Kravis, Henry R.
KRAVIS, HENRY R.
KRAVIS, HENRY R. (1944– ), U.S. financier. Born in Tulsa, Okla., the son of an oil engineer and a former oil-business partner of Joseph P. Kennedy, Kravis went to Claremont College in California and earned a master's degree in business from Columbia University in 1969. That year he joined Bear Stearns, the Wall Street firm, along with his cousin, George R. Roberts. Both worked under Jerome Kohlberg Jr., the corporate finance manager. Kohlberg sought out undervalued small companies, or undervalued operations within larger companies, and helped the management of these companies borrow the capital to buy the businesses themselves. 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 concern Kohlberg Kravis Roberts & Co. 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 10 percent of the buyout price 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, led by Michael *Milken. These so-called leveraged buyouts in the late 1970s and early 1980s were wildly successful for kkr. Houdaille Industries was the first major company listed on the New York Stock Exchange to be taken over in a leveraged buyout. In those 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 buy-out: Wometco Enterprises. In the same year the firm introduced the public tender offer. The firm and its partners paid $465 for the sugar refiner Amstar and sold it in 1986 for $700 million. In 1987, after other well-publicized takeover attempts, Kohlberg resigned from the firm and Kravis succeeded him as senior partner. The following year the firm won a five-week bidding war to control rjr Nabisco, the 19th largest corporation in the United States. This giant food and tobacco conglomerate owned such familiar brands as Camel, Winston and Salem cigarettes, Wheat Thins and Ritz Crackers, Oreo and Fig Newton, Del Monte vegetables, Planter's Peanuts and Life Savers. Kravis and his group bought the company for $25 billion, nearly double the previous record sale price of a commercial enterprise. Since its inception, kkr has spent more than $73 billion, acquiring more than 45 companies. It divested its holdings in rjr Nabisco in 1995.
The publicity surrounding the rjr Nabisco deal led to the story being dramatized in a book and film, Barbarians at the Gate. Kravis was the model for the lead male character, Edward Lewis, in the 1990 romantic comedy film Pretty Woman, a love story about two people from opposite ends of the social spectrum who meet and fall in love. Julia Roberts, played a prostitute opposite Richard Gere, portraying a wealthy and ruthless businessman who makes a living as a corporate takeover specialist.
In addition to his business activities, Kravis contributed more than $10 million to New York's Mount Sinai Hospital and the Metropolitan Museum of Art. He served on the board of trustees of the Metropolitan and of the New York City Ballet and was chairman of the board of New York City's public television station. A supporter of right-wing politics, Kravis joined with Edgar *Bronfman Sr. and Lewis Eisenberg to establish the Republican Leadership Council. Kravis was New York State co-chairman of the failed presidential re-election campaign of George H.W. Bush in 1992. Kravis funded the Henry Kravis Leadership Institute at his alma mater, Claremont McKenna College, and the Henry Kravis Internships for Teachers of Color. As trustees of Mount Sinai Medical Center, Kravis and his wife donated $15 million to establish the Center for Cardiovascular Health and financed a professorship.
[Stewart Kampel (2nd ed.)]