- The Washington Times - Tuesday, July 29, 2008

NEW YORK (Bloomberg News) | Henry Kravis is taking KKR & Co. public and moving into real estate and stock funds as he tries to catch up with Stephen Schwarzman’s Blackstone Group LP, the world’s largest private-equity firm.

KKR, co-founded by Mr. Kravis in 1976, relied on leveraged buyouts for 95 percent of profit last year, compared with 29 percent for Blackstone. That has left the New York-based firm more vulnerable to the collapse of the LBO market, where announced deals fell more than 70 percent to $163.1 billion this year through July 25 from the same period in 2007, data compiled by Bloomberg show.

Blackstone’s initial public offering in June 2007 garnered $684 million for Mr. Schwarzman, while Kravis and co-founder George Roberts won’t get a cash payout as part of the planned New York listing that KKR disclosed Sunday. Blackstone’s IPO gave the firm stock to make acquisitions and attract new executives. It was the first private-equity company to eclipse $100 billion in assets, helped by expansion into real estate and hedge funds.

“It’s the continued morphing of private equity into other businesses,” said Paul Schaye, managing director of New York-based Chestnut Hill Partners, which helps private-equity funds identify investments.

KKR said it will go public through the bailout of the Amsterdam-listed buyout fund it created in May 2006. New shares used to buy KKR Private Equity Investors LP, which has dropped 44 percent since inception, will trade on the New York Stock Exchange when the deal is completed by year’s end.

“Whatever it is they want to do with public stock, they really want to get going on,” said Steven Kaplan, a finance professor at the University of Chicago Graduate School of Business.

Blackstone, founded by Mr. Schwarzman and Peter G. Peterson in 1985, has assets under management of $113.5 billion, while KKR has $60.8 billion. Washington-based Carlyle Group, which has expanded overseas into markets including the Middle East and Latin America, has about $81 billion.

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