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BIG THINGS

1. Two buyout icons, sign off

Henry KravisAnd George RobertsGuided KKR For nearly 50 years, I was responsible for its transformation into the financial colossus that it is today.

Their time at the top is over. The end of the era is near for private equity.

George Roberts (left in framed photograph) and Henry Kravis, (right) were the first to create KKR at Rose and … [+]Joe’s restaurant (photo below) in New York City, 1976. Forty-seven year later, the cousins are retiring as co-CEOs.

San Francisco Chronicle via Getty Images

Kravis, Roberts and Roberts today announced that they will be stepping down as co-CEOs for KKR. Current co-presidents will replace them Joe BaeAnd Scott NuttallEffective immediately. Roberts, aged 78, and Kravis, 77 respectively, are among America’s 100 most wealthy people. They will continue to serve as co-executive chairmanmen. However, the two cousins who co-founded KKR in 1976 alongside Roberts will remain co-executive chairmen. Jerome KohlbergThey are the latest members of the founding generation of private equity to leave the industry they helped create. Few members of this generation are still around.

Stephen Schwarzmanis still the CEO Blackstone. Nearly every major private equity firm that has invested for decades has had to deal with succession planning in recent times. This is a difficult task in an industry where investor aura and personal relationships are so important. Bain Capital? The Carlyle Group? Hellman & Friedman? TPG? Leonard Green & PartnersAnd Silver LakeThese are just a handful of other industry heavyweights established in the 20th century and that no longer function under their original leadership.

Earlier in the year Apollo Global ManagementIt faced its own unique succession problem, as a long-serving CEO. Leon BlackAfter an investigation into his financial connections, he resigned. Jeffrey Epstein. He was replaced by Marc RowanAnother cofounder:

For many years it has been obvious that KKR was moving in this direction. In 2017, Nuttall and Bae were named co-presidents. Since then, they have been the firm’s public face, leading earnings calls and investor days. Kravis and Roberts jointly stated that the appointment was made four years ago. “ensuring we have the right team and leadership structure to serve our clients and partners for decades to come.”

The first K of KKR is long gone. Kohlberg left the firm in 1987 just a few years before KKR’s famous $25 billion buyout. RJR Nabisco. He continued to found Kohlberg & Co.KKR was a smaller private equity company than KKR. Kohlberg, who was 90 years old, died in 2015.

KKR won’t likely ever do a deal that causes as much ink to flow as the Nabisco takeover. “Barbarians at the Gate.”The firm has remained at forefront of the industry during the reigns of Kravis and Roberts. It has made huge acquisitions, raised huge funds, and pioneered new avenues for private capital, including insurance, credit investing, and investment banking. The 1980s private partnership of KKR bears little resemblance today to the publicly traded financial behemoth.

Other than the appointment of new CEOs, more changes are on the horizon. KKR also announced today that it will gradually eliminate its dual-class share structure, which gives additional voting power to company executives. “one-share, one-vote”This format will make it easier to include KKR’s stock in public indexes. Similar shifts were made by Apollo and Carlyle to coordinate with their succession plans.

KKR stock should become even more attractive to investors. It’s already very appealing: KKR shares have risen more than 65% since 2021’s start. This is part of a larger surge in private equity stocks, which has been driven by the industry’s stellar performance during the pandemic.

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KKR’s market capital has risen to $56 billion. This is a staggering amount that Kravis and Roberts would not have imagined when they founded the company 47 years ago. It also demonstrates how private equity has transformed from a niche industry to one of the most important economic engines in the world. The evolution continues today. But the next half-century of growth will be for a different generation to worry about—and to profit from.

Emerson Electric & AspenTech are creating a new major player in the industrial-software space.

Getty

2. Emerson’s $11B software wager

Software is essential for heavy industry. This is the motivation behind today’s announcement by Emerson ElectricFusion of two of its software companies Aspen TechnologiesIn a cash-and stock deal worth $11 million, AspenTech will form a new-look AspenTech. It will create and sell software to electric utilities, miners and geologists, as well as clients in a range other industries that are more concerned with physical tools than digital.

We all need to know that software is consuming the world. Emerson and AspenTech are attempting to capitalize on the booming market for software, AI, and similar technologies.

AspenTech is already a space-focused company, but industrial software is only one part of a larger business at Emerson. The St. Louis-based conglomerate is valued at $57 billion. It employs more than 80,000 people and has a portfolio of industrial brands. RIDGIDPower tools Workshop vacuums. After a steep fall in the first days of the pandemic that led to a rapid decline, its share price has more then doubled over the past 18 month. This increase certainly increased the appeal of its stock as a potential merger currency.

Emerson will be contributing its OSIAnd Geological Simulation SoftwareThe deal included 6 billion in cash and units in return for a 55% stake at AspenTech. It bought OSI (also called Open Systems International) which makes software to the power industry a little over a year back in a $1.6bn takeover.

AspenTech’s transaction value is $160 per share. This 27% premium compares to the stock price before Bloomberg reported that AspenTech could be in the works. The company, based in Bedford, Mass., logged $709.4 millions in revenue for its fiscal 2021. This is an 18.5% increase over the previous year. AspenTech chief executive Antonio PietriHis role will remain at the combined firm.

AspenTech and Emerson should be busy closing this $11 billion deal for a while. However, there may be more M&A in the near future. It sounds like today’s deal was created with future consolidation at heart. The Wall Street Journal:

“Mr. Pietri and Emerson CEO Lal Karsanbhai said in interviews they sketched out the deal over an Italian dinner in Boston’s North End in July, concluding in part that a combined company could be better positioned for further acquisitions.”

ALTER THINGS

French grocery and retail giants French Grocery have joined forces for the second time in this year. Carrefour It was unsuccessful in its attempts at a mega-merger. Recently, the company offered to acquire a rival Auchan for €16.8 billion (about $19.4 billion), Carrefour has pulled back from the negotiations due to the objections of its leading shareholders, the Moulin According to a Reuters report, family. Carrefour and Canadian retail powerhouse Carrefour were both announced earlier this year. Couche-TardFrench regulators opposed a planned merger worth $20 billion and believed that the deal could cause food security concerns. Carrefour has been unsuccessfully trying to tie-up. However, two major grocery takeovers occurred just a few miles away in Britain. Asda sold for £6.8 billion (about $9.3 billion) and Morrisons recently signed a £7 billion pact.
The cycling industry is in for a shakeup. Dorel IndustriesToday’s announcement included an agreement to sell Cannondale? Schwinn? MongooseIt also includes a dozen other brands Dorel SportsDivision for $810 million Pon HoldingsA Dutch company, whose portfolio already includes Santa Cruz? Urban ArrowThere are many other brands that offer biking products. Pon will have a greater presence in the U.S., and its revenue will nearly double. Pon.Bikeunit Dorel reneged on an earlier agreement to sell its own unit. Cerberus Capital ManagementThe shareholders objected to the take-private purchaseout of the company, which was worth $370 million. The conglomerate will now concentrate its efforts on its two remaining divisions, which sell furniture and juvenile products like strollers and cribs.
The infrastructure unit of Ardian It will purchase Spanish fiber internet provider Adamo TelecomFrom EQT for more than €1 billion (nearly $1.2 billion), continuing a string of recent deal activity in the European telecom market in general—and the Spanish telecom market in particular. Last week, reports emerged that a number of deals were being made in the Spanish telecom market. Telefonica was considering a sale of its Spanish fiber business for as much as €15 billion, and Red Eléctrica An auction is being held for its Spanish fiber network. KKR? AXA Allianz among those chasing a deal that could be worth €1.3 billion, according to local media reports. The shift to 5G is coming along with years of shrinking margins and rising costs to drive consolidation in the sector.
Late last week, Hellman & FriedmanIncreased its takeover offer Zooplus to €470 per share, matching a bid submitted two weeks prior by EQT. The bidding war between the two companies has been extended for the German retailer for pet food and other pet care products. It was a process that reached a point where it was too costly for the blood. KKRAlthough it had expressed interest in Zooplus previously, it pulled out after the price started rising. The latest dueling proposals both value Zooplus at €3.36 billion (about $3.9 billion).
It continues to be an acquisition-filled year for the pharmaceutical sector. Pacira BioSciencesThe company, which specializes on non-opioid pain relief, has signed an agreement to purchase Flexion Therapy$630 million, or $8.50 a share This is 47% more than the Friday closing price for Flexion stock. This is the strategic reason. Flexion creates non-opioid-based pain relief for patients suffering from arthritis and other musculoskeletal disorders. It makes it a natural match with Pacira’s existing portfolio. The U.S. healthcare system’s increasing dependence on opioids in 2000 and 1990s created a national crisis, which prompted companies like Flexion as well as Pacira to look for other ways to treat their pain.
In a slightly smaller deal with pharma,Supernus PharmaceuticalsWe have agreed to purchase Adamas PharmaceuticalsFor approximately $400 million or $8.10 per shares, two drugs aimed at Parkinson’s patients will be added to the company’s existing portfolio of central nervous system disorders treatments. Supernus will pay a 75.6% premium on Friday’s closing price for Adamas shares. Trokendi XR is a drug that prevents migraines and treats seizures in epilepsy patients. It currently accounts for more than half the net sales of Supernus.
2021 has a long way to go. It’s never too soon to look ahead to 2022. Co-owners Hellman & FriedmanAnd PermiraWe are preparing an IPO to support call-center software specialists GenesysBloomberg estimates that the company could go public in early next year. It is estimated that the company will be valued at around $20 billion. This adds another name to a crowded global IPO queue. Genesys sells call-center technology to blue-chip clients that include Lenovo? Microsoft? PayPal Ticketmaster. A listing at the reported valuation would be very profitable for the company’s owner: Genesys was purchased by Permira in 2012 at $1.5 billion. H&F purchased a stake at $3.8 billion in 2016.
Major Japanese oil refiner Eneos HoldingsOfficially announced a pact for purchase Japan Renewable EnergyAccording to reports, the takeover was imminent for around 200 billion yen (around $1.8 billion). Keitaro InoueEneos senior vice president, John Sullivan, stated that the acquisition is a “key turning point”The company is focusing its efforts to reduce carbon emissions and shift its focus towards renewable assets. It has a stated goal to reach carbon neutrality by 2040. Current JRE investors Goldman SachsAnd GIC They will sell their stakes in this deal.
Given the U.K.’s plans to ban new combustion-engine cars by the end of the current decade, the importance infrastructure in the country for electric cars is only going to increase. One company aims to create some of this infrastructure. Pod Point, plans to make a public offer in London to accelerate its services, including charging systems for homes and workplaces, as well commercial charging stations. Majority of these charging stations are state-backed Electricite de FrancePod Point claims it has sold more that 100,000 charging points in the U.K. since its inception in 2009. According to PitchBook, the company was valued at just above $110 million and received a growth financing round in 2019.
Russia’s Renaissance Insurance GroupThe initial price range to be set for a Moscow IPO could be more than 73 million rubles (about $1billion) and raise more money than 25 billion rubles. Renaissance is Russia’s largest online provider of insurance policies. The current majority shareholder of the company is The Sputnik Group, a Russian investment and advisory firm headed by a banker Boris Jordan. It is also backed by Baring VostokAmerican’s private equity firm,. Michael Calvey, who was arrested in Russia in 2019, and convicted in April for embezzlement.
KKR The alternative investor is not the only one who has been busy planning for the future. Värde PartnersThe Minneapolis-based firm specializes in restructuring and debt deals. Brad BauerAnd Giuseppe NaglieriThey will be moving from their current jobs as deputy chief investments officers to new roles of co-CIOs. They will be sharing the current CIO’s role for the moment. Ilfryn CarstairsLast year, he was also promoted to the role of co-CEO. Carstairs promotion appeared to be setting up for Carstairs’ eventual exit. George Hicks, the longtime CEO who cofounded Värde in 1993.

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READ THESE THINGS

SpaceX’s Elon Musk is and Dish Network’s Charlie Ergen are two visions for the future. They might not have enough bandwidth to meet their needs. [The Wall Street Journal]

After a surprise merger with Sony, Zee Entertainment, an Indian TV network, is in a dispute with a major shareholder about whether the deal should be made. [Reuters]

The Pacific Northwest was hit with a record-breaking heat wave earlier this summer, causing disasters Oregonians had never seen before. They will likely see them again. [The New Yorker]

The past 15 years have seen a complete transformation in the newspaper industry through consolidation. It means that small-town life in America will never be the exact same. [The Atlantic]

Sanjeev Gapta, Britain’s Finance Minister, faced many problems after Greensill Capital collapsed. “saviour of steel.”He’s now facing a coup attempt at Dunkirk from an unlikely source: American Industrial Partners. [Financial Times]

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