By Gillian Tan
KKR & Co.'s first-quarter profit rose 29% as the
private-equity firm took advantage of strong equity markets and a
robust deal-making environment to cash out of investments at a
brisk pace, a pattern its executives expect to continue.
Companies are fetching high prices in sales and the stock market
continues to soar, allowing the New York firm to continue selling
companies it owns and stakes in those it already has taken
public.
"We've been selling into the strength," said Scott Nuttall, the
head of KKR's global capital and asset-management group, on a call
with analysts Thursday.
The firm's shares were up 0.4% Thursday afternoon at $23.47.
KKR reported first-quarter profit of $270.5 million, or 57 cents
a share, up from $210 million, or 65 cents a share, in the same
period last year.
The firm's first-quarter economic net income was $599.4 million,
or 62 cents a share, down from $630.3 million, or 77 cents a share,
a year ago. The result topped Wall Street's estimates for the
profitability measure, which includes unrealized gains as well as
cash earnings. Analysts polled by Thomson Reuters anticipated
economic net income of 53 cents a share.
KKR's report came a week after larger rival Blackstone Group LP
posted its largest quarterly profit ever and said it would make the
biggest dividend payment in its history. Carlyle Group LP and
Apollo Global Management LLC are set to report first-quarter
results over the next two weeks.
KKR firm said it would pay a dividend of 46 cents for the
quarter, an increase from 43 cents a year ago. The firm said its
second-quarter dividend may be lower if the sale of
orthopedic-device maker Biomet Inc. to Zimmer Holdings Inc.,
expected to close in June, isn't completed until July or
August.
KKR's private-equity segment posted gains of 17.1% from a year
earlier, boosted by the sale of stakes in pharmacy company Alliance
Boots GmbH to Walgreen Co., Big Heart Pet Brands to J.M. Smucker
Co., and Fotolia to Adobe Systems Inc. The firm also booked gains
on the sale of stock in Nielsen NV and German forklift truck maker
Kion Group AG.
In the first quarter, the firm further marked up the value of
its stake in Atlanta-based First Data Corp., which it only began to
value above its cost at the end of 2014. At its lowest point, KKR
had valued First Data, which it took private in 2007 for about $26
billion, at 60 cents on the dollar. It is now valued at $1.18 on
the dollar.
The same conditions that have helped KKR book gains on past
investments have made new deals harder to come by for the firm and
its private-equity rivals.
"Valuations are high," said Mr. Nuttall. Still, KKR has taken
advantage of "selective opportunities where we have a real angle,"
he said, citing the firm's deal to purchase Air Medical Group
Holdings from Bain Capital LLC.
The firm is also looking to Asia for opportunities in the light
of the slowdown in China, he said. Earlier this week, a consortium
including KKR reached a deal to buy a controlling stake in Ticket
Monster, South Korea's No. 2 mobile commerce company, from Groupon
Inc.
KKR was active abroad in the first quarter. The firm was part of
a consortium that reached a deal to buy GE Capital's
consumer-finance business in Australia and New Zealand. The firm
also used its own cash to invest in Israeli tech company ClickTale,
which helps businesses maximize revenue from website visitors.
KKR reported assets under management of $99.1 billion, down from
$102.3 billion a year ago but up from $98.6 billion at the end of
2014. In the first quarter, it raised new capital for direct
lending, infrastructure and its so-called special situations fund,
which invests in troubled companies.
Mr. Nuttall said KKR plans to launch a new North America-focused
private-equity fund later this year. It raised $9 billion for a
predecessor fund at the end of 2013, roughly half the size of a
$17.6 billion fund it raised in 2006.
Write to Gillian Tan at gillian.tan@wsj.com
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