KKR & Co. (KKR:US), the buyout firm run by Henry Kravis and George Roberts, is pursuing deals in the energy industry as it expands beyond traditional corporate takeovers, Roberts said in an interview.
Energy “is a huge opportunity for us,” Roberts said in the interview that aired today on Bloomberg Television’s “MoneyMoves with Deirdre Bolton.” “We’ve been interested in that for a long period of time, and now seems like a very good time to be investors in that.”
KKR, which Roberts and his cousin Kravis started in 1976 with Jerome Kohlberg, is pursuing efforts in hedge funds, direct loans to companies and infrastructure deals as well as energy as the market for corporate buyouts wanes. Private-equity managers announced $309.7 billion of buyouts last year, less than half 2007’s record $727 billion, according to data compiled by Bloomberg.
The firm has pursued natural-gas investments tied to shale discoveries and has a group dedicated to energy and infrastructure transactions headed by Marc Lipschultz.
Buying oil or gas-rich land or existing energy assets, and financing refineries, is distinct from the corporate LBO world, where KKR and its competitors negotiate with boards of directors to take over companies. Earlier this year, KKR formed a $250 million venture with Chesapeake Energy Corp. (CHK:US) to acquire mineral rights and royalties from owners of oil and gas properties.
Owning such varied companies as Toys “R” Us Inc. and Del Monte Foods Co. carries a responsibility that extends beyond its investors to employees and the environment, Roberts said in the interview at his Menlo Park, California, office. New York-based KKR has stakes in 79 companies that generate about $200 billion in revenue a year, Roberts said. Those companies employ about 1 million workers around the world.
“Those people live and work in communities that are affected by decisions those companies make,” he said. “We have an obligation not just to the investors who invest with us, but to all other stakeholders.”
Private-equity firms including KKR, Blackstone Group LP (BX:US) and Carlyle Group LP (CG:US) are facing public scrutiny by virtue of the breadth of their holdings, their decisions to take their own firms public and the presidential candidacy of Mitt Romney, the co-founder of Bain Capital LLC. Romney has faced accusations from both Republicans and Democrats during the campaign that his private equity history was characterized by cutting jobs and closing factories in pursuit of investment returns.
Roberts, 69, said KKR added 25,000 jobs across its companies in 2010 and 2011.
KKR was among the first private-equity firms to raise money from public pensions. Roberts in the late 1970s and early 1980s persuaded pensions in Oregon and Washington to invest in KKR funds. KKR and its competitors have continued to tap such pensions for money by promising returns to help meet obligations to retirees.
“We need each other,” Roberts said. “Private equity needs pension funds to help us fund our business. And they need us to generate returns.”
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