Focus Financial shares tumble after office hours as side bid is filed that mostly earns KKR and Stone Point without generating M&A capital

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New York rollup stocks rose with RIA valuations, giving pre-IPO investors an exit window

The two firms which invested a lot of money in Focus Financial Partners Inc. when it was unlucky are ready to try their luck by cashing in big, three years after the IPO.

The New York-based roll-up announced after market close today that it is offering 7 million shares of its common stock, primarily to cash Kohlberg Kravis Roberts & Co. LP and Stone Point Capital LLC.

Matt Crow: “KKR was never meant to be a permanent shareholder. “

The companies will receive the proceeds from the sale of 6,536,327 shares, or more than $ 300 million at today’s share price. See: Stone Point and KKR buy Focus Financial for $ 2 billion using massive leverage

Targeted actions (JIBS) closed today at $ 52.27, near the 52-week high of $ 56, but fell rapidly 5% to $ 49.54 following the offer’s announcement in after-hours trading normal. Focus went public in the mid $ 30 range, but traded as low as $ 12 last year.

To concentrate Dear the secondary offer at $ 48 per share.

Last week Credit Suisse raised his course target for Focus stocks at $ 62 starting at $ 53.

The share price dictates this offer more than the insiders’ thirst to get out, says Matt Crow, president of Mercer Capital of Memphis, Tenn.

“Focus traded above $ 50 for the first time in history, and that brought sellers to the table,” he says.

“I wouldn’t necessarily see this insider selling negatively, as KKR was never meant to be a permanent shareholder. “

KKR and Stone Point put cash in 2017 and Focus completed its IPO in July 2018.

The IPO raised $ 532 billion and about $ 393 million, or 71% of the proceeds, was spent on loan repayment. See: Focus Financial’s IPO pays off for KKR and Stone Point, after all, by hitting the price bar plus a “pop” investor. Now on to the less glamorous task of paying off the debt

The 463,673 shares offered by Focus itself are issued in the name of certain of the existing unitholders of Focus Financial Partners, LLC, its operating subsidiary.

Focus will use the amount of this contribution to purchase units comprising employees and managers of its partner RIA companies. Focus officers and directors will not receive proceeds, the statement said.

The fact that no offer fuels mergers and acquisitions is not necessarily special here, Crow adds.

“The company probably doesn’t need cash as it just negotiated large increases to its lines of credit.”

But Wall Street gets another transactional bite at this apple.

Goldman Sachs & Co. LLC, BofA Securities, Inc., KKR Capital Markets LLC and SPC Capital Markets LLC are acting as co-book managers for the offering.

New partnership

In a separate announcement today (February 25), Prairie Capital Management, LLC, a registered investment advisor (RIA) headquartered in Kansas City, Missouri, said it has reached an agreement to join the Focus partnership.

The transaction is expected to close in the second quarter of 2021, subject to customary closing conditions.

Since 1995, Prairie founders and directors have provided trust wealth management services to a select group of high net worth individuals, family offices, foundations, endowments and other institutions across the United States, according to a statement. .


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