Daily News: December 18, 2013

Johnson & Weaver to Investigate $2.6B KKR Financial Holdings Sale

KKR & Co. and KKR Financial Holdings announced the signing of a definitive merger agreement where KKR will acquire KFN through a stock-for-stock merger that values KFN at $2.6 billion.

According to KKR’s press release, under the agreement, which was approved by each company’s boards of directors, shareholders of KFN will receive 0.51 common units of KKR for each common share of KFN. Based on KKR’s closing price as of December 16, 2013, the exchange ratio equates to a value of $12.79 per common share of KFN, implying a 35% premium to KFN’s closing price on December 16, 2013, or $2.6 billion in total common equity value.

Henry Kravis and George Roberts, co-chairmen and co-chief executive officers of KKR, stated: “Through this transaction, we are acquiring a business with a fully invested, complementary portfolio of assets while increasing the scale and diversity of KKR’s balance sheet. Furthermore, through the distribution of KFN’s realized earnings, the transaction is expected to provide a meaningfully greater recurring component to KKR’s distribution and also be immediately accretive on a total distribution per unit basis.”

However, Shareholder Rights law firm Johnson & Weaver is investigating whether members of KKR Financial Holdings’ board of directors breached its fiduciary duties in connection with the sale.

The investigation concerns whether KFN’s board failed to satisfy their duties to the company’s shareholders, including whether the board adequately pursued alternatives to the acquisition and whether the board obtained the best price possible for KFN’s shares of common stock. The investigation also concerns KKR’s role in the process leading up to the announcement.

Goldman, Sachs and Simpson Thacher & Bartlett are representing KKR; and Lazard and Cravath Swaine & Moore are serving as independent financial and legal advisors to the independent directors of KKR. Sandler O’Neill + Partners and Wachtell, Lipton, Rosen & Katz are serving as independent financial and legal advisors to the independent committee of the KFN board of directors.

KFN is a specialty finance company with a portfolio of assets spanning a complementary range of strategies. KFN is externally managed by KKR.

Johnson & Weaver is a shareholder rights law firm with offices in California and New York. The firm represents individual and institutional investors in shareholder derivative and securities class action lawsuits.

To read the full KKR press release regarding its acquisition click here.