KKR's credit unit offers $499m for Australia's Pepper

Pepper said in a filing that the firm had offered A$3.60 per share for the company, a slight premium to the July 4 closing price of A$3.55 (though below A$3.70, where the price had briefly spiked shortly before closing). Under the deal Pepper's directors also have permission to pay a dividend of up to A$0.03 per share.

Pepper has granted exclusivity to KCA to allow it to conduct due diligence and potentially to negotiate a binding offer. 

Pepper specializes in loans to creditworthy customers who may find it difficult to get credit from a bank, such as the self-employed. It mainly operates within Australia and New Zealand but does significant business in Australia and Europe as well. The company also services loans on behalf of other banks and financial institutions and provides advisory services to corporate clients.

According to the most recent annual report, for the year ended December 2016, the company recorded revenue of A$685 million, up from A$528 million the year before. Over the same period, net profit grew from A$3 million to A$62 million.

KCA invests across a range of credit scenarios, including direct lending, mezzanine financing, and special situations. As of December 2016, the unit had 125 investment professionals globally and one of its seven offices is located in Sydney. It seeks to bring value to investees by leveraging the full KKR network including the private equity and capital markets teams.

KKR already has exposure to Australia's credit market through its PE unit, having agreed in 2015 to buy GE Capital's Australia and New Zealand consumer lending unit for an enterprise valuation of A$8.2 billion as part of a consortium including Värde Partners and Deutsche Bank. The investment came from the firm's second Asian fund, which closed in 2013 at $6 billion. KKR has since closed its third pan-regional fund at $9.3 billion.

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• Topics
• Australasia
• Financials
• Buyouts
• Australia
• KKR
• Financial Services