Kohlberg Kravis Roberts (KKR) is partnering with Dutch investment firm Reggeborgh in the ‘strong expansion’ of Deutsche Glasfaser (DG), a company fully-owned by Reggerborgh, which plans, builds and operates fibre-optic networks in Germany, the global asset manager said in a statement.
KKR will acquire a majority stake in DG through its latest infrastructure vehicle. KKR Global Infrastructure Investors II closed on $3.1 billion, slightly above its hard cap, earlier this month. Like its predecessor, it will make investments in the energy supply chain, water systems, roads, railways, airports and communications networks, focusing on OECD countries. KKR’s first infrastructure fund closed in 2012 on $1 billion.
According to the statement, KKR and Reggeborgh will provide DG “with the long-term capital to embark on an ambitious growth programme whereby approximately €450 million is to be invested in the further roll-out of German fibre optics infrastructure over the next few years.” The New York-based asset manager did not disclose financial details about the transaction and declined to comment through a spokesperson.
“Deutsche Glasfaser is a blueprint for the type of investments our infrastructure fund is targeting in Europe: building a partnership with a best-in-class company, and investing significant amounts of capital to grow a business with strong infrastructure characteristics,” said Jesus Olmos, member and head of European Infrastructure at KKR.
“We are very excited about this new addition to our European portfolio as it opens up opportunities in a new and promising sector – telecom infra – alongside our existing investments in renewables, water, district heating, parking and rolling stock,” Olmos added.
Launched in 2012 by Reggeborgh, which until recently owned Dutch network supplier Reggefiber, DG is active across the entire fibre-optic value chain from passive and active infrastructure to acting as internet service provider. It focuses on suburban and rural parts of Germany and has connected about 100,000 German households and companies to its fibre-optic network.
According to KKR, the growth opportunities in the sector in Germany are significant, given that broadband penetration in the country is still below the European average, while the German government aims to achieve 100 percent broadband coverage at a speed of at least 50 megabits per second by 2018.
The transaction, which is subject to customary closing conditions, is the first sizeable investment KKR is making in Europe through its second infrastructure fund, a spokesperson told Infrastructure Investor. Last December, KKR announced a joint partnership with Veresen, an energy infrastructure company based in Canada.
Veresen Midstream, as the joint venture is called, acquired certain natural gas gathering and compression assets supporting Montney development in the Dawson area of north-eastern British Columbia from Encana Corporation and the Cutbank Ridge Partnership (CRP), a partnership between Encana and Mitsubishi subsidiary Cutbank Dawson Gas Resources. Under the terms of that agreement, Veresen Midstream would invest up to C$5 billion (€3.6 billion; $3.8 billion) of new midstream expansion for Encana and CRP in the Montney region under a 30-year fee-for-service arrangement.
The partnership with Reggeborgh marks another milestone for KKR. While the firm has invested in the German telecoms sector before it did so through its private equity funds, backing Versatel, a German fibre-based fixed line telecom provider which owns the second largest fibre infrastructure in Germany after Deutsche Telekom.
DG represents the second telecoms investment for KKR's infrastructure platform. In October 2013, KKR agreed to invest – through its first infrastructure vehicle – $100 million in partnership with Pittsburgh-based investment firm Associated Partners LP to build wireless communications infrastructure.
In addition to infrastructure, KKR also invests in private equity, real estate, credit and hedge funds. As of March 31, its assets under management totaled $99.1 billion. With the closing of its second infrastructure fund, the firm now has approximately $5.6 billion in infrastructure assets under management. It has also deployed about $1 billion through co-investments.