Biography: Henry Kravis
Financier and Investor

Henry Kravis was born in Tulsa Oklahoma. His father was an oil engineer and onetime oil business partner of Joseph P. Kennedy, father of the President. Young Henry attended prep school in the east, and went to Claremont College in California, where he majored in economics and was captain of the golf team.

In 1969, Kravis received an MBA from Columbia University and joined the staff of Bear Stearns, along with his cousin, George R. Roberts. Both young men worked under Jerome Kohlberg, Jr., the corporate finance manager. Kohlberg taught them what he called "bootstrap" acquisition. He sought out undervalued small companies, or undervalued operations within larger companies, and helped the management of these concerns borrow the capital to buy the business themselves. Kohlberg saw great opportunities he felt the investment banking community were overlooking. In 1976, when Bear Stearns would not appropriate the funds for these projects, Kohlberg resigned and took his two young associates with him. Together they founded the investment banking firm Kohlberg Kravis Roberts & Co. (KKR).

For the next six years, KKR created a series of limited partnerships to acquire companies, reorganize them, sell off some assets or subsidiaries, and resell the company. Typically, KKR put up ten percent of the buyout price out of its own funds, and borrowed the rest from investors by issuing so-called "junk bonds." In the 1980s these bonds were usually underwritten by the investment bank Drexel Burnham Lambert.

In some cases KKR helped company management and a group of limited partners buy up all the stock of a publicly traded company and take it private. They then sought to streamline the company through layoffs, or by disposing of unprofitable or inefficient subsidiaries. In other cases, they took the company private only long enough to make it lean and profitable and then offered its stock to the public again. A.J. Industries, Lily-Tulip and Houdaille Industries were some of the more spectacular leveraged buyouts of the late '70s and early '80s. Houdaille was the first major company listed on the New York Stock Exchange to be taken over in a leveraged buyout. In these years, KKR averaged $50 million a year for itself and earned a 36 percent return on investment for its limited partners.

In 1984, KKR pulled off its first billion-dollar buyout: Wometco Enterprises. In the same year, they introduced the public tender offer. The firm and its partners paid $465 million for sugar refiner Amstar and sold it in 1986 for $700 million. When takeover artist T. Boone Pickens staged a hostile takeover of Gulf Oil, KKR attempted a rescue, and offered $12 billion, but were outbid by Chevron.

KKR next intervened in a struggle over Beatrice Companies, a conglomerate based on a food-processing business. KKR outbid the competitors, offered the management generous retirement packages and proceeded to dismantle the conglomerate. With most of the subsidiaries sold off, the core business remained extremely profitable and offered investors a seven-fold return on their money.

In this venture, KKR departed from their usual role of "white knight" protecting company management from a hostile takeover. While this acquisition was not exactly hostile, it was certainly aggressive, an approach which came to be known as the bear hug acquisition. Safeway was acquired in a white knight operation. The buyout of Owens-Illinois was more ambiguous. The management favored the buyout, outside directors of the company opposed it. In 1987, Jerome Kohlberg, Jr., resigned from the firm, and Henry Kravis succeeded him as senior partner.

In 1988 KKR won a five-week bidding war to control RJR Nabisco, the 19th largest corporation in the U.S. This giant tobacco and food conglomerate owned such familiar brands as Camel, Winston and Salem cigarettes, Wheat Thins, Ritz Crackers, Oreo, Fig Newton, Del Monte vegetables, Planter's Peanuts and LifeSavers. Kravis and his group bought the tobacco and food company for $25 billion, nearly double the previous record sale price of a commercial enterprise. This struggle for control of RJR Nabisco captured the public imagination to an unprecedented degree. The story was dramatized in a bestselling book Barbarians at the Gate, which also became the basis of a well-received television film. In the same year as the Nabisco buyout, KKR successfully shielded Texaco from a hostile takeover, purchased the Stop and Shop grocery chain and bought the Duracell battery company from Kraft Foods.

Kravis exceeded his own record with the 2007 acquisition of energy supplier TXU Corp, now known as Energy Future Holdings. Published calculations of the cost of the deal range from 43 to 48 billion dollars, but by any estimate, it is the largest corporate buyout in history.

Over the years, Kravis has held seats on the board of directors of Duracell, Safeway, Borden, Owens-Illinois, AutoZone, UnionTexas Petroleum, and American Re-Insurance Company and First Data Corporation. In addition to his business activities, Kravis has made contributions as large as $10 million to New York's Mount Sinai Hospital and the Metropolitan Museum of Art. He has also served as a director or trustee of the Metropolitan, the New York City Ballet, Mount Sinai Hospital, New York's public television station (WNET), Rockefeller University, Claremont McKenna College and Columbia Graduate School of Business. In 2010, he announced a gift of $100 million to Columbia to fund the construction of two new buildings for the Business School's second campus, in the Manhattanville section of New York City. It is the largest donation in the school's history.