Kohlberg Kravis Roberts appears to be muscling further into the Australian market, as speculation mounts that the New York fund is behind a big pending buyout proposal in the local market.
The Matthew Grounds-chaired Barrenjoey Capital Partners, backed by Hamish Douglass’s Magellan Financial, is believed to be close to a looming bid that involves KKR.
The buyout fund is cashed up after raising $US15bn ($21bn) for its fourth Asia fund this year – the largest ever raising for a fund in Asia.
Observers say it makes sense for KKR to focus on the Australian market at a time when private equity firms with a mandate to deploy funds in the Asia-Pacific region remain wary about investing in China.
Deals in Japan are considered challenging because of the time they take to execute, while India offers opportunities.
A 15 to 20 per cent return on investments is seen as achievable in the Australian market.
KKR is focusing on energy and health services, which means Origin Energy and the $16bn Ramsay Health Care – the country’s largest private hospital operator – could be in the frame.
The financial sector has also been of interest, although few major targets exist in the local market aside from insurers such as QBE or IAG.
Another suggestion is Coles Group.
KKR previously bid for supermarket chain Coles in 2006, but its bid was rejected. Coles was later sold to Wesfarmers and demerged from the Perth-based conglomerate in 2018.
Coles has prospered from consumers being forced to stay at home during the pandemic over the past two years, but is being hit by higher costs like its rival Woolworths.
Some sources say a bid from a private equity fund for a major Australian listed company is set to land before Christmas.
Others believe it will emerge in January or February.
The talk in debt markets is that KKR is the acquirer.
Apparently, financing has been lined up for a transaction.
The Australian Investment Council reported in its 2021 Yearbook that $27bn of dry powder was held by Australia-focused private capital fund managers as of June last year.
Institutions such as pension funds are pouring money into private equity to seek higher returns in an era of low interest rates.
Henry Kravis and George Roberts announced this year they were stepping down as co-CEOs of KKR, as the founders of the firm become the latest to pass the torch to hand-picked successors.
In October, they handed the reins to Scott Nuttall and Joe Bae.
Kravis and Roberts will continue to serve as co-executive chairmen.
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