KKR Closes European Annex Fund

LONDON (Reuters) – U.S. buyout firm KKR has closed an annex fund to support companies in its second European fund with over 400 million euros ($569.1 million), towards the bottom of its range, a source close to the company said.

KKR confirmed on Thursday it had recently closed the annex fund, but declined to comment on the amount of capital raised.

KKR was looking for 400 million to 700 million euros for follow-on investments, having exhausted the capital in its second European buyout fund, which holds high-profile investments including pharmacy chain Alliance Boots and German broadcaster ProSienbenSat.1 (PSMG_p.DE).

Increasing numbers of private equity firms are raising annex, or top-up, funds as they find they have insufficient capital in their main funds for equity injections or portfolio company acquisitions.

However, annex funds can be unpopular with investors as returns have historically been poor.

KKR is satisfied with the level of capital raised, which will be used for “selected investments” in the fund, the source said. The 4.5 billion euro fund was raised in late 2005.

Under the terms of the agreement, investors were able to transfer a portion of their commitment to the third European fund to the annex fund, the source said. ($1=.7028 Euro)

By Simon Meads (Editing by Simon Jessop)