KKR Plans To Cut Its Gillette Stake
By Peter Ramjug
WASHINGTON (Reuters) - Gillette Co. (NYSE:G - news) Friday said its second-largest shareholder, the investment banking firm Kohlberg Kravis Roberts & Co., plans to halve its stake in the consumer products conglomerate through the sale of more than 25 million shares worth more than $1.5 billion.
KKR, the privately held leveraged buyout specialists, told Gillette the sale of the shares is purely a liquidity move and does not reflect a change in its view toward Gillette's stock, a Gillette spokeswoman told Reuters.
''What they really have advised us that it's really designed to provide liquidity for their investment partnerships, and they have told us that it does not reflect in any way their change in the view toward our stock,'' Joan Gallagher said.
''They have certainly said they want it to be clear it doesn't reflect any change in their views,'' she added.
A KKR spokesman declined to comment.
KKR is looking to sell 25.65 million shares or precisely half of the 51.3 million shares of Boston-based Gillette it now owns, according to a Securities and Exchange Commission filing made Friday by Gillette. The move would reduce KKR's beneficial ownership in the maker of Track II razors, Right Guard deodorant, Duracell batteries and other consumer goods to 2.321 percent from 4.642 percent.
Based Thursday's New York Stock Exchange closing price for Gillette of $59.25, KKR's present stake is valued at about $3.04 billion. U.S. stock markets were closed Friday in observance of the Good Friday and Passover holidays.
Gillette shares this week fell $4.13, or about 6.5 percent, after hitting a 52-week high of $64.38 last Friday, a decline that has knocked down the value of KKR's stake by about $300 million.
The filing said all of the shares are being offered and sold by KKR, which acquired its Gillette stake in 1996 when Gillette bought Duracell Inc. for $7.3 billion. KKR had acquired Duracell in a leveraged buyout in 1988 and took it public in 1991 while retaining a significant stake in the battery maker.
Henry Kravis, who is one of Gillette's directors, is also a general partner of KKR, the filing pointed out.
KKR, in fact, may cut its stake by more than 50 percent, if the 3.8 million-share over-allotment option is exercised by the offering's underwriter, Merrill Lynch & Co. If the over-allotment is fully exercised, then 29.5 million shares would be offered by KKR, and its Gillette stake would by cut by 57.5 percent, according to the filing.
All of the net proceeds from the sale of the shares will go to KKR. Neither Gillette nor any of its executives or employees will receive any proceeds, the filing said.
KKR spokesman Josh Pekarsky declined to comment on the SEC document, saying the shares are in a registration period with federal regulators and thus KKR is limited in what it can say.
He did say KKR has sold Gillette shares before. On Feb. 4, 1998, KKR sold 10 million shares for $101 per share in a secondary offering. That sale, which reaped about $1.01 billion, had reduced KKR's stake in Gillette by a third from about 6.8 percent to its present level.
Gillette said KKR is its second-largest shareholder behind Nebraska billionaire Warren Buffett, who holds 8.7 percent, or 96 million shares, through his holding company Berkshire Hathaway Inc. .
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