Business Context and Reporting Period
Company: KKR & Co. L.P. (KKR)
Filing Type: Form 8-K (Current Report)
Date of Report: December 16, 2013
Event: Entry into a Material Definitive Agreement (Merger Agreement) to acquire KKR Financial Holdings LLC (KFN).
Key Financial Metrics
This filing is a current report regarding a corporate transaction and does not contain periodic financial statements (e.g., revenue, profit, cash flow, or margins). The following transaction-specific financial data is provided:
- Exchange Ratio: 0.51 KKR common units for each KFN common share.
- KFN Outstanding Equity (as of Dec 13, 2013): 204,824,159 common shares and 14,950,000 7.375% Series A LLC Preferred Shares.
- Termination Fee: $26,250,000 payable by KFN to KKR under certain termination scenarios.
- Expense Reimbursement: Up to $7.5 million payable by KFN to KKR under other termination scenarios.
Material Changes and Transaction Details
KKR, KKR Fund Holdings L.P., and Copal Merger Sub LLC entered into an Agreement and Plan of Merger to acquire KFN. Upon completion, KFN will become a wholly-owned subsidiary of KKR Fund Holdings. Key structural changes include:
- Share Conversion: KFN common shares convert to KKR common units; fractional units paid in cash.
- Preferred Shares: KFN's 7.375% Series A Preferred Shares remain outstanding post-merger.
- Options and Phantom Shares: KFN options convert to cash based on the excess of the KKR unit value over the exercise price; phantom shares convert to phantom shares in KKR common units.
- Management: KFN is currently managed by KKR Financial Advisors LLC, a KKR subsidiary.
Guidance, Outlook, Risks, and Conditions
Conditions Precedent: Completion of the Merger is subject to:
- Approval by a majority of KFN's outstanding common shares (including a majority of shares held by non-affiliates).
- Expiration of waiting periods and receipt of regulatory consents (e.g., Hart-Scott-Rodino Act).
- Effectiveness of the Form S-4 registration statement and listing of KKR units on the NYSE.
- Payoff of KFN's existing credit facility and satisfaction of related obligations.
- Receipt of a statement certifying U.S. real property interest thresholds are met.
Termination Rights: The agreement may be terminated if not completed by September 16, 2014, or if shareholder approval is not obtained.
Risks and Forward-Looking Statements: The filing warns that actual results may vary due to regulatory delays, failure to secure approvals, market volatility, disruption of management attention, and general economic conditions. The Merger Agreement representations are not intended as characterizations of actual facts for investors.
Investor Verification Checklist
- Verify the final approval status of the Merger by KFN shareholders.
- Confirm the effectiveness of the Form S-4 registration statement and NYSE listing approval.
- Monitor the payoff status of KFN's existing credit facility.
- Review the full Merger Agreement (Exhibit 2.1) for specific covenants and representations.
- Check for any regulatory consents or antitrust clearances required under the Hart-Scott-Rodino Act.