Does private-equity giant KKR have Chief Justice John Roberts to thank for a stellar quarter?
Yes and no.
The storied buyout firm, run by cousins Henry Kravis and George Roberts, today posted second-quarter profits of $520 million, more than double its profit for the same period last year. Most metrics — including the aggregate value of KKR’s holdings, its share of investment gains and its earnings eligible for distribution to investors — were up in the quarter.
The vast majority of KKR’s profit came from its stake in Alliance Boots, the largest drugstore chain in Britain. After Walgreen agreed last month to buy 45 percent of Boots for $6.7 billion, KKR marked up the value of its Boots holding to $651 million, from $392 million just three months earlier. KKR said today that the Boots stake, which is valued at 1.9 times the cash KKR paid for it, accounted for 82 percent of pre-tax profit for the quarter.
The remainder of KKR’s profit is where Chief Justice John Roberts comes in.
KKR said the stellar performance of its balance sheet, which heavily impacts the firm’s profit metric, was “largely due to the significant appreciation in Alliance Boots, Dollar General and HCA.”
HCA is the biggest hospital chain in the U.S., and it is 20 percent owned by KKR and its affiliated funds, according to Bloomberg data. At that weight, the value of KKR’s stake in HCA jumped $334 million in the final two days of the quarter, when news rippled through the markets that Roberts’ Supreme Court — with the chief justice writing the 5-4 opinion — upheld the core of President Barack Obama’s health-care overhaul.
When the dust settled and the second quarter was in the history books, KKR had marked up the value of its HCA holdings to $568 million, more than 2.5 times its cost and a jump from $463 million three months earlier.
Commenting today on the sterling run for his firm’s balance sheet, KKR chief financial officer Bill Janetschek said, “This strong performance translated into the highest book value figure we’ve reported as a public company.”
For at least part of that performance, he has Roberts to thank.