Buyout firm KKR will sell IPOs through Fidelity
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Wall Street remains wary of initial public stock offerings, so private equity titan Kohlberg Kravis Roberts & Co. has another idea: Make IPOs more available to Main Street.
KKR today struck a deal to sell any public offerings of its portfolio companies via mutual fund giant Fidelity Investments’ brokerage arm.
KKR owns about 50 companies with total annual sales of $200 billion. But the buyout firm hasn’t tried to bring one of its companies public since 2006, when it sold shares in Sealy Mattress Co., Reuters notes. KKR’s plans to go public itself also have been on hold.
The IPO market went into a deep freeze amid the financial-system collapse last year. Overall, just eight IPOs have come to market in the U.S. this year, raising $1.8 billion, according to ipohome.com. The last big year for new stock offerings was 2007, when 273 deals came to market, raising $60.2 billion.
IPOs provide a payday for buyout firms by allowing them to cash out of the companies in their portfolios.
From the joint KKR/Fidelity statement today:
Through the new relationship, Fidelity will have exclusive access to retail securities that are allocated to KKR in all U.S. public offerings in which KKR participates as an underwriter, including IPOs and follow-on offerings. Those retail securities will be made available to Fidelity’s retail brokerage customers as well as to accounts managed by Fidelity’s registered investment advisor (RIA), correspondent broker-dealer and other institutional clients. ‘Our alliance with Fidelity creates a new retail distribution channel for our capital markets business and allows us to provide a broader range of investors with greater access to our offerings,’ said Craig Farr, head of KKR Capital Markets.
If the IPO market heats up again, Fidelity could gain by attracting retail customers who often have found themselves closed out of hot IPOs at big-name brokerages.
The risk is that KKR’s deals could be duds – angering Fidelity clients who may see the fund firm’s arrangement with KKR as implying a mark of quality.
The companies in KKR’s portfolio include medical device firm Biomet Inc., retailer Dollar General Corp., e-commerce firm First Data Corp. and hospital giant HCA Inc.
-- Tom Petruno