G.P. KKR 2000 Fund Will Seek $8 Billion –

Just in case you forgot about Kohlberg Kravis Roberts & Co., the New York buyout kings are preparing to come to market with what will be the largest private equity fund ever attempted.

According to a source familiar with the fund-raising effort, KKR is about to launch a buyout fund with a target of $8 billion. If fund raising is successful, the new effort will surpass the $5.7 billion KKR 1996 Fund, to date the largest private equity vehicle ever raised.

A spokesperson for KKR declined comment for this article.

The new fund will be competing for limited partner dollars alongside many other major buyout firms currently marketing funds, including Thomas H. Lee Co., which is raising a fund with a $5 billion target, Hicks, Muse, Tate & Furst, which is seeking in excess of $4 billion, Welsh, Carson, Anderson & Stowe, which just launched a $4 billion buyout fund (see story p. 12), Apollo Advisors LP, which last month launched a $4.5 billion fund, and EM Warburg, Pincus & Co., which is seeking an additional $2 billion for international investing.

“I don’t know where I’ll get all the money to invest with these groups,” said an alternative investment manager at a major state pension. “What everybody is going to face is, How much money can we put to work right now?’ You can’t commit to everyone.”

The manager could not confirm the $8 billion target amount, but said, “Everyone knows it’s going to be big.”

Steady Investing

KKR has received much attention for its forays into high-technology investing (investments made entirely with the partners’ personal wealth) and its huge bids in Europe through a $2.9 billion European fund. But the firm has also quietly been investing at a steady clip in a broad range of domestic sectors – some sexy, some refreshingly mundane. In February, KKR bought a 19.9% stake in DLP Inc., the parent of Dayton Power and Light Co., for $550 million (BUYOUTS Sept. 27, 1999, p. 14). DLP is an electricity-generating business.

In January, KKR invested $200 million in CAIS Internet, a publicly traded provider of broadband services.

Late last year, KKR spent $900 million on the recapitalization of Alliance Imaging Inc., an outsourcer of diagnostic scanning services (BUYOUTS Sept. 27, 1999, p. 14).

At the turn of the century, KKR, the firm that made LBO a household term, has eased up on highly leveraged transactions due mostly to the unwillingness of banks to provide such leverage and has increasingly turned to taking minority stakes in publicly traded companies.

Unlike other large buyout firms, KKR has not specifically set aside funds for “new economy” investments. This has not prevented the firm’s partners from getting involved in Internet activity. For example, last month, the partners at KKR announced a joint business with venture capital firm Accel Partners called Accel-KKR Internet Co. which will help traditional companies create Internet businesses (BUYOUTS March 6, p. 3). In Europe, KKR partners bought a minority position in European Digital Partners, an Internet investment group (BUYOUTS March 20, p. 35).