KKR/Fidelity Deal Won’t Include KKR’s IPO, Or Will It?

Earlier today, KKR and Fidelity Investments announced a deal whereby Fidelity’s retail and institutional brokerage clients would have the opportunity to participate in IPOs and follow-on offerings underwritten by KKR’s capital markets group. Basically a win-win for both sides, with KKR getting buyers and Fidelity’s clients getting rare IPO access (yes, rare even when IPOs are bountiful). Sure there could be losses if the deals are dogs, but buyout-backed IPOs are typically a smart bet.

KKR’s most anticipated IPO, however, is not for one of its portfolio companies. Instead, it’s for KKR’s own management company — prompting one of my Reuters colleagues to write the following:

A deal between KKR and Fidelity would give the mutual fund giant’s customers access to an IPO by the private equity firm itself – if KKR were to do one, a source familiar with KKR said.

Would make sense, except that the KKR IPO proposal does not include the sale of any new shares for Fidelity clients to buy. Instead, it’s designed to work as a sort of reverse merger, with KKR acquiring an Amsterdam-listed affiliate called KKR Private Equity Investors (KPE), and then listing the combined entity in New York. In other words, this is a long-term wealth creation play for Henry Kravis and company, not a one-day score.

So was my colleague’s source just a dunderhead, or does he/she know something we don’t… like, say, that KKR is leaning toward a traditional IPO again (its original filing was vanilla, with the KPE plan announced later)? If so, what does that mean for the future of KPE? And does KKR truly believe that Fidelity would produce enough buyside interest, given the public stock struggles of Blackstone and Fortress? Or is this more about secondary offers of KKR stock than it is about an initial public offering?

Just more questions, and the interminable wait for KKR’s IPO/Un-IPO continues…