KKR relaunches IPO bid for Australia's Pepper

The company will sell 173.2 million shares at A$2.89 apiece, according to a prospectus. This equates to a market capitalization of A$1.27 billion.

There will be no partial exit. The offering comprises new shares, of which 168.6 million will go to public market investors and 4.6 million to Pepper’s management. In addition, Pepper ANZ HoldCo, which is majority-owned by KKR, will receive 14.4 million shares to satisfy a A$41.6 million shareholder loan.

KKR currently holds a 64.94% interest in Pepper, while minority investors – chiefly early backer and former chairman Seamus Dawes – have 27.18%, and management and related parties have 7.92%. These percentages will change slightly post-IPO due to some reorganization of management stakes.

KKR’s credit unit acquired Pepper, then a listed company, in 2017 at a valuation of A$676 million. It first filed for an IPO in 2019 to no avail. A relaunch in February 2020 – following the sale of Pepper’s European division for A$322 million – was supposed to lay the ground for another tilt at the public markets. This also came to nothing.

It coincided with a period of difficulty for private equity-backed IPOs across the board. When the likes of consumer lending start-up Plenti and beauty e-commerce business Adore Beauty listed last autumn, it ended a three-year wait for a sizeable IPO with a financial sponsor. The market quickly took off and a total of A$2.2 billion was raised through 13 offerings in 2020, the most since 2015, AVCJ Research’s records show.

Founded in 2000, Pepper claims to be one of the largest non-bank lenders in Australia and New Zealand. In Australia, it offers home loans and real estate loans to prime and near prime customers as well as asset-backed financing for cars, caravans, bikes, and small equipment. The company entered New Zealand in 2019, providing prime and near prime residential mortgages.

Pepper has originated over A$32.3 billion in loans since inception. As of December 2020, it had A$13.3 billion in assets on the lending side and A$1.7 billion on the asset servicing side. Net interest income was A$352.2 million, up from A$268.6 million a year earlier, while EBITDA rose from A$116.2 million to A$180.6 million and net profit from A$63.7 million to A$106.3 million.

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• Topics
• Australasia
• IPO
• Financials
• Australia
• New Zealand
• KKR
• Financial Services