KKR & Co. (KKR) signed an agreement to buy Global Atlantic Financial Group Ltd. to give the private-equity firm a stronger foothold in the insurance industry, in a deal that could be valued at more than $4 billion, sending shares up almost 4% in pre-market trading.
The stock rose 3.9% to $32.01 in Wednesday’s pre-market trading as KKR said that as part of the strategic transaction, it will acquire all of the outstanding shares of retirement and life insurer Global Atlantic. Under the terms of the agreement, KKR will pay Global Atlantic shareholders an amount equal to 1x Global Atlantic’s book value as of the date of closing, subject to an equity roll-over for certain existing shareholders. As of March 31, Global Atlantic’s book value was about $4.4 billion.
KKR will fund the acquisition, net of equity roll-over participation, from a combination of cash on hand, proceeds from potential minority co-investors and the issuance of new debt and/or equity.
“This is a transformative event for KKR,” said KKR Co-CEOs Henry Kravis and George Roberts. “Global Atlantic is a best-in-class business with a like-minded entrepreneurial management team. Our businesses are complementary and our partnership will benefit all of our collective stakeholders.”
KKR said that the global insurance industry, with over $30 trillion of assets, is a key strategic focus for the buy-out firm. Global Atlantic, which has more than two million policyholders through its retirement and life insurance products managing almost $90 billion in assets, will continue to operate as a separate business with its existing brands and management team following the closure of the deal.
The transaction, which is expected to close in early 2021, subject to regulatory approvals, will be accretive across key financial metrics and “meaningfully” increase KKR’s permanent capital base, the company said.
Shares in KKR have been on a steep recovery path soaring more than 60% since March 23, erasing all of this year’s earlier losses. Despite the recent rally, the $34.25 average analyst price target implies another 11% upside potential in the coming 12 months. (See KKR stock analysis on TipRanks).
Piper Sandler analyst Sumeet Mody last month initiated coverage of KKR with a Buy rating and a $40 price target (30% upside potential), saying that the combination of a “strong” fundraising and fee related earnings growth trajectory, “differentiated” business model, long-term industry tailwinds and valuation make the current levels an attractive entry point.
Turning now to the rest of Wall Street, analysts have a prevailing bullish outlook on the stock. The Strong Buy consensus boasts 7 Buy ratings versus 2 Hold ratings.
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