KKR makes first investment in India

US buyout group KKR has entered into its first investment in India in a big splash, acquiring the software business of Flextronic International for $900 million.

A relatively new player in Asia, Kohlberg Kravis Roberts (KKR) is making waves with the latest acquisition of a majority stake in the India and US-based software development and solutions business of Nasdaq-listed Flextronic International.

KKR has signed an agreement to acquire the software business, Flextronics Software Systems (FSS) – headquartered in California, with operations predominantly located in India – in a transaction valued at around $900 million (€739 million), according to a joint statement. The completion of the transaction, subject to regulatory approvals, is expected mid-year.

The acquisition represents KKR’s first investment in India and second in Asia. It is also believed to be the largest leveraged buyout and technology investment in India thus far. Last year, KKR made its first Asian investment in Avago Technologies, former semiconductor products group of Agilent Technologies. Avago is co-headquartered in Singapore.

Flextronics will retain a 15 percent equity stake in FSS following the acquisition, and continue as a business partner and customer. The existing FSS management team will continue to lead the software business, and operate under a new name that has yet to be selected, according to the statement.

A provider of software solutions to the global communications industry, FSS boasts of its unique ability to deliver communications solutions that stretch from the network infrastructure to end user devises. FSS has approximately 6,100 employees worldwide.  In addition to India and the US, FSS is present in China, Germany, Italy, South Africa and Ukraine.

KKR will finance the acquisition with fully underwritten debt facilities. Citigroup Global Markets (Asia) and Merrill Lynch are joint bookrunners and joint lead arrangers for the financing. Citigroup and Morgan Stanley acted as financial advisors to KKR on this transaction.

“Our investment…is an outstanding opportunity to create value in a high-growth sector…..the software business has an unmatched record success in the delivery of communications technology. We believe the business is well-positioned to build on the strong foundation it has developed in its markets,” Adam Clammer, a member of KKR, said in the statement.

KKR set up offices in Hong Kong and Tokyo last year.