Private-equity firm KKR buys affiliated debt company for $2.6 billion

Private-equity firm Kohlberg Kravis Roberts, or KKR, announced that it's buying up its sister company for $2.6 billion.

Publicly-traded KKR Financial Holdings, or KFN, is a credit investment company and will be brought under the roof of the KKR publicly-traded company. Bloomberg notes the irony of private-equity growing in a publicly-traded realm.

KKR will be buying up a $2.9 billion debt investment portfolio in the sale, and the ratio of exchange prices for the combined company will come to $12.79.

KKR shares slid a small increment Monday in response to the news, sliding just more than one percent again Tuesday to $24.79. But KFN shares jumped 31 percent Monday, and again by almost 31 percent Tuesday to $12.34.

Four years ago, KKR purchased another sister company, publicly-traded KKR Private Equity Investors, during which KKR first began trading on the New York Stock Exchange.

KFN started trading on the NYSE in 2007 after evolving from its roots as a real estate trust. It turned toward dealing with corporate debt after the 2007 sub-prime mortgage crisis.

Monday's merger announcement comes prior to KKR's Tuesday announcement of a near closure of $1.5 billion real estate fund. Ralph Rosenberg, who heads the KKR real estate group, told the Wall Street Journal that "a lot of the old players are off the playing field," and that KKR's 2012 investment in real estate is starting to show returns by new investors entering real estate in risky and rewarding ways.

[Bloomberg] [NY Times] [Wall Street Journal] [Zack's]