On the Same Day KKR Buys Two Companies For $1 Billion And Invests $200 Million In A Third

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KKR – (L-R)  George Roberts and Henry Kravis

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Yesterday New York publicly listed private equity investment holding company KKR announced two new significant transactions on the same day. The first deal is a definitive agreement to purchase two separate units from English company Melrose Industries Plc (Melrose) for approximately US $1.0 billion. These are the Crosby Group (“Crosby”) and Acco Material Handling Solutions (“Acco”), and both are in the industrial materials and components handling business.

Crosby is a leading global provider of highly engineered solutions for lifting and rigging applications across the oil and gas, construction, mining and industrial sectors. Headquartered in Tulsa, Oklahoma, Crosby has over 1, 300 employees globally. Acco, is a much smaller company, headquartered in York, Pennsylvania, with 130 employees and manufactures custom-built specialty material handling equipment, including a full line of hoists, industrial cranes, monorails, carts and trailers.

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According to Melrose published financial reports, both units had good financial results for the full year in 2012, and for the first half of 2013 the Melrose segment in which they operate, and of which they are a large component, matched the prior year in revenue and slightly improved its profitability. Accordingly one can likely infer that in this case, by buying businesses with healthy cash flows, KKR can now support both acquisitions using the substantially leveraged buyout format which has been its stock in trade, and without major turn-around action required.

Pete Stavros, a senior manager of KKR and Head of their Industrials investing team, stated: “Crosby and Acco have long and distinguished histories of providing distributors and end customers with the highest quality products and customer support to meet their lifting and rigging needs. We are excited to partner with the many dedicated employees of both companies and look forward to working together to begin a new chapter of growth and global expansion.”

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This transaction is expected to close in the fourth quarter of 2013, subject to the usual caveats. As always a full bevy of advisors hovers around any deal of this kind, especially such a large one. In this case Rothschild and Simmons & Company International served as lead financial and M&A advisors to KKR, and Morgan Stanley, UBS Investment Bank, and RBC Capital Markets also served as M&A advisors. Fully committed financing to pay for it will be provided by Morgan Stanley, UBS Investment Bank, and KKR Capital Markets. Kirkland & Ellis LLP served as legal counsel to KKR.

In the second deal KKR has now bought a “substantial minority” equity stake in Malaysian company Weststar Aviation Services (“Weststar”) for US$200 million, which will be its first investment of any kind in the Malaysian economy.

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Founded in 2003, Weststar is a leading provider of offshore helicopter transportation services to the oil and gas industry. With a large and modern fleet of world-class helicopters and a stable of blue chip oil and gas companies as customers, Weststar is the largest such provider in Southeast Asia.

Ming Lu, a senior manager of KKR and Regional Head of Southeast Asia, commented, “We are very pleased to partner with a high-performing company such as Weststar. We believe trends in the oil and gas sector in Malaysia and the broader region are long-term positive, and we look forward to supporting the Company in its ambitious growth and expansion plans.”

“KKR has significant experience investing in the offshore aviation sector in Avincis Group and has a strong and experienced regional team in Southeast Asia. With KKR, we have a value-added partner who shares our vision of growing the Company into one of the world’s leading offshore helicopter services companies, ” said Tan Sri Syed Azman Syed Ibrahim, Weststar Group Managing Director.

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KKR claims a long track record of success in Southeast Asia, having already invested nearly US$1.5 billion in companies based in this region since 2005. KKR new investment in Weststar represents its first investment from the KKR Asian Fund II, a recently-closed US$6 billion fund dedicated to pan-Asian private equity transactions.

About KKR

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with US$83.5 billion in assets under management as of June 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform.

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