Suit Over KKR's $2.6B Acquisition of Affiliate Dismissed

The Delaware Court of Chancery has dismissed a lawsuit alleging KKR & Co.’s $2.6 billion buyout of its publicly traded debt-investment unit, KFN, was unfair because the acquirer was a controlling shareholder and engineered a transaction that shortchanged stockholders. In granting the defendant’s motion to dismiss, Chancellor Andre G. Bouchard said the plaintiffs’ claims did not prove KKR controlled KFN’s board when the transaction was approved.

“In my opinion, the allegations of the complaint do not support a reasonable inference that KKR was a controlling stockholder of KFN within the meaning of this court’s precedents,” Bouchard said in In re KKR Financial Holdings LLC Shareholder Litigation. “Although these allegations demonstrate that KKR through its affiliate managed the day-to-day operations of KFN, they do not support a reasonable inference that KKR controlled the KFN board—which is the operative question under Delaware law—such that the directors of KFN could not freely exercise their judgment in determining whether or not to approve and recommend to the stockholders a merger with KKR.”