KKR closes $4.6bn North American focused fund

BY Richard Summerfield

Private equity (PE) powerhouse KKR and Co has announced the final close of KKR Ascendant Fund SCSP, a $4.6bn fund dedicated to investing in middle market businesses in North America.

The fund, which was launched in 2022, is the first KKR vehicle solely focused on opportunities in the middle market and will target established companies with strong growth potential across seven industry verticals: consumer, financial services, healthcare, industrials, media, software and tech-enabled services.

“We are very proud of the strong response we have received from our fundraising efforts and believe that Ascendant is well-positioned to address the robust and attractive opportunities in the North American middle market,” said Pete Stavros and Nate Taylor, co-heads of KKR Global Private Equity. “We have long invested in this space in our Americas Private Equity funds and have found that we can harness KKR’s unique resources and expertise in value creation to deliver highly differentiated business outcomes. We wanted to launch a fund dedicated to this segment so that our investors could directly participate in the compelling outcomes we believe we can continue to deliver in the middle market.”

“Broad-based employee ownership and engagement programs are a key part of how KKR creates and maintains value across our portfolio companies,” said Nancy Ford and Brandon Brahm, co-heads of KKR’s Ascendant strategy. “Having seen the great success of these programs in other areas of KKR’s portfolio, we are thrilled that Ascendant will build on that strong foundation. These programs, which provide both equity ownership to employees and a strategy to enhance employee engagement, are implemented with the goal of creating aligned interests and enabling all employees to participate in the investment outcomes their work creates.”

The Ascendant fund, which was oversubscribed at the time of its closing, received backing from a range of investors, including public pensions, family offices and insurance companies. To date, the fund has struck six deals for companies including software provider Alchemer, dental care chain 123Dentist, and fire equipment provider Marmic Fire & Safety.

In a break from PE tradition, KKR has pledged to offer equity to employees of all its North America portfolio companies from the new fund. Typically, such an offer is usually reserved only for senior executives. However, over the last decade, emboldened by the firm’s investments in the industrial sector which began using the model, KKR has since expanded the employee ownership programme to more than 50 of its portfolio companies, awarding billions of dollars of equity to more than 110,000 employees. The firm believes it leads to higher revenue, improved productivity and lower turnover within its portfolio companies.

KKR, which had $601bn in assets under management (AUM) as of the end of June, has been attempting to raise capital at a difficult time for fundraising for large buyout firms. Limited partners have been unenthusiastic about making new commitments. PE firms have struggled to return capital amid persistently high interest rates, which have made selling companies to other buyout firms or refinancing companies challenging. However, after the Federal Reserve recently cut US borrowing rates, there is an expectation that PE-backed deal volume will begin to climb again.

News: KKR raises $4.6 billion for debut North America mid-market deals fund

L&G exits Cala Group for $1.8bn

BY Richard Summerfield

Legal and General (L&G) is to sell its UK housebuilder Cala Group to investment groups Sixth Street Partners and Patron Capital in a $1.8bn deal, as part of a plan to slim down and focus on its main operations.

The deal will see L&G receive around £500m when the deal closes, which is expected to happen before the end of the year, and the rest of the cash over five years. The company plans to reinvest the funds in its wider operations, as well as supporting future shareholder returns. L&G paid more than £315m to buy Patron’s majority stake in Cala in 2018. Patron formerly owned Cala alongside L&G but in 2018 sold its stake in the company at an equity valuation of £605m.

“Today’s announcement is excellent news for Cala,” said Kevin Whitaker, chief executive of Cala. “This investment by Sixth Street and Patron demonstrates their confidence in Cala’s business plan and further potential. We look forward to developing a strong partnership with Sixth Street and reigniting the excellent relationship we shared with Patron between 2013 and 2018. I would like to thank Legal & General for their support since they first invested in Cala. With their backing, Cala has successfully tripled the number of homes we build each year, whilst revenue and profits have grown five- and ten-fold respectively.”  

“Cala has a bright future and we are proud to be entering this new chapter as stewards of a company with such a deep history and long track record of sustainable growth,” said Julian Salisbury, co-chief investment officer of Sixth Street. “We, together with Patron, look forward to continuing to support Cala and its management team, not only with capital but also with the significant resources of our London-based real estate investment team led by Giulio Passanisi.” 

“We are pleased to be able to back the Cala business once again,” said Keith Breslauer, managing director and founder of Patron Capital. “Cala is one of the UK’s leading housebuilders with a best-in-class landbank and a focus on building high-quality homes, being consistently ranked five-star for customer service. Furthermore, Cala is also a people business with a strong corporate culture and a business we know well, and we look forward to working closely with Cala’s impressive management team and our partner, Sixth Street, to further build the business and help tackle the undersupply of homes in the UK.” 

“This transaction demonstrates continued momentum in executing our strategy, simplifying our portfolio to enable a sharper focus on our core, synergistic businesses,” said António Simões, group chief executive of L&G. “Cala has been an important part of L&G for over a decade, with profits increasing ten-fold since our initial investment in 2013. The sale announced today will provide capital to deliver our strategic goals of sustainable growth alongside enhanced returns for shareholders. I’d like to thank the whole Cala team for their contribution to the Group and wish them every success in the future.”

News: Legal & General sells UK housebuilder CALA Group in $1.8 bln deal

Mastercard acquires Recorded Future in $2.65bn deal

BY Fraser Tennant

In a deal that adds threat intelligence and cyber security technologies to its corporate portfolio, US multinational payment card services corporation Mastercard is to acquire threat intelligence company Recorded Future in a transaction valued at $2.65bn.

The combination of technology and expertise will help enable the development of even more robust practices and drive greater synergies in cyber security and intelligence, as well as helping to protect people and businesses.

“Trust is the foundation of any relationship,” said Craig Vosburg, chief services officer at Mastercard. “Recorded Future adds to how we deliver that greater peace of mind before, during and after the payment transaction. Together we will innovate faster, create smarter models and anticipate emerging threats before cyber attacks can take place – in payments and beyond.”

A current collaboration is an artificial intelligence (AI)-supported service that alerts financial institutions more quickly and with greater accuracy when a card is likely to have been compromised. Since its launch earlier this year, the service has doubled the rate at which compromised cards are identified, as compared to the same time period last year.

Headquartered in Boston with offices and employees around the world, Recorded Future works with over 1900 businesses and government organisations across more than 75 countries to provide real-time, unbiased and actionable intelligence.

The company offers real-time visibility into potential threats by analysing a broad set of data sources to provide insights that enable its customers to take action to mitigate risks. This ability, coupled with its use of AI and other best-in-class technologies, will add to Mastercard’s identity, fraud prevention, real-time decisioning and cyber security services.

“We created Recorded Future with a simple goal to secure the world with intelligence,” said Christopher Ahlberg, chief executive of Recorded Future. “By joining Mastercard, we see an opportunity to help more businesses and governments determine the steps to realise their full potential – and to enable everyone to feel safer in their daily lives.”

The transaction, which is anticipated to close by the first quarter of 2025, is subject to regulatory review and other customary closing conditions.

As new technologies are introduced and adopted, the acquisition bolsters the insights and intelligence used to secure today’s digital economy – in the payments ecosystem and beyond.

News: Mastercard bolsters threat intelligence capabilities with $2.65 billion deal for Recorded Future

Salesforce acquires Own Company in $1.9bn deal

BY Fraser Tennant

In its third acquisition in little more than a month, US cloud-based software company Salesforce is to acquire Own Company, a data protection and management solutions start-up, for approximately $1.9bn in cash.

The move to acquire Own Company is the latest example of Salesforce’s ‘try before you buy’ acquisition strategy, which follows deals to buy start-up software company Tenyx and retail point of sale software vendor PredictSpring.

Moreover, the acquisition comes at a time when customers are increasingly focused on mitigating data loss due to system failures, human error and cyber attacks, with the advent of artificial intelligence (AI) making customers even more aware of the need to protect and manage access to data.

“Data security has never been more critical, and Own Company’s proven expertise and products will enhance our ability to offer robust data protection and management solutions,” said Steve Fisher, president and general manager of Einstein 1 Platform and Unified Data Services at Salesforce. “This transaction underscores our commitment to providing secure, end to end solutions that protect our customers’ most valuable data and navigate the shifting landscape of data security and compliance.”

Trusted by nearly 7000 customers to safeguard mission-critical data, Own Company’s data platform provides data archiving, seeding, security and analytics capabilities that help customers ensure the availability, compliance and security of their mission-critical software as a service data.

“We are excited to join forces with Salesforce, a company that shares our commitment to data resilience and security,” said Sam Gutmann, chief executive of Own Company. “As digital transformation accelerates, our mission has expanded from preventing data loss in the cloud to helping customers protect their data, unlock business insights and accelerate AI-driven innovation.”

The transaction is expected to close in the fourth quarter of Salesforce’s fiscal year 2025, subject to customary closing conditions, including the receipt of required regulatory approvals.

Mr Gutmann concluded: “Together with Salesforce, we will deliver even greater value for our customers by driving innovation, securing data and ensuring compliance in the world’s most complex and highly regulated industries.”

News: Salesforce to buy data protection provider Own Company for $1.9 bln

Methanex strikes $2.05bn methanol deal

BY Richard Summerfield

Methanex Corporation has agreed to acquire the methanol business of Dutch green fuel manufacturer OCI Global, in a deal worth $2.05bn.

According to a statement announcing the deal, the $2.05bn purchase price will consist of $1.15bn in cash, the issuance of 9.9 million common shares of Methanex valued at $450m (based on a $45 per share price) and the assumption of $450m in debt and leases. OCI will become the second-largest shareholder of Methanex, with about 13 percent of the company.

The deal is expected to close in the first half of 2025. The transaction has been approved by the boards of directors of both companies and is subject to receipt of certain regulatory approvals and other closing conditions.

Under the terms of the deal, Methanex, a Canadian company that supplies, distributes and markets methanol worldwide, will acquire a methanol facility in Beaumont, Texas with an annual production capacity of 910,000 tonnes of methanol and 340,000 tonnes of ammonia, a 50 percent interest in a second methanol facility also in Beaumont, Texas, operated by the joint venture Natgasoline, OCI HyFuels, which produces low-carbon methanol and sells volumes with trading and distribution capabilities for renewable natural gas (RNG), and a methanol facility in Delfzijl, Netherlands with an annual capacity to produce 1 million tonnes of methanol.

Methanex expects to achieve approximately $30m of annual cost synergies from lower logistics costs and lower selling, general and administrative expenses.

“This transaction is testament to the efforts of an exceptionally talented group across OCI Methanol’s platform, who have prioritized value creation for the past 14 years,” said Bashir Lebada, chief executive of OCI Methanol Group. “We are proud of OCI’s contributions to new applications, and in pioneering the use of methanol as a fuel globally, Methanex is well positioned to leverage OCI HyFuels to accelerate the transition to a low-carbon economy.”

 “We expect the acquisition to add incremental annual Adjusted EBITDA of $275 million to our expected run-rate Adjusted EBITDA of $850 million at a $350/MT realized methanol price,” said Dean Richardson, senior vice president, finance & chief financial officer at Methanex. “We remain firmly committed to maintaining financial flexibility and have in place a robust financing plan that will support de-levering to our target range of 2.5 to 3.0 times debt/Adjusted EBITDA within approximately 18 months from closing, assuming an average realized price of $350/MT. The plan includes the repayment of our $300 million bond as scheduled in December 2024.”

“This is an outstanding strategic fit for Methanex,” said Ahmed El Hoshy, chief executive of OCI. “We look forward to working closely with Methanex’s management to fully integrate the business after closing, and to ensure continuity and successful stewardship of the business.”

News: Methanex to acquire OCI's methanol business in $2.05 bln deal