The Wall Street Journal reports that, when legendary buyout shop KKR debuts on the NYSE it will sport a market value of between $12 billion and $15 billion — roughly 10-12 times 2009 earnings versus rival firm Blackstone Group’s (BX) multiple of 13.

If this seems like an odd time for a private equity IPO, it is. It’s a little bit like trying to unload a Michael Vick memorabilia collection the day after his indictment, but the KKR IPO is very different from the Blackstone one of last year. To begin with, it’s no an opportunity for insiders to cash out. The company’s top executives will have their stakes locked up for six to eight years and, because of the complex nature of the deal, KKR won’t even have to find buyers for its shares, nor will it raise any additional funds. The WSJ sums up the deal:

KKR is selling the shares in part to take over its struggling European affiliate, KKR Private Equity Investors, which trades in Amsterdam. In effect, KKR is offering shareholders in its European affiliate 21% of the value of KKR itself in exchange for shares in the affiliate, which has lost value as investors fretted about declining values of private-equity assets.

In other words, this is somewhat of a distressed IPO — and that may mean investors will be better positioned for success than they were by the cynical insider cash-outs at companies like Blackstone and Fortress Investment Group.

But maybe not: KKR issued a press release saying it expected the offering to occur in the fourth quarter of 2008 — pretty short notice. If the KKR brass thought that the market was set to turn anytime soon, wouldn’t they delay the IPO until they could achieve a better valuation and more fanfare? It seems like the company thinks that market conditions are unlikely to improve by enough to get investors excited anytime soon, and so there’s no point in delaying.

That doesn’t bode well for investors in KKR, or similarl companies like The Blackstone Group.

Zac Bissonnette

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