KKR & Co. Inc. (KKR, Financial) is a private equity and real estate investment firm. It specializes in direct and fund of fund investments. While it considers all industries, it focuses on software, security, technology and real estate.
Investor Chuck Akre (Trades, Portfolio), from Akre Capital Management, purchased 57,500 shares of KKR during the second quarter, accounting for a 0.37% change in the number of shares he holds in the company, which is how it showed up on my radar.
Let’s take a deeper look at how this private equity fund operates.
Data center acquisitions
KKR has recently announced its plans to acquire a 20% stake in Singtel's data center business. The deal is valued at 1.1 billion Singapore dollars (approximately $800 million). This move highlights the growing importance of data centers in the digital age and the increasing demand for data storage and processing capabilities.
Singtel, a leading telecommunications company based in Singapore, operates a regional data center business that provides critical infrastructure for storing and managing large amounts of data. With the rapid growth of cloud computing, artificial intelligence and other data-intensive technologies, the demand for data centers has been steadily increasing.
The investment in Singtel's data center business is a strategic move to capitalize on this growing demand. By acquiring a stake in Singtel's business, KKR aims to benefit from the potential growth and profitability of the data center industry.
For KKR, this investment represents an opportunity to tap into the potential growth of the data center industry. As more businesses and industries embrace digital technologies, the demand for data centers is expected to continue rising. By acquiring a stake in Singtel's data-center business, KKR is positioning itself to benefit from this growth and generate attractive returns for its investors.
KKR takes big stake in U.K. battery group Zenobe
The company recently announced its acquisition of a significant stake in Zenobe, a U.K. battery storage company. The deal, valued at $750 million, will make KKR a joint largest shareholder alongside Infracapital, the owner of the Red Funnel ferry line, which serves the Isle of Wight on England's south coast.
This investment highlights the growing interest in the renewable energy sector, particularly in battery storage technology. As the world transitions toward cleaner and more sustainable energy sources, the demand for efficient energy storage solutions has been on the rise. Battery storage plays a crucial role in balancing the intermittent nature of renewable energy sources like solar and wind power, ensuring a stable and reliable electricity supply.
Zenobe has established itself as a leader in the U.K. battery storage market, providing innovative solutions for grid-scale energy storage, electric vehicle charging infrastructure and behind-the-meter applications.
KKR’s efforts to create and protect value through broad-based employee ownership programs in portfolio companies. CEO Craig Larson shared the success story of RBmedia, one of the largest audiobook publishers in the world, where the introduction of an equity ownership program resulted in significant financial benefits for employees. He mentioned that over 35 companies have implemented such programs, benefiting over 60,000 employees. Larson expressed optimism about future success stories and the continued growth of these programs.
KKR's investment in Zenobe also aligns with the U.K. government's efforts to promote clean energy and achieve its net-zero emissions target by 2050. The U.K. has been at the forefront of renewable energy adoption, and the development of battery storage infrastructure is crucial for the country's energy transition.
Financial performance
During the second-quarter earnings call, Larson and Chief Financial Officer Rob Lewin provided insights and updates on the company's financial performance. They highlighted key financial metrics, investment performance, capital metrics and their commitment to creating and protecting value through sustainability.
Fee-related revenue for the quarter amounted to $967 million, a 7% increase from the previous quarter and a 25% increase year over year. Larson noted that fee-related earnings came in at $602 million, or 67 cents per share, with a best-in-class fee-related earnings margin of 62%. This represented a 10% improvement from the previous quarter and a 31% increase compared to the second quarter of 2022.
Larson also highlighted the performance of the insurance segment, with Global Atlantic generating $170 million of pretax earnings in the quarter. The segment's performance exceeded expectations, with a pretax return on equity above the top end of the targeted range of 14% to 15%.
Regarding capital metrics, KKR raised $13 billion in the quarter through diverse fundraising activities. The company's assets under management increased to $519 billion, with fee-paying assets under management reaching $420 billion. Additionally, the company deployed approximately $10 billion in the quarter, evenly spread across private equity, real assets and credit.
Conclusion
KKR's commitment to sustainability and its efforts to create and protect value through broad-based employee ownership programs in portfolio companies highlights it as a responsible corporate partner.
The company's fee-related businesses, along with its asset management and insurance segments, have demonstrated strong financial performance in the second quarter of 2023. KKR's focus on diversification and strategic investments has contributed to its success in generating fee-related revenues and delivering value to its clients.
