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KKR Planning IPO

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Damn the torpedoes! Full speed ahead!
Kohlberg Kravis Roberts have hired Morgan Stanley and Citigroup as underwriters for the potential public offering, CNBC’s Charlie Gasparino reported today. While warning that the plans were still tentative, Gasparino said that KKR would pursue an IPO that would compete in size with Blackstone’s.
There has been rumor and speculation that KKR would follow its rival Blackstone into the public markets since news of Blackstone’s offering broke months ago. But the last time we checked in, people were saying KKR had rejected going forward with an IPO. What's more, some had wondered if tax legislation recently proposed in the US Senate would have a chilling effect on the urge to go public. The proposed bill would force private equity partnerships to pay taxes at the corporate rate if they go public, instead of treating profits as capital gains taxed when distributed to the partners under the current law.
But despite the potentially higher tax bills, Blackstone seems undeterred in their desire to sell shares. And investors are apparently undeterred in their desire to buy them. Talk that the higher tax bill could knock as much as 20% off the value of Blackstone has not been reflected in the appetite for the shares.
The success of Blackstone’s offering, which is expected to price tonight at the high end of its range and is reportedly oversubscribed by a factor of seven, has sparked talk of offerings coming from not only KKR, but Apollo, Carlyle and TPG. Gasparino says that Apollo is also leaning toward an IPO, something he has steadily maintained despite contrary reports in the New York Times.
There’s something of an irony in KKR following Blackstone in offering shares to the public. According to sources familiar with the genesis of the Blackstone IPO, the idea of going public was hatched after KKR succeeded in selling shares in one of its buyout funds to the public. At the time, Blackstone head Stephen Schwarzman publicly complained that the enormous offering had sucked the air out of the market for exchange traded private equity funds. Selling partnership shares of Blackstone was hatched as a new way of getting at the capital markets. So KKR may have inspired the very offering that they are now looking to imitate.
KKR May Launch IPO Later This Year: CNBC's Gasparino []