Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of KKR Financial Holdings LLC (UNKNOWN:KFN.DL) soared 27% today after private equity giant KKR & Co. (NYSE:KKR) agreed to acquire the specialty finance company, which it already manages, for $2.6 billion.
So what: The all-stock deal -- 0.51 common units of KKR for each KKR Financial share held -- values KKR Financial at $12.79 per share and represents a premium of 35% of its Monday closing price. KKR is making the move to expand and diversify its asset base, but judging from its own stock's 3% plunge today, Mr. Market isn't thrilled with the price management is paying to do it.
Now what: The deal is expected to close in the first half of 2014. "Through this transaction, we are acquiring a business with a fully invested, complementary portfolio of assets while increasing the scale and diversity of KKR's balance sheet," said KKR Co-Chairmen and Co-CEOs Henry Kravis and George Roberts. "Furthermore, through the distribution of KFN's realized earnings, the transaction is expected to provide a meaningfully greater recurring component to KKR's distribution and also be immediately accretive on a total distribution per unit basis."
So while KFN's upside might be limited at this point, KKR's bolstered asset base and improved yield profile are certainly worth looking into.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.