January 31, 2020 / 8:41 PM / 17 days ago

UPDATE 1-KKR seeks inclusion in Russell indexes, shares rise

(Recasts with strategy and stock rise, adds KKR co-president’s comment, analyst comment, adds company and financial details)

By Chibuike Oguh

Jan 31 (Reuters) - Private equity firm KKR & Co Inc said on Friday it will seek to be included in the Russell U.S. indexes, a move targeted at increasing its shareholder base, sending its shares sharply higher.

KKR Co-president Scott Nuttall said on the New York-based firm’s quarterly earnings call that the process of admission into the indexes began after it held meetings with new investors last year.

“We are discussing with our board taking the steps necessary to be included in the Russell indexes when they rebalance this spring,” he told analysts and reporters.

KKR’s shares climbed 5.5% to $32.05 in late trading on Friday.

The Russell indexes track the performance of the most-traded stocks in the U.S. equity market. The indexes are reviewed every June and are closely followed by mutual funds and other large money managers.

Private equity firms such as KKR, Blackstone Group Inc , and Apollo Global Management Inc are not included in Russell indexes because of their dual-class share structures. Carlyle Group LP became the first U.S. private equity firm to eliminate its dual-class share structure last year.

“KKR will need to move a small amount of voting rights to its float, but this would have a positive impact on trading volume and its long-term shareholder base,” Credit Suisse analyst Craig Siegenthaler said in a note to investors.

EARNINGS BEAT

Earlier on Friday, KKR said fourth-quarter after-tax distributable earnings fell 18%, owing to a decline in asset sales from its private equity business and lower transaction fee income in its capital markets unit.

KKR said after-tax distributable earnings (DE) - the cash available for paying dividends to shareholders - fell to $375.1 million compared with $460 million a year earlier.

That resulted in DE per share of 44 cents in the quarter, which exceeded the average analyst forecast of 41 cents, according to data compiled by Refinitiv.

On Thursday, KKR peers Blackstone and Apollo also reported fourth-quarter earnings that outperformed most analyst estimates. However, their DE rose on stronger asset sales.

KKR said the value of its private equity portfolio appreciated by 27% during the 2019 full year, which compares with 9.3% and 15.6% for Blackstone and Apollo, respectively.

The New York-based firm said its total assets under management rose to $218.4 billion at the end of December from $208.4 billion three months earlier. (Reporting by Chibuike Oguh in New York Editing by Edwina Gibbs and Matthew Lewis)

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