- $ -- $ --
Advisory Fees -- -- --
Incentive Fees -- -- --
----------- ---------- -----------
Total Fee Income -- -- --
----------- ---------- -----------
Employee Compensation and
Benefits -- -- --
Other Operating Expenses 1,278 -- 1,278
----------- ---------- -----------
Total Expenses 1,278 -- 1,278
----------- ---------- -----------
Fee Related Earnings (1,278) -- (1,278)
Investment Income (Loss) (256,110) -- (256,110)
Non-Controlling Interests (2,574) (201,303) (i) (203,877)
----------- ---------- -----------
Economic Net Income (Loss) $ (254,814) $ 201,303 $ (53,511)
=========== ========== ===========
*T
-0-
*T
KKR Group Historical Total Reportable Segment Information
Year Ended December 31, 2007
(e)
Acquired
Total Partnership
Private Fixed Reportable Historical
Equity Income Segments Information
-------- -------- ----------- -----------
Management Fees $231,527 $ 68,194 $299,721 $ --
Advisory Fees 537,126 11,421 548,547 --
Incentive Fees -- 23,335 23,335 --
-------- -------- ----------- -----------
Total Fee Income 768,653 102,950 871,603 --
-------- -------- ----------- -----------
Employee Compensation and
Benefits 187,540 24,507 212,047 --
Other Operating Expenses 209,700 16,349 226,049 56,157
-------- -------- ----------- -----------
Total Expenses 397,240 40,856 438,096 56,157
-------- -------- ----------- -----------
Fee Related Earnings 371,413 62,094 433,507 (56,157)
Investment Income (Loss) 403,601 984 404,585 58,930
Non-Controlling Interests -- 23,264 23,264 --
-------- -------- ----------- -----------
Economic Net Income (Loss) $775,014 $ 39,814 $814,828 $ 2,773
======== ======== =========== ===========
*T
-0-
*T
KKR Group Total Reportable Segment Pro Forma Information
After Adjustments for the Restructuring Transactions and the
Acquisition
Year Ended December 31, 2007
Acquired
Partnership
Total and
Reportable Adjustments for Adjustments
Segments Restructuring for
Historical Transactions Acquisition
----------- ----------------- -------------
Management Fees $299,721 $ -- $(47,584) (f)
Advisory Fees 548,547 -- --
Incentive Fees 23,335 -- (956) (f)
----------- ---------- ---------
Total Fee Income 871,603 -- (48,540)
----------- ---------- ---------
Employee Compensation and
Benefits 212,047 (101,756) (d) --
Other Operating Expenses 226,049 (2,184) (a) 7,617 (f)
----------- ---------- ---------
Total Expenses 438,096 (103,940) 7,617
----------- ---------- ---------
Fee Related Earnings 433,507 103,940 (56,157)
Investment Income (Loss) 404,585 (111,144) (a) 58,827 (g)
Non-Controlling Interests 23,264 48,772 (b)(c) 28 (h)
----------- ---------- ---------
Economic Net Income (Loss) $814,828 $ (55,976) $ 2,642
=========== ========== =========
Total Total
Reportable Reportable
Segments Allocation to Segments
As Adjusted KKR Holdings Pro Forma
(100%) (79%) (21%)
----------- -------------- -----------
Management Fees $252,137 $ -- $252,137
Advisory Fees 548,547 -- 548,547
Incentive Fees 22,379 -- 22,379
----------- ---------- -----------
Total Fee Income 823,063 -- 823,063
----------- ---------- -----------
Employee Compensation and
Benefits 110,291 -- 110,291
Other Operating Expenses 231,482 -- 231,482
----------- ---------- -----------
Total Expenses 341,773 -- 341,773
----------- ---------- -----------
Fee Related Earnings 481,290 -- 481,290
Investment Income (Loss) 352,268 -- 352,268
Non-Controlling Interests 72,064 601,581 (i) 673,645
----------- ---------- -----------
Economic Net Income (Loss) $761,494 $(601,581) $159,913
=========== ========== ===========
*T
-0-
*T
KKR Group Private Equity Pro Forma Information
After Adjustments for the Restructuring Transactions and the
Acquisition
Year Ended December 31, 2007
Adjustments for
Private Equity Restructuring Adjustments
Historical Transactions for Acquisition
-------------- ---------------- ---------------
Management Fees $231,527 $ -- $(44,040) (f)
Advisory Fees 537,126 -- --
Incentive Fees -- -- --
-------------- ----------- ----------
Total Fee Income 768,653 -- (44,040)
-------------- ----------- ---------------
Employee Compensation
and Benefits 187,540 (95,600) (d) --
Other Operating
Expenses 209,700 (2,184) (a) --
-------------- ---------------- ----------
Total Expenses 397,240 (97,784) --
-------------- ---------------- ----------
Fee Related Earnings 371,413 97,784 (44,040)
Investment Income
(Loss) 403,601 (111,144) (a) (14,147) (g)
Non-Controlling
Interests -- 71,344 (b) (581) (h)
-------------- ----------- ---------------
Economic Net Income
(Loss) $775,014 $ (84,704) $(57,606)
============== ================ ===============
Private Equity Allocation to KKR Private Equity
As Adjusted Holdings Pro-Forma
(100%) (79%) (21%)
-------------- ------------------ --------------
Management Fees $187,487 $ -- $187,487
Advisory Fees 537,126 -- 537,126
Incentive Fees -- -- --
-------------- --------------- --------------
Total Fee Income 724,613 -- 724,613
-------------- --------------- --------------
Employee Compensation
and Benefits 91,940 -- 91,940
Other Operating
Expenses 207,516 -- 207,516
-------------- ------------------ --------------
Total Expenses 299,456 -- 299,456
-------------- ------------------ --------------
Fee Related Earnings 425,157 -- 425,157
Investment Income
(Loss) 278,310 -- 278,310
Non-Controlling
Interests 70,763 499,836(i) 570,599
-------------- --------------- --------------
Economic Net Income
(Loss) $632,704 $(499,836) $132,868
============== ================== ==============
*T
-0-
*T
KKR Group Fixed Income Pro Forma Information
After Adjustment for the Restructuring Transactions and the
Acquisition
Year Ended December 31, 2007
Adjustments for
Fixed Income Restructuring Adjustments
Historical Transactions for Acquisition
------------ --------------- ---------------
Management Fees $ 68,194 $ -- $ (3,544) (f)
Advisory Fees 11,421 -- --
Incentive Fees 23,335 -- (956) (f)
------------ ---------- ---------------
Total Fee Income 102,950 -- (4,500)
------------ ---------- ----------
Employee Compensation and
Benefits 24,507 (6,156) (d) --
Other Operating Expenses 16,349 -- --
------------ ---------- ----------
Total Expenses 40,856 (6,156) --
------------ --------------- ---------------
Fee Related Earnings 62,094 6,156 (4,500)
Investment Income (Loss) 984 -- --
Non-Controlling Interests 23,264 (22,572) (c) (45) (h)
------------ ---------- ----------
Economic Net Income (Loss)$ 39,814 $ 28,728 $ (4,455)
============ ========== ===============
Fixed Income Allocation to Fixed Income
As Adjusted KKR Holdings Pro-Forma
(100%) (79%) (21%)
------------ ------------- ------------
Management Fees $64,650 $ -- $64,650
Advisory Fees 11,421 -- 11,421
Incentive Fees 22,379 -- 22,379
------------ ---------- ------------
Total Fee Income 98,450 -- 98,450
------------ ---------- ------------
Employee Compensation and
Benefits 18,351 -- 18,351
Other Operating Expenses 16,349 -- 16,349
------------ ---------- ------------
Total Expenses 34,700 -- 34,700
------------ ---------- ------------
Fee Related Earnings 63,750 -- 63,750
Investment Income (Loss) 984 -- 984
Non-Controlling Interests 647 50,629(i) 51,276
------------ ---------- ------------
Economic Net Income (Loss) $64,087 $(50,629) $13,458
============ ============= ============
*T
-0-
*T
KPE Partnership Pro Forma Information
After Adjustments for the Restructuring Transactions and the
Acquisition
Year Ended December 31, 2007
(e)
Acquired Adjustments for
Partnership Restructuring Adjustments
Historical Transactions for Acquisition
----------- --------------- ---------------
Management Fees $ -- $ -- $ --
Advisory Fees -- -- --
Incentive Fees -- -- --
---------- --------------- ----------
Total Fee Income -- -- --
---------- --------------- ----------
Employee Compensation and
Benefits -- -- --
Other Operating Expenses 56,157 -- (48,540) (f)
---------- --------------- ---------------
Total Expenses 56,157 -- (48,540)
---------- --------------- ---------------
Fee Related Earnings (56,157) -- 48,540
Investment Income (Loss) 58,930 -- 14,044 (g)
Non-Controlling Interests -- -- 654 (h)
---------- --------------- ----------
Economic Net Income (Loss) $ 2,773 $ -- $ 61,930
========== =============== ==========
(e)
Principal Allocation to Principal
As Adjusted KKR Holdings Pro-Forma
(100%) (79%) (21%)
----------- ------------- ---------
Management Fees $ -- $ -- $ --
Advisory Fees -- -- --
Incentive Fees -- -- --
---------- ---------- --------
Total Fee Income -- -- --
---------- ---------- --------
Employee Compensation and Benefits -- -- --
Other Operating Expenses 7,617 -- 7,617
---------- ---------- --------
Total Expenses 7,617 -- 7,617
---------- ---------- --------
Fee Related Earnings (7,617) -- (7,617)
Investment Income (Loss) 72,974 -- 72,974
Non-Controlling Interests 654 51,116(i) 51,770
---------- ------------- --------
Economic Net Income (Loss) $64,703 $(51,116) $13,587
========== ============= ========
*T
Notes to Preliminary Unaudited Pro Forma Segment Information
(All amounts are in thousands ($000s))
1. Historical KKR Group Segment Information
The KKR Group is a global alternative asset manager with principal
executive offices in New York and Menlo Park, California. Its
alternative asset management business involves sponsoring and managing
investment funds that make investments worldwide in private equity and
debt transactions on behalf of third-party investors and the KKR
principals, including the founders of the KKR Group. In connection
with these activities, the KKR Group also manages investments in
public equity and is engaged in capital markets activities. With
respect to certain funds that it sponsors, the KKR Group commits to
contribute a specified amount of equity as the general partner of the
fund (ranging from approximately 2% to 4% of a fund's total capital
commitments) to fund a portion of the acquisition price for the fund's
investments.
The KKR Group earns ongoing management fees for providing
management and other services to its private equity and credit
strategy funds as well as advisory and incentive fees in connection
with investments or transactions. The KKR Group also earns investment
income from investing its own capital alongside third party investors
and from the carried interest it receives in respect of fund
investments. A carried interest provides the general partner of a fund
with a disproportionate share of the investment gains generated on
third-party capital invested by the fund.
The historical combined financial statements of the KKR Group
include the results of eight of the KKR Group's private equity funds
(including the Acquired Partnership) and two of the KKR Group's credit
strategy funds (the "KKR Funds") and the general partners and
management companies of those funds. The KKR Group operates as a
single professional services firm and carries out its business
activities under the "KKR" brand name. The entities comprising the KKR
Group are under the common control of the senior principals of the KKR
Group (the "Senior Principals"), who are actively involved in the KKR
Group's operations and management.
For management reporting purposes, the KKR Group currently
operates through two reportable business segments: Private Equity and
Fixed Income.
-- The Private Equity segment involves sponsoring and managing a
group of funds that make primarily control-oriented
investments in connection with leveraged buyouts and other
similar investment opportunities. These funds are managed by
Kohlberg Kravis Roberts & Co. L.P. and currently consist of a
number of private equity funds that have a finite life and
investment period and the Acquired Partnership, a private
equity-oriented permanent capital vehicle.
-- The Fixed Income segment involves sponsoring and managing a
group of private and publicly-traded investment funds and
managed accounts that invest primarily in corporate debt as
well as managing four structured finance vehicles that were
established to complete secured financing transactions. These
entities are managed primarily by KKR Financial Advisors LLC
and KKR Strategic Capital Management, L.L.C. and include KKR
Financial Holdings LLC (NYSE: KFN) and the KKR Strategic
Capital Funds, one of which is currently owned by KPE.
Within each of these segments, the KKR Group conducts capital
markets and public equity activities. However, such activities do not
qualify as separately reportable business segments under SFAS 131 and
the results of such activities are included in the Private Equity and
Fixed Income segments. All inter-segment transactions are eliminated
in the segment presentation.
Management makes operating decisions and assesses the performance
of each of the KKR Group's business segments based on financial and
operating metrics and data that is presented excluding the impact of
the consolidation of the Consolidated Entities in the combined
financial statements of the KKR Group. As a result, all segment
information for the KKR Group excludes the assets, liabilities and
operating results related to the Consolidated Entities. See "Basis of
Presentation."
Economic net income ("ENI") and fee related earnings are key
performance measures used by management. ENI represents net income
excluding the impact of income taxes, non-cash employee compensation
charges associated with equity interests in the KKR Group's business,
any compensation borne by KKR Holdings, and charges relating to the
amortization of intangible assets. See "Reconciliation of Segment
Reporting to Financial Statement Reporting and Net Income." Fee
related earnings represents net income adjusted to: (i) include
management fees earned from consolidated funds that were eliminated in
consolidation; (ii) exclude expenses of consolidated funds, non-cash
employee compensation charges associated with equity interests in the
KKR Group's business, any compensation borne by KKR Holdings, and
charges relating to the amortization of intangible assets;
(iii) exclude investment income; (iv) exclude non-controlling
interests in income of consolidated entities and (v) exclude the
impact of taxes. These measures are used by management in making
resource deployment and other operational decisions.
2. Adjustments for the Restructuring Transactions
Because the legal entities that comprise the KKR Group are under
the common control of the Senior Principals and will be under the
common control of the Senior Principals following the completion of
the Restructuring Transactions, the Restructuring Transactions will be
accounted for as a transfer of interests under common control.
Accordingly, KKR will carry forward into its consolidated financial
statements the value of assets, liabilities and non-controlling
interests in the combined entities recognized in the KKR Group's
combined financial statements, except as described in Note (I). All
references to ENI in the following notes with the exception of Note
(i) represent ENI before allocation to KKR Holdings. See Note (i) for
allocation to KKR Holdings.
(a) This amount has been adjusted to reflect the elimination of
the financial results of the general partners of the 1996 Fund,
because the Group Partnerships will not acquire an interest in those
general partners in connection with the Restructuring Transactions due
to the fact that the general partners of those funds are not expected
to receive meaningful proceeds from further realizations. Those
general partners are entitled to carried interests that allocate to
them a percentage of the net profits generated on the fund's
investments, subject to certain requirements. The funds also pay
management fees to the KKR Group in exchange for management and other
services.
The elimination of the financial results of the general partners
of the 1996 Fund resulted in the elimination of $2,184 of expenses and
$111,144 of investment income for the year ended December 31, 2007 and
$21 of expenses and $(14,437) of investment loss for the three months
ended March 31, 2008. While the management fee paid by the 1996 Fund
is eliminated as an inter-company transaction in the combined
financial statements of the KKR Group, it is not eliminated in the
historical segment information of the KKR Group due to the fact that
segment results are presented without giving effect to the
consolidation of the Consolidated Entities. Accordingly, no pro forma
adjustments have been made to management fees or fee income related to
the 1996 Fund for the periods indicated.
(b) This amount has been adjusted to reflect the inclusion of
non-controlling interests in consolidated entities representing the
Other Interests, except for non-controlling interests in consolidated
entities representing Other Interests relating to capital invested by
or on behalf of the general partners of the KKR Funds since January 1,
2007. See "Restructuring Transactions--Conversion into a Holding
Partnership Structure" for a description of the Other Interests. While
economic interests in the capital investments made by or on behalf of
the general partners of the KKR Funds prior to the completion of the
Acquisition will not be contributed to the Group Partnerships, the
Group Partnerships will hold all of the interests in capital
investments made by or on behalf of the general partners of the KKR
Funds following the completion of the Acquisition. To illustrate the
pro forma impact that such future capital investments will have on the
financial results of KKR, no pro forma adjustments have been made to
eliminate the financial results of any capital investments made on or
after January 1, 2007.
The inclusion of the Other Interests not relating to capital
invested by or on behalf of the general partners of the KKR Funds
since January 1, 2007 impacted non-controlling interests by $71,344
for the year ended December 31, 2007 and $(37,979) for the three
months ended March 31, 2008 and impacted ENI during such periods by
corresponding inverse amounts. The retention of the full impact of
results attributable to capital invested by or on behalf of the
general partners of the KKR Funds since January 1, 2007 contributed
$20,553 in investment income and ENI for the year ended December 31,
2007 before allocation to KKR Holdings and $6,892 in investment income
and ENI for the three months ended March 31, 2008 before allocation to
KKR Holdings.
(c) This amount has been adjusted to reflect the KFI Acquisition,
which resulted in the elimination of non-controlling interests in
income of consolidated entities that previously allocated 35% of the
ENI generated by the management companies of the Fixed Income segment
to holders of such interests. The elimination of these non-controlling
interests in consolidated entities resulted in an increase in ENI of
$22,572 for the year ended December 31, 2007 and $3,686 for the three
months ended March 31, 2008.
(d) This amount has been adjusted to reflect the elimination of
executive bonuses attributable to the non-controlling principals.
Following the Restructuring Transactions and the Acquisition, KKR
principals will receive financial benefits from KKR's business in the
form of distributions and payments received from KKR Holdings and
through their direct and indirect participation in the value of Group
Partnership units held by KKR Holdings and the economic costs of any
cash bonuses paid to KKR principals will be borne by KKR Holdings.
For the year ended December 31, 2007 and the three months ended
March 31, 2008, these arrangements resulted in the elimination of
executive bonuses in the Private Equity segment by $95,600 and
$16,194, respectively, and $6,156 and $1,391 from the Fixed Income
segment, respectively. See Note (II) under "Transactions and
Adjustments Excluded from Pro Forma Presentation" for information
relating to certain, largely non-cash, employee compensation and
benefits expenses that will be recorded in KKR's financial statements
following the Restructuring Transactions and the Acquisition.
3. Adjustments for the Acquisition
(e) It is anticipated that the business of the Acquired
Partnership will be accounted for by KKR as a separate reportable
business segment referred to as the Principal segment. Accordingly,
the results of such business have been presented separately under such
caption in the preliminary unaudited pro forma segment information of
KKR.
(f) This amount has been adjusted to reflect the elimination of
the management and incentive fees paid by the Acquired Partnership
under its services agreements with the KKR Group. While the Acquired
Partnership will pay a management and incentive fee to subsidiaries of
KKR in an amount to be determined following the Acquisition, the
payments will be eliminated as inter-segment transactions, because the
Acquired Partnership will be wholly-owned within the Principal
segment. For the year ended December 31, 2007 and the three months
ended March 31, 2008, the elimination reduced management fees of the
Private Equity segment by $44,040 and $12,817, respectively, reduced
management fees of the Fixed Income segment by $3,544 and $653,
respectively, reduced incentive fees of the Fixed Income segment by
$956 and $0, respectively, and reduced expenses of the Principal
segment by $48,540 and $13,470, respectively.
(g) This amount has been adjusted to reflect the elimination of
carried interest allocated from certain investments in limited partner
interests of the Acquired Partnership to the general partners of
Consolidated Entities in the Group Partnership as well as amounts
allocated to the general partner of the Acquired Partnership pursuant
to its capital interest. While the Acquired Partnership will pay a
carried interest to subsidiaries of KKR, the payments will be
eliminated as inter-segment transactions, because the Acquired
Partnership will be wholly-owned within the Principal segment. For the
year ended December 31, 2007 and the three months ended March 31,
2008, the elimination increased (reduced) investment income of the
Private Equity segment by $(14,147) and 3,355, respectively, and
impacted investment income of the Principal segment by $14,044 and
$(2,823), respectively.
(h) This amount has been adjusted to reflect the inclusion of new
non-controlling interests in consolidated entities representing Other
Interests that a former KKR principal and such person's designees will
hold in the Principal segment. Those Other Interests will result in
the allocation to such person of an aggregate of 1% of the net income
reported by the KKR Group until a future date, as described under
"Restructuring Transactions--Conversion into a Holding Partnership
Structure." The inclusion of such non-controlling interests in
consolidated entities impacted non-controlling interests of the
Principal segment by $654 for the year ended December 31, 2007 and
$(2,574) for the three months ended March 31, 2008 and impacted ENI
during such periods by corresponding inverse amounts.
(i) This amount has been adjusted to reflect the inclusion of new
non-controlling interests in consolidated entities representing the
Group Partnership units that will be indirectly held by KKR principals
through KKR Holdings following the completion of the Acquisition. The
inclusion of these new non-controlling interests in consolidated
entities described above impacted non-controlling interests by
$601,581 for the year ended December 31, 2007 and $(243,423) for the
three months ended March 31, 2008 and impacted ENI during such periods
by corresponding inverse amounts.
4. Transactions and Adjustments Excluded from Pro Forma
Presentation
(I) The KFI Acquisition and the contribution by Non-Controlling
Principals of their equity interests in the KKR Group to the Group
Partnerships in the Restructuring Transactions will be accounted for
as an acquisition of a non-controlling interest in a consolidated
entity using the purchase method of accounting with the KKR Group
being treated as the accounting acquirer. The Acquisition will
similarly be treated as an acquisition of a non-controlling interest
in a consolidated entity using the purchase method of accounting with
KKR being treated as the accounting acquirer.
Under purchase accounting, the KKR Group and KKR will allocate the
purchase price to the fair value of the assets acquired and
liabilities assumed. Any excess of the purchase price over the fair
value of the tangible assets acquired will be allocated to any
separately identifiable intangible assets on the statement of
financial condition with any excess recorded as goodwill. Finite-lived
intangible assets will be amortized over their useful lives on a
straight-line basis, which will give rise to non-cash amortization
charges in KKR's statement of financial condition over the
amortization period. To the extent that the sum of the amounts
assigned to assets acquired and liabilities assumed is in excess of
the cost of the acquired interests, that excess will be allocated as a
pro rata reduction of the amounts that otherwise would have been
assigned to all of the acquired assets except (a) financial assets
other than investments accounted for by the equity method, (b) assets
to be disposed of by sale, (c) deferred tax assets, (d) prepaid assets
relating to pension or other postretirement benefit plans, and (e) any
other current assets. If any excess remains after reducing to zero the
amounts that otherwise would have been assigned to those assets, that
remaining excess will be recognized as an extraordinary gain in the
period in which the transaction is completed.
No pro forma adjustments have been made to reflect these charges,
because management's financial reporting excludes the impact of
charges relating to the amortization of intangible assets. Adjustments
for such charges will be included, however, in pro forma financial
information giving effect to the impact of the transactions on the
face of the combined financial statements of the KKR Group.
(II) Following the Restructuring Transactions and the Acquisition,
KKR principals will receive financial benefits from KKR's business in
the form of distributions or payments received from KKR Holdings and
through their direct or indirect participation in the value of Group
Partnership units held by KKR Holdings and, accordingly, such KKR
principals will not be paid any cash bonuses directly by KKR. A
portion of the interests in KKR Holdings that will entitle KKR
principals to participate in the value of Group Partnership units held
by KKR Holdings will be subject to vesting and a portion of the
distributions or payments made to such individuals from KKR Holdings
will be subject to discretionary allocation. In addition, in
connection with the Restructuring Transactions and the Acquisition,
KKR expects to adopt an equity incentive plan and grant awards under
such plan to employees who are not KKR principals.
The above arrangements are expected to give rise to periodic
employee compensation and benefits charges in the consolidated
financial statements of KKR, despite the fact that substantially all
of the economic consequences of such arrangements will be borne solely
by KKR principals. Except for cash-settled awards granted under KKR's
equity incentive plan and any compensation borne by KKR Holdings,
these employee compensation and benefits charges will consist of
non-cash charges. No pro forma adjustments have been made to reflect
these charges, because management's segment reporting excludes the
impact of non-cash employee compensation charges associated with
equity interests in the KKR business as well as any compensation borne
by KKR Holdings. No pro forma adjustments have been made to reflect
the possibility of cash charges associated with grants of cash-settled
awards under KKR's equity incentive plan, because the form and amount
of grants to be made under the plan have not yet been determined.
Adjustments for the various employee compensation charges described
above will be included, however, in pro forma financial information
giving effect to the impact of the transactions on the face of the
combined financial statements of the KKR Group.
(III) The KKR Group has historically operated as a group of
partnerships for U.S. federal income tax purposes and, in the case of
certain entities located outside the United States, corporate entities
for foreign income tax purposes. Because most of the entities in the
KKR Group are taxed as partnerships, the income of the KKR Group
generally has been allocated to, and the resulting tax liability
generally has been funded by, partners and the KKR Group generally has
not been taxed at the entity level. Accordingly, income tax provisions
reflected in the KKR Group's historical combined financial statements
primarily have been attributable to the New York City unincorporated
business tax and foreign income taxes imposed on certain entities
located outside the United States.
Following the Restructuring Transactions and the Acquisition, the
Group Partnerships and their subsidiaries will continue to operate as
partnerships for U.S. federal income tax purposes and, in the case of
certain entities located outside the United States, corporate entities
for foreign income tax purposes. Accordingly, those entities will
continue to be subject to New York City unincorporated business taxes
or foreign income taxes. Certain of the Group Partnership units owned
by KKR, however, will be held through an intermediate holding company
that will be taxable as a corporation for U.S. federal income tax
purposes. As a result of such holding structure, KKR will record an
additional provision for corporate income taxes that will reflect its
current and deferred tax liability relating to the taxable earnings
allocated to such entity.
No pro forma adjustments have been made to reflect the additional
tax provision that will result from the Restructuring Transactions and
the Acquisition, because management's segment reporting and ENI is
calculated on a pre-tax basis. Adjustments for the tax provision will
be included, however, in pro forma financial information giving effect
to the impact of the transactions on the face of the combined
financial statements of the KKR Group. The anticipated impact of the
additional tax provision on the financial statements of KKR has not
yet been determined.
(IV) In connection with the Restructuring Transactions and the
Acquisition, KKR will enter into an exchange agreement with KKR
Holdings pursuant to which KKR Holdings or certain transferees of its
Group Partnership units may up to four times each year exchange Group
Partnership units held by them for KKR common units on a one-for-one
basis, subject to customary conversion rate adjustments for splits,
unit distributions and reclassifications and compliance with the terms
and conditions of the exchange agreement. The Group Partnership units
held by KKR Holdings will be subject to transfer restrictions and
generally will not be exchangeable for a period of time following the
completion of the Restructuring Transactions and the Acquisition. No
determination has been made as to the manner in which such future
exchanges will be accounted for in the consolidated financial
statements of KKR. Accordingly, no pro forma adjustments have been
made to reflect the exchange agreement.
(V) In connection with the Acquisition, KKR will issue CVIs that
may result in an adjustment to the amount of consideration issued in
the Acquisition under certain circumstances, as described under
"Acquisition." The CVIs may be settled in cash or through the delivery
of additional KKR common units. This commitment of KKR is economically
hedged by a similar arrangement with KKR Holdings as described under
"Acquisition." No determination has been made as to how the CVIs, or
the arrangement with KKR Holdings, will be accounted for by KKR.
Accordingly, no pro forma adjustments have been made.
(VI) Immediately prior to the Acquisition, the KKR Group is
expected to make one or more cash and in-kind distributions to certain
of its existing owners representing substantially all available
cash-on-hand, certain receivables of its management companies and
certain personal property (consisting of non-operating assets) of the
management company for its Private Equity segment. The actual amount
of such distributions has not yet been determined and will depend on
the amounts of available cash-on-hand and receivables of the
management companies and the book value of such personal property at
the time of Acquisition. No pro forma adjustment has been made to
reflect these distributions, because such distributions would not have
significantly impacted the KKR Group's operating results.
(VII) KKR and KPE will incur various expenses to complete the
Restructuring Transactions and the Acquisition. These expenses include
fees and expenses of the financial advisors, legal and other advisors
engaged by each of KKR and KPE, transaction-related accounting and
audit costs, fees and expenses of agents engaged to provide various
services in connection with the Restructuring Transactions and the
Acquisition, filing fees with regulatory bodies, listing fees and
other miscellaneous costs. No pro forma adjustments have been made to
reflect these expenses due to the fact that they currently are not
determinable.
(VIII) Following the Restructuring Transactions and the
Acquisition, KKR will incur costs associated with being a publicly
traded entity. Such costs will include new or increased expenses for
such items as insurance, directors' fees, accounting work, legal
advice, investor relations and compliance with applicable regulatory
or stock exchange requirements, including costs associated with
compliance with the Sarbanes-Oxley Act and periodic or current
reporting obligations. No pro forma adjustments have been made to
reflect such costs due to the fact that they currently are not
objectively determinable.
Reconciliation of Segment Reporting to Financial Statement
Reporting and Net Income
(All amounts are in thousands ($000s))
The following tables present amounts that reconcile management's
reporting of the historical segment information of the KKR Group and
preliminary unaudited pro forma segment information of KKR to the
historical unaudited combined operating results of the KKR Group and
the preliminary unaudited pro forma combined operating results of KKR
for the year ended December 31, 2007 and the three months ended March
31, 2008. You should read this information in conjunction with the
information included under "Basis of Presentation" and "Notes to
Preliminary Unaudited Pro Forma Segment Information."
For the year ended December 31, 2007 and the three months ended
March 31, 2008, the KKR Group did not record any non-cash employee
compensation charges or any charges relating to the amortization of
intangible assets. Accordingly, for such periods, the combined ENI of
the KKR Group and the ENI of the total reportable segments is the
equivalent of income before taxes. On a pro forma basis, KKR will
record non-cash employee compensation charges as well as any
compensation borne by KKR Holdings as described in Note (II) as well
as additional non-cash charges relating to the amortization of
intangible assets as described in Note (I). As a result, the pro forma
consolidated ENI of KKR and the pro forma ENI of the total reportable
segments is the equivalent of income before taxes, non-cash employee
compensation charges associated with equity interests in the KKR
business, any compensation borne by KKR Holdings, and charges relating
to the amortization of intangible assets.
The items eliminated in calculating the pro forma consolidated ENI
of KKR and the pro forma ENI of the total reportable segments may be
significant to KKR's business: (i) income tax expense represents a
necessary element of KKR's costs and its ability to generate income
given that ongoing income generation is expected to result in future
income tax expense; (ii) amortization may be a necessary element of
KKR's costs following the Restructuring Transactions and the
Acquisition; and (iii) non-cash compensation expense as well as
compensation that will be borne by KKR Holdings is expected to be a
recurring component of KKR's costs and KKR is expected to incur lower
cash compensation costs as a result of the financial benefits provided
to KKR principals through KKR Holdings and equity grants that may be
made under KKR's equity incentive plan. Furthermore, any measure that
eliminates compensation costs and the carrying costs associated with
balance sheet assets has material limitations as a performance
measure. In light of the foregoing limitations, management does not
rely solely on ENI as a performance measure and also considers GAAP
results. ENI is not a measure of financial performance under GAAP and
should not be considered as an alternative to net income or any other
measures prepared in accordance with GAAP. Because ENI is not
calculated in the same manner by all companies, it may not be
comparable to other similarly titled measures used by other companies.
All amounts in the following tables are in thousands ($000s).
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*T
KKR Group Historical Operating Results
Three Months Ended March 31, 2008
Total
Reportable Combination
Segments Adjustments Combined
Historical Historical Historical
----------- ----------- -----------
Management Fees $ 94,960 $ (80,030) $ 14,930
Advisory Fees 41,073 12,587 53,660
Incentive Fees -- -- --
----------- ----------- -----------
Total Fee Income 136,033 (67,443) 68,590
----------- ----------- -----------
Employee Compensation and
Benefits 48,063 -- 48,063
Other Operating Expenses 52,715 2,759 55,474
----------- ----------- -----------
Total Expenses 100,778 2,759 103,537
----------- ----------- -----------
Fee Related Earnings 35,255 (70,202) (34,947)
Investment Income (Loss) (148,395) (590,003) (738,398)
Non-Controlling Interests 3,870 (660,205) (656,335)
----------- ----------- -----------
Economic Net Income (Loss) (117,010) -- (117,010)
Less: Income Tax Expense 888 (III)
Less: Employee Compensation (II)
Charges --
Less: Charges Relating to (I)
Amortization of Intangible
Assets --
-----------
Combined Net Income (Loss) $(117,898)
===========
*T
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*T
KKR Group Pro-Forma Operating Results
After Adjustments for the Restructuring Transactions and the
Acquisition
Three Months Ended March 31, 2008
Total
Reportable Combined
Segments Combination Pro-
Pro-Forma Adjustments Forma
(21%) Pro-Forma (21%)
----------- ----------- ----------
Management Fees $ 81,490 $ (65,337) $ 16,153
Advisory Fees 41,073 12,587 53,660
Incentive Fees -- -- --
----------- ----------- ----------
Total Fee Income 122,563 (52,750) 69,813
----------- ----------- ----------
Employee Compensation and
Benefits 30,478 -- 30,478
Other Operating Expenses 53,972 1,481 55,453
----------- ----------- ----------
Total Expenses 84,450 1,481 85,931
----------- ----------- ----------
Fee Related Earnings 38,113 (54,231) (16,118)
Investment Income (Loss) (386,713) (280,144) (666,857)
Non-Controlling Interests (283,894) (334,375) (618,269)
----------- ----------- ----------
Economic Net Income (Loss) (64,706) -- (64,706)
Less: Income Tax Expense -- (III)
Less: Employee Compensation (II)
Charges --
Less: Charges Relating to (I)
Amortization of Intangible
Assets --
Combined Net Income (Loss) $ (64,706)
==========
*T
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KKR Group Historical Operating Results
Year Ended December 31, 2007
Historical
Total
Reportable Combination
Segments Adjustments Combined
----------- ----------- ----------
Management Fees $299,721 $ (236,153) $ 63,568
Advisory Fees 548,547 228,038 776,585
Incentive Fees 23,335 (1,223) 22,112
----------- ----------- ----------
Total Fee Income 871,603 (9,338) 862,265
----------- ----------- ----------
Employee Compensation and
Benefits 212,047 718 212,765
Other Operating Expenses 226,049 2,096 228,145
----------- ----------- ----------
Total Expenses 438,096 2,814 440,910
----------- ----------- ----------
Fee Related Earnings 433,507 (12,152) 421,355
Investment Income (Loss) 404,585 1,587,198 1,991,783
Non-Controlling Interests 23,264 1,575,046 1,598,310
----------- ----------- ----------
Economic Net Income (Loss) $814,828 $ -- $ 814,828
Less: Income Tax Expense 12,064 (III)
Less: Employee Compensation (II)
Charges --
Less: Charges Relating to (I)
Amortization of Intangible
Assets --
----------
Combined Net Income (Loss) $ 802,764
==========
*T
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*T
KKR Group Pro-Forma Operating Results
After Adjustments for the Restructuring Transactions and the
Acquisition
Year Ended December 31, 2007
Total
Reportable
Segments Combination Combined
Pro-Forma Adjustments Pro-Forma
(21%) Pro-Forma (21%)
----------- ----------- ----------
Management Fees $252,137 $ (182,482) $ 69,655
Advisory Fees 548,547 228,038 776,585
Incentive Fees 22,379 (267) 22,112
----------- ----------- ----------
Total Fee Income 823,063 45,289 868,352
----------- ----------- ----------
Employee Compensation and
Benefits 110,291 718 111,009
Other Operating Expenses 231,482 (4,980) 226,502
----------- ----------- ----------
Total Expenses 341,773 (4,262) 337,511
----------- ----------- ----------
Fee Related Earnings 481,290 49,551 530,841
Investment Income (Loss) 352,268 1,184,056 1,536,324
Non-Controlling Interests 673,645 1,233,607 1,907,252
----------- ----------- ----------
Economic Net Income (Loss) $159,913 $ -- $ 159,913
Less: Income Tax Expense -- (III)
Less: Employee Compensation (II)
Charges --
Less: Charges Relating to (I)
Amortization of Intangible
Assets --
----------
Combined Net Income (Loss) $ 159,913
==========
*T
Annex B
TRANSACTION TERMS AND CONDITIONS
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I. STRUCTURE OF TRANSACTION
Transaction Acquisition by KKR & Co. L.P., a Delaware limited
partnership (the "Purchaser"), of all of the assets of
KKR Private Equity Investors, L.P. ("KPE" or the
"Seller"), including all of the limited partner
interests in KKR PEI Investments, L.P. (the "Acquired
Partnership"), and the assumption by KKR of all of the
liabilities of the Seller. Executives of Kohlberg
Kravis Roberts & Co. (together with affiliated
companies, "KKR") will not sell any equity in the
Combined Business (as defined below) in the
transaction.
Following the completion of the Transaction, the
Purchaser will control the asset management of
Kohlberg Kravis Roberts & Co. as well as the Acquired
Partnership (the "Combined Business"). KPE unitholders
will own 21% of the equity in the Combined Business
and KKR principals will own 79% of the equity in the
Combined Business, prior to taking into account any
common units of the Purchaser that may be issued in
connection with the CVIs.
Consideration KPE unitholders to receive for each common unit of KPE
(i) 1 common unit of the Purchaser and (ii) 1
contingent value interest ("CVI") of the Purchaser
having the terms described below. The CVI is designed
to provide KPE unitholders with an adjustment of the
consideration under certain circumstances so that at
the maturity date of the CVIs the combined value of
(x) 1 Purchaser common unit, (y) distributions on the
Purchaser common unit between the closing date and the
maturity of the CVIs and (z) one CVI, will equal at
least $22.25, the net asset value per KPE common unit
as of June 30, 2008, subject to the cap described
below.
Transaction expected generally to be tax-free for KPE
unitholders in the United States but may not be in
other jurisdictions, including the United Kingdom,
Canada or Luxembourg.
Conditions Transaction conditioned on the consent of 50% plus one
Precedent / unit of the KPE common units outstanding (excluding,
Unitholder from both the numerator and the denominator, any KPE
Consent common units whose consent right is controlled by KKR
or its affiliates).
Transaction subject to other customary closing
conditions precedent.
Registration/ Purchaser common units (including those, if any,
Listing delivered at maturity of the CVIs) will be registered
with the U.S. Securities and Exchange Commission
("SEC") and listed on the New York Stock Exchange.
Purchaser common units will not be listed on Euronext
Amsterdam.
CVIs will be registered with the SEC, but the CVIs will
not be listed on any exchange and the holders of the
CVIs will not be permitted to directly or indirectly
transfer, hedge or monetize their interests in the
CVIs.
Upon completion of the transaction, KPE will be
deregistered as an investment company in Guernsey,
dissolved and delisted from Euronext Amsterdam.
KKR Principals KKR principals will retain 79% of the equity of the
Combined Business at closing (prior to taking into
account any common units that may be issued in
connection with the CVIs). This interest will be held
directly in the Group Partnerships and, pursuant to an
exchange agreement, may be exchanged for units of the
listed company. KKR principals will be subject to 180-
day lockup and significant transfer and vesting
restrictions (6-8 years). Transfer and vesting
restrictions subject to waiver by KKR founders.
Distribution Intend to distribute substantially all of the cash
Policy earnings of the asset management business.
Distributions to be made on a pro rata basis to KKR
principals and public unitholders without priority.
Timing Closing expected during fourth quarter 2008.
*T
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II. FINANCIAL TERMS
Capitalization KPE unitholders will in the aggregate receive
and Exchange approximately 204.9 million Purchaser common units in
Ratio connection with the transaction, which will represent
21% of the equity of the Combined Business at closing
(prior to taking into account any units that may
issued in connection with the CVIs). KKR principals
will retain the remaining 79% of the equity of the
Combined Business at closing (prior to taking into
account any common units that may be issued in
connection with the CVIs). KKR principals will not
receive additional equity in connection with the
transfer of cash or units to the entities through
which the Combined Business is held (the "Group
Partnerships") in connection with the issuance of
common units or payment of cash to holders of CVIs by
the Purchaser.
The CVIs will in the aggregate entitle KPE unitholders
to receive a maximum of an additional 6% of the equity
of the Combined Business as of the closing date (or,
subject to customary adjustments, a maximum of
approximately 58.54 million Purchaser common units)
or, at the option of the KKR principals, cash having a
value equivalent thereto. If the CVIs were settled
with the maximum number of Purchaser common units, the
KPE unitholders would receive 27% of the equity of the
Combined Business outstanding as of the closing date
with KKR principals retaining the remaining 73% of the
equity of the Combined Business outstanding as of such
date.
Settlement and Each CVI will be settled at maturity for the CVI
Payoff Value Consideration. For these purposes, "CVI Consideration"
per CVI means, subject to the cap described below, the
positive difference, if any, between (i) the Strike
Price (defined below) and (ii) the greater of (A) the
average volume weighted average price ("VWAP") of
Purchaser common units during the Averaging Period
(defined below) (the "Common Unit Value") and (B) the
Floor Price (defined below).
The CVI Consideration may be delivered, at the option
of the KKR principals, in either cash or a variable
number of Purchaser common units having a value
equivalent to the CVI Consideration subject to the cap
described below.
In order to elect cash settlement, the KKR principals
will be required to provide the Purchaser with notice
of such election at least 10 days prior to the
commencement of the Averaging Period.
The CVI Consideration will effectively be provided by
the KKR principals. If Purchaser common units are
delivered upon maturity of the CVIs, provisions in the
governing agreements of the Group Partnerships will
reduce the KKR principal's relative equity ownership
in the Group Partnerships by the relevant amount. If
CVIs are settled in cash, a cash contribution will be
made by the KKR principals to the Group Partnerships,
which will then distribute the relevant amount of cash
to holders of CVIs.
Cap If the CVI Consideration is settled in Purchaser common
units, the maximum aggregate number of Purchaser
common units issuable in order to satisfy the CVI
Consideration will be limited to 0.2857 Purchaser
common units per CVI, or 6% of the equity of the
Combined Business at closing (the "Unit Cap"). If the
CVI Consideration is settled in cash, the maximum
amount of cash to be delivered in order to satisfy the
CVI Consideration will be limited to the amount equal
to the value of the Unit Cap (based on Common Unit
Value).
Strike Price Initial strike price equal to $22.25, the NAV per KPE
common unit as of June 30, 2008 (the "Strike Price").
The Strike Price will be adjusted downward by the
amount of any distributions paid on Purchaser common
units between the closing of the transaction and
maturity of the CVIs.
Floor Price Initial floor price to equal to $17.3056 (the "Floor
Price"). The Floor Price will be adjusted downward by
the amount of any distributions paid on Purchaser
common units between the closing of the transaction
and maturity of the CVIs.
Averaging 90 trading day period ending on 3 trading days prior to
Period the maturity date.
Maturity Date The earlier of 36 months from the date of the closing
of the transaction or a fundamental change (as defined
in the CVI Agreement).
Knockout Maturity of CVIs will be accelerated and expire without
Feature consideration if the Purchaser common units trade on a
VWAP basis at or above $24 (less the amount of any
distributions paid on Purchaser common units between
the closing of the transaction and end of the relevant
20-day period) for 20 consecutive trading days at any
point prior to the commencement of the Averaging
Period.
*T
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*T
III. GOVERNANCE
Governance of Consistent with publicly traded partnerships in the
KKR United States, the Purchaser will be managed by a
general partner (the "KKR General Partner"). The KKR
General Partner will have a board of directors with
the following features:
-- A majority of the board will be "independent" under
New York Stock Exchange standards
-- Henry Kravis and George Roberts will serve as Co-
CEOs and Co-Chairmen of the KKR General Partner
-- The board will have an audit committee consisting
entirely of independent directors and at least one
financial expert under NYSE and SEC rules
-- The board will have a conflicts committee consisting
entirely of independent directors that will be
responsible for reviewing and approving specific
matters that the board of directors believes may
involve a conflict of interest
-- The board will have a nominating and corporate
governance committee
Ownership interests in the KKR General Partner will be
held by KKR principals and certain actions of the KKR
General Partner may not be taken without the consent
of a majority of those shareholders.
Voting Rights Holders of Purchaser common units will be entitled to
vote to approve the following matters:
-- Sale of all or substantially all of the assets of
the Purchaser
-- Merger or consolidation of the Purchaser
-- Withdrawal of the KKR General Partner as the general
partner of the Purchaser
-- Amendments to the Purchaser charter that are
materially adverse to the holders of the Purchaser
common units
KKR principals will hold special voting rights
representing their economic interest in Group
Partnerships (79% at closing) and will thus control
any vote of holders of Purchaser common units
immediately after closing.
*T
Annex C
Please refer to accompanying PowerPoint presentation, "Transaction
Announcement Presentation."
MULTIMEDIA AVAILABLE:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=5741006
--30--
CONTACT: Media Contacts in the U.S.:
Kekst and Company
Ruth Pachman and David Lilly, 212-521-4891/4878
or
Finsbury in London
Simon Moyse, +44 (20) 7251 3801
or
Investor Contact:
KKR KPE LLC
Investor Relations Manager
Katherine Becher, 1-212-659-2026
Disclaimer: Deze bekendmaking is officieel geldend in de originele
brontaal. Vertalingen zijn slechts als leeshulp bedoeld en moeten
worden vergeleken met de tekst in de brontaal welke als enige,
juridische geldigheid beoogt.