Investment firm KKR & Co has agreed to purchase KFN in an all-stock deal that values the specialty finance company at $2.6bn.
For each KFN shares, KKR offered to pay KFN shareholders with 0.51 KKR shares, which is equivalent to a 35% premium based on 16 December 2013 closing prices.
KFN, which is outwardly managed by KKR, operates a specialty finance company with a portfolio of assets across a complementary range of strategies, principally leveraged credit through ownership of subordinated and mezzanine notes across various CLOs, among others.
The agreement, which has already been approved by the boards of directors of both KKR and KFN, is expected to complete during the first half of 2014, subject to customary regulatory approvals and other customary closing conditions.
Upon closing of the acquisition, KFN will operate as a subsidiary of KKR.
KKR co-chairmen and co-CEOs, Henry Kravis and George Roberts, said, "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."
Goldman, Sachs & Co and Simpson Thacher & Bartlett LLP are representing KKR, and Lazard and Cravath Swaine & Moore are acting as independent financial and legal advisors to the independent directors of KKR.
Sandler O’Neill + Partners, and Wachtell, Lipton, Rosen & Katz have been appointed to offer independent financial and legal advice to the independent committee of the KFN board of directors.