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Excerpts: KKR gets $1B for KinderCare

  • New York leveraged buyout house Kohlberg Kravis Roberts & Co. has struck a deal to sell childcare center operator KinderCare Learning Centers Inc. to a subsidiary of Michael Milken’s and Larry Ellison’s Knowledge Universe Inc. for $1.04 billion in cash and assumed debt.
  • KKR, which took control of KinderCare nearly eight years ago from Oaktree Capital Management LLC in a $570 million leveraged recapitalization, will garner $406.2 million for its 15.66 million KinderCare shares.
  • That’s just over 2.7 times the $148.8 million KKR invested in KinderCare in February 1997.
  • Oaktree, which kept about a 10% stake in the 1997 recap, would sell it for $49.2 million.
  • Knowledge Learning is one of several learning-services businesses backed by Milken’s and Ellison’s investment vehicle Knowledge Universe. Milken, the former Drexel Burnham Lambert junk-bond financier, and Oracle Corp. chairman and CEO Ellison started Knowledge Universe in 1996. Knowledge Learning has 750 day-care centers, 450 before-and-after-school programs and 90 employer-sponsored child-care centers.
  • It will pay about 7.2 times trailing Ebitda for KinderCare, which operates 1,230 centers in 39 states. The centers offer day-care services for toddlers and pre-schoolers as well as tutorial and after-school programs for older children.
  • The company generated $144.5 million of Ebitda on $866 million in revenues during the 12 months ended Sept. 17. That’s up from $81.9 million of Ebitda and $563 million of revenues the year KKR bought it.
  • The deal will remove KinderCare from direct private equity ownership for the first time in 15 years.
  • In 1989 KinderCare was taken private by Lodestar Group, a now-defunct buyout firm headed by Ken Miller, a former vice chairman of Merrill Lynch & Co.’s capital markets division.
  • KinderCare soon went bankrupt, and Trust Co. of the West, a distressed-securities investor, amassed a position in its debt.
  • When KinderCare emerged from bankruptcy in April 1993, TCW swapped its debt for a majority of KinderCare’s equity. In the mid-1990s Oaktree, a Los Angeles firm spun out of TCW, took over the management of TCW’s investment.

Source: The Deal