One of KKR’s top reasons for going public is that it wants a “public currency” that would enable it to expand its asset management platform via acquisition. For precedent, see how Blackstone Group bought hedge fund manager GSO Capital in an all-stock deal. But what exactly might KKR want to buy?
How about all or part of Lehman Brothers’ asset management business, which is known to be on the block. Not necessarily its private equity unit – although market sources say it’s being shopped – but perhaps some stuff that KKR doesn’t already have in-house. For example, CNBC’s Charlie Gasparino is reporting that KKR is showing strong interest in Lehman’s Neuberger & Berman money management unit. Gasparino says that Lehman wants to sell a 70% stake at a $10 billion valuation, with an option to reacquire the unit at a latter date.
Not sure the final part would fit into KKR’s expansion plans, but this still looks like it could be a case of coinciding interests: KKR believes its needs to expand its asset management platform, while Lehman believes it needs to shrink its asset management platform. Buyer, meet seller.
It’s also worth noting that KKR could always just do this deal as a traditional LBO – thus absolving it of the aforementioned dilemma – particularly if Lehman wants to move faster than do KKR’s IPO underwriters.
Gasparino says that Blackstone hasn’t shown much interest in Neuberger & Berman, but that doesn’t mean that it isn’t eying other pieces of Dick Fuld’s troubled empire. Ditto for pending public entity Apollo Management. You never want to be forced into a sale, but at least there are a bunch of large enough buyers out there…