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So, three years after KKR began planning an IPO, shares ("common units" or limited partnership interests) of KKR & Co. L.P. are trading on the NYSE.  If we can even make our memories go back to a time before the 2008 financial crisis, we will remember when Fortress and Blackstone, two other private equity firms, went public, generating hundreds of millions of dollars in tax-advantaged gains to their founders.  But KKR came a little late to the party, and ended up postponing its IPO, only to list its shares on the Euronext Amsterdam exchange through a foreign subsidiary, KKR & Co. (Guernsey) L.P. nine months ago.  Today, all of the holders of KKR Guernsey units received units of U.S.-based KKR, and could immediately trade them on the NYSE.  These units opened this morning at $10.50 per unit, and has gone up to over $11, but is now at $10.48 on what turned out to be a weak trading day.

Blogger Emeritus Vic Fleischer has been the go-to person on the tax implications of these private equity limited partnership IPOs for quite awhile.  On his own website, he has written about this new KKR deal and the pending legislation that is putting pressure on the founders to sell their founding stock quicker rather than later. 

No new shares were sold today, although the media is referring to the listing transfer as an IPO.  However, the Prospectus for the registration of the new shares and the in-kind distribution note that the firm anticipates a "Public Offering" of $500,000,000 worth of shares:

Subject to market conditions, we are planning to sell common units in a public offering following the U.S. Listing, which we refer to as the "Public Offering". Assuming an aggregate offering amount of $500,000,000 at an offering price of $9.44 per common unit, which is the last reported sale price of KKR Guernsey units on Euronext Amsterdam on July 6, 2010, we would issue 52,966,102 common units in the Public Offering resulting in an aggregate of 735,973,522 common units outstanding on a fully diluted basis, with new common unitholders holding 7.2% of our fully diluted common units, former KKR Guernsey unitholders holding 27.8% of our fully diluted common units and our principals holding the remaining 65.0% through KKR Holdings. . . . . .None of our principals is selling any common units or will otherwise receive any of the net proceeds from the Public Offering, and any common units issued by us in the Public Offering would reduce the interests in our business held by KKR Guernsey unitholders and our principals on a pro rata basis. We have filed a separate registration statement with the Securities and Exchange Commission to register the Public Offering. There is no assurance that the Public Offering will be consummated as set forth herein or at all. The U.S. Listing is not contingent on the occurrence of the Public Offering.

Vic explains that if Henry Kravis were to sell $500 MM of KKR units under today's tax regime, the tax bill would be $75 MM. If pending legislation were to pass and Kravis' gains were not taxed at capital gains rates, then the bill could be twice that or more.  Though the Prospectus repeats several times that no principals will be selling common units in the Public Offering, the principals may intend to sell at other times.  Did I mention how much I missed Vic?

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