KKR & Co. Inc. has reached an agreement to acquire Arctos Partners in a transaction that carries an initial valuation of $1.4 billion, plus the potential for further payments of up to $550 million that are linked to performance milestones and vesting through 2031.
Founded in 2019 and based in Dallas, Arctos oversees about $15 billion in assets and is the largest institutional investor in stakes of professional sports franchises. The firm also extends capital solutions to other alternative asset managers, positioning itself at the intersection of sports investing and GP solutions.
For KKR, the acquisition represents a direct entry into the sports franchise stakes market while strengthening the firm’s capabilities in GP solutions and the secondaries space. Arctos holds a unique regulatory standing as the only firm approved for multi-team ownership across all five major U.S. sports leagues - the NBA, NFL, MLB, NHL and MLS.
"Arctos has created a distinctive and scaled platform across sports investing and capital solutions for asset managers, and the team has extensive experience in secondaries - three areas where we see significant long-term opportunity," said Joe Bae and Scott Nuttall, Co-Chief Executive Officers of KKR.
As part of the deal, Arctos Managing Partners Ian Charles and Doc O'Connor will join KKR as Partners. Ian Charles is slated to lead a newly created KKR Solutions business that will incorporate Arctos' Sports and Keystone businesses and serve as the foundation for a multi-asset class secondaries business within KKR.
The structure of the initial $1.4 billion consideration is composed of $300 million in cash and $900 million in equity granted to existing Arctos shareholders. Portions of the equity allocated to management are subject to vesting schedules through 2030. In addition, the agreement includes an allocation of $200 million in equity to be distributed by 2028, with those shares vesting through 2033.
KKR expects the acquisition to bolster its earnings profile and expand its base of long-duration capital. Upon closing the transaction, perpetual and long-dated capital would account for 53% of KKR's reported $759 billion of assets under management.
The transaction remains subject to customary closing conditions, including regulatory approvals and sign-offs from the relevant sports leagues.
Sectors affected: Private equity, sports franchise investing, alternative asset management and secondaries markets.