Two Partners at Kohlberg Kravis Resign To Start Their Own Investment Company
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Kohlberg Kravis Roberts & Company partners Edward Gilhuly and Scott Stuart, who were seen as potential candidates to run the New York-based buyout firm, will resign to start their own company.
Mr.Gilhuly, 45, and Mr.Stuart, 46, will leave at the end of the year and raise money for a company that will invest in publicly traded stocks, according to a statement yesterday. The two joined KKR in 1986 after graduating from Stanford Business School and served on the firm’s investment committee.
“I’m shocked,” the co-founder and chief executive of Chicago-based buyout firm Madison Dearborn Partners, John Canning, said. “They appeared to be KKR through and through.”
Succession is an issue throughout the buyout industry, where many founders are in their 60s and manage funds designed to run as long as 10 years. KKR, founded in 1976, will be an investor and part-owner in Mr. Gilhuly and Mr. Stuart’s new fund.
“As entrepreneurs ourselves, we understand and respect the desire to start a new enterprise, and we wish them well in the future,” the founders of KKR, Henry Kravis, 61, and George Roberts, 61, said in the statement.
Neither Mr. Kravis nor Mr. Roberts was available for comment, a KKR spokeswoman, Ruth Pachman, said. KKR also said yesterday it plans to open offices in Hong Kong and Tokyo, its first in Asia. Joseph Bae, a KKR managing director in New York, will move to Hong Kong to lead the firm’s Asian operations. Justin Reizes, a principal at KKR’s London office, will join Mr. Bae.
Alex Navab and Todd Fisher will replace Mr. Gilhuly and Mr. Stuart on the six-member KKR investment committee. KKR raised more than $5 billion for its second European buyout fund.
“We’ve always been aware that Henry and George are of a certain age, and there needed to be strong backup,” Gerard Drummond, the 67-year-old chairman of the Oregon Investment Council, KKR’s second-largest investor which oversees $49.5 billion of pension assets, said.
“We have on a number of occasions questioned George who’s our principal contact as to his future plans,” Mr. Drummond said. “He’s assured us he plans to stay very, very active for the foreseeable future.”
Mr. Stuart was a 30-year-old KKR associate when he helped analyze and provide forecasts for Mr. Kravis and Mr. Roberts during the $31 billion takeover of RJR Nabisco in 1989, the biggest leveraged buyout ever. He focused on consumer products, energy, and KKR Financial, the firm’s real estate investment trust. Mr. Gilhuly helped open KKR’s London office in 1998 and returned to America this year.
“We have chosen to move into a new area of investing at a time when KKR is clearly flourishing thanks to strong leadership, a deep, experienced team, and a focused approach to value creation,” Mr. Gilhuly and Mr. Stuart said in yesterday’s statement.
KKR now employs 56 investment professionals in three offices.
The company will seek investments throughout the Asia-Pacific region, including China, Korea, and Japan, Mr. Bae said in the KKR statement.
“The Asian markets will have a pivotal global influence in the coming decades and will offer significant investment opportunities,” Mr. Kravis said in the statement.