KKR to close US$16.5bn fund shortly

Kohlberg Kravis Roberts & Co (KKR) is about to finish fundraising for its flagship 2006 Fund.

Sources suggest the fund is likely to pull in US$16.5bn. That would make it the largest ever single private equity fund, being US$900m bigger than the US$15.6bn fund raised by US rival Blackstone for its fifth global fund earlier this year.

The fundraising will come as a relief to KKR’s management. In early May the group raised US$5bn for KKR Private Equity Investors, a vehicle listed on Euronext allowing public equity investors a chance to back a private equity partnership.

Shares in the group started trading at US$25 but have since fallen 12% to US$21.60. In August KKR Private Equity Investors admitted that its net asset value stood at US$23.77 a share. The vehicle’s biggest commitment so far has been a US$1.9bn investment in the KKR 2006 Fund.

Other holdings in the public vehicle include a US$200m co-investment in Dutch publisher VNU. This followed the buy-out of the media company by a consortium that, beside KKR, included AlpInvest, Blackstone, Carlyle, Hellman & Friedman and Thomas H Lee Partners. The deal, in June, valued VNU at €7.6bn (US$9.7bn).

KKR Private Equity Investors has also contributed funds that will assist the buy-out of US hospital operator HCA. This US$33bn deal, due to complete in November, has been backed by Bain Capital, Merrill Lynch Global Private Equity and founder Thomas Frist. It would be the largest ever leveraged buy-out.

One source said the closing of the 2006 Global fund was “not too far away”.

Since KKR listed a vehicle on Euronext, two other private equity groups, Apollo and Doughty

Hanson, have said they plan to follow this lead. Another rival, Texas Pacific is also raising a global fund of a similar size to KKR’s.

KKR is also apparently interested in raising money for an Asian fund over the next year as well.