KKR’s Profit Surge Amid Economic Challenges

KKR's Profit Surge Amid Economic Challenges

Global investment company KKR & Co. L.P. (NYSE:KKR) defied the negative impacts of the crisis in the European region, and the weakening economic growth worldwide. The company’s second quarter economic net income (ENI) increased to $546.1 million from the $315 million during the same period last year. After tax, its ENI was $0.74 per adjusted unit, up from $0.36 in 2011. The company beat the $0.16 cents average analysts’ estimate.

Based on the second quarter result of the company, DealBook cited that its economic net income after taxes was $146.3 million, more than triple, compared with its income a year earlier. The result was calculated using the generally accepted accounting principles within the private equity industry.

In a statement, Henry Kravis and George Roberts, co-founders and co-chief executive officers of KKR said, “Against challenging economic capital markets backdrop, we are pleased with our results.”

According to the company, the growth in its second quarter income was derived from its private equity investments, and interests earned from its private equity funds. Its private equity investments portfolio jumped by 5.1 percent.

KKR’s $406.1 million total distributable earnings is higher than its $142.9 million result during the same quarter in 2011. As of June 30, 2012, its book value was $6.5 billion on segment basis.

The total assets managed by the company declined from $ 62.3 billion (Marc 31, 2012) to the $61.5 billion as of June 30, 2012. Its free paying assets under management also went down to 47.2 billion. Its free related earnings (FRE) went down from $76.1 million during the second quarter last year, to the current $68.8 million.

The strong growth of the company during the second quarter is due to its transaction with Walgreens (NYSE.WAG), after the largest drug store chain in the United States agreed to purchase 45 percent interest, worth $6.7 billion, in Alliance Boots, a European pharmacy retailer. The agreement boosted its portfolio and its value climbed from $391.7 million to $650.6 million, as of June 30, 2012.

The company also announced its partnership with Stone Point Capital, an investment firm, to provide capital markets services to midmarket and private equity-owned companies. Both companies committed $150 million each in the joint venture. KKR said that its existing capital markets business is separate from its new business venture with Stone Point Capital.

Furthermore, KKR also reiterated its plan to acquire Prisma Capital Partners LP, a firm engaged in providing customized hedge fund solutions with $ 7.8 billion assets under management. The company expects to close the transaction during the fourth quarter this year.

KKR’s other investments include Toys R Us Inc., HCA Holdings Inc. (NYSE:HCA), and Go Daddy.

About the Author

Marie Cabural
Marie received her Bachelors Degree in Mass Communication from New Era University. She is a former news writer and program producer for Nation Broadcasting Corporation (NBC-DZAR 1026), a nationwide AM radio station. She was also involved in events management. Marie was also a former Young Ambassador of Goodwill during the 26th Ship for Southeast Asian Youth Program (SSEAYP). She loves to read, travel and take photographs. She considers gardening a therapy.