KKR Upsizes and Prices Offering of Mandatory Convertible Preferred Stock

Rhea-AI Summary

KKR (NYSE: KKR) has successfully priced its upsized offering of 6.25% Series D Mandatory Convertible Preferred Stock at $2.25 billion, representing 45 million shares at $50.00 per share. This marks a significant increase from the initially announced $1.50 billion offering.

The offering, expected to close on March 7, 2025, will generate net proceeds of approximately $2.20 billion, potentially reaching $2.53 billion if underwriters exercise their over-allotment option. The funds will be used for acquiring additional equity interests in core private equity portfolio companies within KKR's Strategic Holdings segment.

Each preferred stock share will automatically convert to common stock on March 1, 2028, with a conversion rate between 0.3312 and 0.4140 shares. Dividends will be paid quarterly at a 6.25% annual rate, starting June 1, 2025. The preferred stock will be listed on NYSE under the symbol 'KKR PR D'.

Positive

• Successful upsizing of offering from $1.5B to $2.25B indicates strong investor demand
• Significant capital raise of $2.20B (potentially $2.53B) strengthens investment capacity
• 6.25% dividend rate provides steady income stream for investors

Negative

• Potential dilution of existing shareholders upon conversion in 2028
• Additional dividend payment obligations may impact cash flow
• Increased financial leverage through preferred stock issuance

Insights

Financial Analyst

KKR's $2.25 billion mandatory convertible preferred stock offering represents a significant capital raise that was upsized by 50% from the initially announced $1.5 billion, indicating strong investor demand. The 6.25% dividend yield provides an attractive income component while the mandatory conversion feature limits immediate dilution.

The strategic purpose behind this financing is particularly noteworthy - KKR intends to use these funds to increase ownership stakes in core private equity portfolio companies within its Strategic Holdings segment. This appears to be a calculated move to capture more value from assets they already know well and believe have strong growth potential.

The conversion terms (between 0.3312 and 0.4140 shares of common stock per preferred share by March 2028) create a variable dilution impact based on future share performance. This structure suggests management confidence that KKR's stock price will appreciate over the coming three years.

From a balance sheet perspective, this hybrid security provides KKR with additional financial flexibility without immediately increasing its debt burden, while the company gains firepower for strategic acquisitions. The success of this capital deployment will ultimately depend on the performance of the portfolio companies KKR selects for increased investment.

NEW YORK--(BUSINESS WIRE)-- KKR & Co. Inc. (“KKR”) (NYSE: KKR) today announced that it has priced its previously announced offering of $2.25 billion (45,000,000 shares) of its 6.25% Series D Mandatory Convertible Preferred Stock (the “mandatory convertible preferred stock”) at a price to the public and liquidation preference of $50.00 per share. The offering was upsized from the previously announced size of $1.50 billion (30,000,000 shares). The underwriters have a 30-day option to purchase up to an additional $337.50 million (6,750,000 shares) of mandatory convertible preferred stock, solely to cover over-allotments, if any. The offering is expected to close on March 7, 2025, subject to customary closing conditions.

The net proceeds from the mandatory convertible preferred stock offering will be approximately $2.20 billion (or approximately $2.53 billion if the underwriters exercise their option to purchase additional shares in full), after deducting underwriting discounts and estimated offering expenses. KKR intends to use the net proceeds from the offering for the acquisition of additional equity interests in core private equity portfolio companies reported in its Strategic Holdings segment and for other general corporate purposes.

Unless earlier converted at the option of the holders, each share of mandatory convertible preferred stock will automatically convert on March 1, 2028 (subject to postponement for certain market disruption events) into between 0.3312 and 0.4140 shares of KKR’s common stock, subject to certain customary anti-dilution adjustments. The number of shares of common stock issuable upon conversion will be determined based on the average volume-weighted average price per share of common stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately preceding March 1, 2028.

Dividends on the mandatory convertible preferred stock will be payable on a cumulative basis when, as and if declared by KKR’s board of directors, at an annual rate of 6.25% on the liquidation preference of $50.00 per share. If declared, these dividends will be paid in cash, in shares of common stock or in a combination of cash and shares of common stock, at KKR’s election, subject to certain limitations, on March 1, June 1, September 1 and December 1 of each year, commencing on June 1, 2025, and ending on, and including, March 1, 2028.

Currently, there is no public market for the mandatory convertible preferred stock. KKR has applied to list the mandatory convertible preferred stock on the New York Stock Exchange under the symbol “KKR PR D.”

Morgan Stanley & Co. LLC, KKR Capital Markets LLC, Goldman Sachs & Co. LLC and UBS Securities LLC are acting as joint book-running managers for the offering.

The offering is being made pursuant to an effective shelf registration statement on file with the U.S. Securities and Exchange Commission (the “SEC”). The offering is being made by means of a prospectus and related preliminary prospectus supplement only. An electronic copy of the preliminary prospectus supplement, together with the accompanying prospectus, is available on the SEC’s website at www.sec.gov. Alternatively, copies of the preliminary prospectus supplement and accompanying prospectus may be obtained by contacting the joint book-running managers: Morgan Stanley & Co. LLC, Attention: Prospectus Department, 180 Varick Street, 2^nd Floor, New York, NY 10014, or by email to prospectus@morganstanley.com; KKR Capital Markets LLC, by telephone at (212) 750-8300 or by email to ECMCapitalMarkets@kkr.com; Goldman Sachs & Co. LLC, Attention: Prospectus Department, 200 West Street, New York, NY 10282; and UBS Securities LLC, Attention: Prospectus Department, 1285 Avenue of the Americas, New York, NY 10019.

This press release shall not constitute an offer to sell or a solicitation of an offer to purchase the mandatory convertible preferred stock or any other securities, and shall not constitute an offer, solicitation or sale of the mandatory convertible preferred stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, pertaining to KKR. Forward-looking statements relate to expectations, estimates, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements can be identified by the use of words such as “outlook,” “believe,” “think,” “expect,” “potential,” “continue,” “may,” “should,” “seek,” “approximately,” “predict,” “intend,” “will,” “plan,” “estimate,” “anticipate,” visibility,” “positioned,” “path to,” “conviction,” the negative version of these words, other comparable words or other statements that do not relate strictly to historical or factual matters. These forward-looking statements are based on KKR’s beliefs, assumptions and expectations, but these beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or within its control. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. We believe these factors include those in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should be read in conjunction with the other cautionary statements that are included in our periodic filings. Past performance is no guarantee of future results. All forward-looking statements speak only as of the date of this press release. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date of this press release except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250304161115/en/

Investor Relations:

Craig Larson

Tel: +1 (877) 610-4910 (U.S.) / +1 (212) 230-9410

investor-relations@kkr.com



Media:

Kristi Huller, Miles Radcliffe-Trenner or Julia Kosygina

Tel: + 1 (212) 750-8300

media@kkr.com

Source: KKR & Co. Inc.

FAQ

What is the size and price of KKR's Series D Mandatory Convertible Preferred Stock offering?

KKR's offering is $2.25 billion (45 million shares) priced at $50.00 per share, upsized from the initial $1.50 billion announcement.

When will KKR's Mandatory Convertible Preferred Stock convert to common shares?

The mandatory conversion date is March 1, 2028, with a conversion rate between 0.3312 and 0.4140 shares of common stock per preferred share.

What dividend rate does KKR's new preferred stock offer?

The preferred stock offers a 6.25% annual dividend rate, payable quarterly starting June 1, 2025.

How will KKR use the proceeds from this preferred stock offering?

KKR will use the proceeds to acquire additional equity interests in core private equity portfolio companies in its Strategic Holdings segment and for general corporate purposes.

What is the trading symbol for KKR's new preferred stock?

The preferred stock will trade on the NYSE under the symbol 'KKR PR D'.