RE:KKRKKR are incredibly astute investors. They are not the kink of firm that sits on the sidelines. I would say that they purchased 5% with a very clear outcome in mind. I remember what they did with Shoppers Drug Mart in a 4 year time frame (article below)
Canada has been very, very good to Kohlberg Kravis Roberts.
The world's best-known leveraged buyout firm took a few more chips off the table yesterday by leading a syndicate of owners that sold up to 20 million shares in Shoppers Drug Mart for $460-million.
KKR, made famous for its Barbarians At The Gate takeover of RJR Nabisco, bought Canada's biggest drugstore chain from conglomerate Imasco just four years ago. The management-led buyout saw KKR and backers that included the Ontario Teachers Pension Plan Board and CIBC World Markets put up $5 a share to buy Shoppers equity, and borrow the rest of the $2.55-billion purchase price.
Today, Shoppers is a $5-billion company, with a stock that was halted for the share sale after changing hands at $23.55 on the Toronto Stock Exchange. In the Street's terms, KKR and friends have a four-bagger. Their original investment has increased fourfold in as many years. (It's worth noting that Shoppers management did not opt to sell any of their shares.)
After this share sale, the KKR-led group will hold roughly 60 per cent of Shoppers, down from 70 per cent of the chain.
"We are pleased to have this opportunity to expand our shareholder base with additional long-term investors, while at the same time increasing the size and liquidity of the company's public float," Glenn Murphy, Shoppers chairman and CEO, said in a press release late yesterday.
Shoppers' controlling shareholders commissioned CIBC World Markets and Merrill Lynch to do what's known as an overnight marketed deal. The dealers announced they were selling shares late yesterday. During the evening and early morning, they called potential investors. A price for the new shares will be set before trading begins this morning. Given the communications reach of modern technology -- cellphones and BlackBerrys -- such a campaign allows for a major sales effort.
This is the second time that KKR and its partners at Shoppers have cashed in part of their winnings. Last June, the financiers moved $644-million worth of stock, selling at $23 a share.
Over 26 years, KKR has purchased $110-billion (U.S.) worth of companies, averaging 3.5 buyouts a year.
Shoppers is the firm's second major win in this country. In the 1990s, KKR had another four-bagger when it bought, then quickly resold, Canadian General Insurance. However, the biggest bet KKR has made in Canada has yet to pay off. The firm, teamed again with the Ontario Teachers, bought Bell Canada's directories for $3-billion (Canadian) this past summer, winning a spirited bidding war for the prize.