KKR, Fidelity in IPO Deal

While industry experts are still pondering if the recent flurry of successful initial public offerings indicates a broader recovery, Kohlberg Kravis Roberts on Monday agreed to sell shares of its private-equity companies through Fidelity Investments.

Under terms of the agreement, Fidelity’s retail customers will get access to the IPO shares. Until now, such offerings mostly went to institutions and wealthy investors. Again with private equity firms looking to expand their reach, KKR will not only get a distribution channel but also exclusive access to the Boston-based mutual fund giant’s clients.

As financial markets have been murky over the last few years, KKR has not taken any of its portfolio companies public since the IPO of Sealy (ZZ) in 2006. While it still considers buying out the Amsterdam-listed KKR Private Equity Investors LP in order to go public, that IPO has also been on hold for at least 2 years.

While IPO investments are traditionally seen as risky ventures, capital markets have gained pace of late. Among successful IPOs in the recent past were Rosetta Stone (RST), Bridgepoint Education (BPI), DigitalGlobe (DGI), SolarWinds (SWI), OpenTable (OPEN) and ChangYou (CYOU).

KKR and Fidelity are now banking on the strength of these deals to remain optimistic and put up a platform that would help them to jump in once things heat up. As, Mark Haggerty of Fidelity Capital Markets said, "When the IPO market returns, our distribution network is going to be very interested in getting back involved."

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