Caisse, KKR in US$4.3B deal to buy USI Insurance

• KKR & Co. and Caisse de Dépot et Placement du Québec agreed to buy Onex Corp.' s USI Insurance Services in a deal valued at about US$ 4.3 billion including debt.

KKR and the Caisse, Canada’s second- largest pension fund manager, will have equal ownership in the Valhalla, N.Y.- based insurance broker, according to a statement Friday. The acquirers said they’ve established a partnership to make core private equity investments, or deals for stable companies they can hold for longer than the typical three- to five-year period in leveraged buyouts.

Private equity firms have long favoured deals in insurance services, where capital expenditures and debt levels are typically low and cash flow is steady. KKR and the Caisse outbid others including buyout firms Carlyle Group LP and CVC Capital Partners for USI, according to people with knowledge of the process. Blackstone Group LP agreed last month to buy human- resources and benefits-administration platforms from broker Aon Plc for as much as US$4.8 billion.

“USI operates in a resili- ent sector characterized by stable, long-term returns and serves small and medium- sized businesses, which are the cornerstone of the U.S. economy ,” said Christian Puscasiu, t he Caisse’s co- head of private equity direct investments.

KKR’s new partnership with the Caisse to make longer-hold investments reflects a wave of similar strategies by peers seeking to benefit from holdings that grow steadily and produce stable cash. Blackstone struck its first such deal in January, acquiring musicrights company SESAC Holdings, and Carlyle and CVC also have funds to make core private equity investments. KKR co-founder Henry Kravis has lamented in the past that typical buyout fund structures don’t allow for longer ownership, calling Warren Buffett’s long- duration capabilities in Berkshire Hathaway Inc. “the perfect private equity model.”

Onex, Canada’s largest buyout firm, bought USI from a fund run by Goldman Sachs Group Inc. in 2012, in a transaction valued at US$2.3 billion. USI has since made more than 30 acquisitions to increase its network across the U.S ., according to data compiled by Bloomberg.