Bloomberg News
NEW YORK - Kohlberg Kravis Roberts & Co. is aiming to amass as much as $10 billion for what would be the world's biggest buyout fund, people familiar with the plans said.
Known for its $26.4 billion buyout of RJR Nabisco in 1988, KKR would gain about $25 billion in purchasing power with the new fund. The fund would surpass one being raised by Thomas H. Lee & Co. of more than $6 billion, underscoring investor demand for returns they bet will outstrip stocks.
First Union Corp.'s private equity unit in New York, which has invested in several KKR funds, would probably participate in any new fund, said David Knowlton, the managing director of the Charlotte, N.C., banking company division.
Still, Mr. Knowlton said, a fund as big as $10 billion could be too large to show the results expected of private equity investments. "You could be diversifying away your returns," he said.
It is crucial for leveraged-buyout firms to be among the "top 10" in fund-raising "so people know you do have the money and can write the check," said Thomas H. Lee, founder of the rival Boston-based buyout firm that bears his name.
KKR has invested $13.5 billion of equity in more than 80 transactions since its founding in 1976.
Institutional investors are flocking to private equity as the firms, including KKR, expand into more early-stage companies and chase undervalued businesses that have been left behind in the bull market.
In recent months, KKR has focused on Europe and has closed on a fund of about $3 billion to invest there. Other recent transactions include its $550 million purchase of one-fifth of DPL, the owner of an Ohio utility, and the $1.84 billion buyout of Shoppers Drug Mart Inc.
KKR's portfolio includes: Borden Inc., makers of Elmer's glue and Prince spaghetti; Boyds Collection Ltd., makers of collectible teddy bears; and Primedia Inc., the publisher of Seventeen and New York magazines.
More recently, KKR has joined with Accel Partners, a Silicon Valley venture capital firm, to make technology and Internet investments. The first investment for Accel-KKR Internet Co., was a round of financing of more than $36 million in Found.com, a company that helps online and offline retailers to enable customers to find and buy merchandise.
