KKR Wholly Owns Global Atlantic Financial Group After US$ 2.7 Billion Deal
Posted on 11/29/2023
Global Atlantic Financial Group is an insurance company meeting the retirement and life insurance needs of individuals and institutions. It is a majority-owned subsidiary of KKR. KKR is an investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR and Global Atlantic Financial Group announced a definitive agreement under which KKR will acquire the remaining 37% stake of insurance company Global Atlantic, increasing KKR’s ownership to 100%.
Joe Bae and Scott Nuttall, Co-Chief Executive Officers of KKR, said: “The strategic partnership we envisioned three years ago has exceeded our expectations. It has been transformative for both businesses and a great cultural fit that has enabled us to contribute to Global Atlantic’s continued strong performance and success, while also being a key driver of growth for KKR. We expect the new ownership structure will foster even closer collaboration, allowing us to fully leverage our complementary strengths and grow faster together.”
KKR notes: “Since 2021, KKR has served as Global Atlantic’s asset manager, offering access to its global investment and origination capabilities for the benefit of GA’s policyholders. Global Atlantic’s assets under management have grown significantly, up from US$ 72 billion in 2020 to US$ 158 billion today. As Global Atlantic has grown, it has benefited from the scale of KKR’s asset management businesses in meeting GA’s investment needs while maintaining a focus on risk management and continuing to deliver market-leading returns. The strategic partnership has proven to be both an important source of capital for Global Atlantic and a driver of international growth, with Global Atlantic leveraging KKR’s global reach to establish new business relationships in Hong Kong, Singapore and Japan.”
Global Atlantic has been a source of financial success for KKR and a key element of KKR’s growing real estate credit and asset-based financing businesses. Allan Levine, Chief Executive Officer of Global Atlantic said: “We are taking this step because we have demonstrated, over the last three years, that we are stronger together. Being part of KKR has strengthened our position as a leading insurance company and enhanced our ability to deliver compelling solutions for our clients. Moving from a diverse group of shareholders to a single one with KKR clarifies our objectives and allows us to think―and invest―longer term.”
After closing, Global Atlantic will continue to be led by its management team and operate under the Global Atlantic brand.
Transaction Details
Under the terms of the agreement, KKR will pay Global Atlantic’s minority shareholders an amount in cash equal to 1.0x Global Atlantic’s book value with certain adjustments. The total cash purchase price is currently estimated to be approximately US$ 2.7 billion. Global Atlantic management is expected to exchange a majority of its Global Atlantic equity interests for KKR equity. KKR will fund the transaction from its balance sheet, which had US $23 billion of cash and investments as of September 30, 2023. The transaction, which is expected to close in the first quarter of 2024, is subject to customary closing conditions.
Advisors
Simpson Thacher & Bartlett LLP and Debevoise & Plimpton LLP acted as legal advisors to KKR and Global Atlantic, respectively. Barclays provided a fairness opinion for Global Atlantic.
Strategic Initiatives
KKR also announced a series of other Strategic Initiatives that are contingent on the closing of the Global Atlantic transaction. These include:
- Creating a new business segment, Strategic Holdings. The new segment will principally be comprised of KKR’s Core Private Equity balance sheet holdings. Core Private Equity has scaled into a business with $35 billion of assets under management, including $6.5 billion of assets on KKR’s balance sheet. Given the maturation and strong performance of these companies, KKR expects to begin receiving more recurring cash dividends from this segment of the balance sheet.
- Modifying its compensation structure to be more success based. KKR will draw a greater share of compensation from carried interest instead of fee related earnings. The adjustment is expected to result in enhanced shareholder value by delivering more of the firm’s recurring revenues to shareholders.
- Introducing a new reporting framework. KKR will report a new key metric, Total Operating Earnings, which will be comprised of Fee Related Earnings, Strategic Holdings and Insurance Operating Earnings. KKR expects Total Operating Earnings will highlight the growth of its more recurring earnings streams.
