KKR & Berkmans’ Associated Partners reach $100 Million Wireless Deal

(October, 2013) KKR & CO. has struck a $100 million pact to build wireless communications infrastructure alongside Associated Partners LP, an investment firm run by brothers David and Bill Berkman.

Associated Partners’ managers are the scions of a Pittsburgh family that made a fortune in communications. The family business started selling greeting cards and went on to own radio and TV stations and eventually operates and sell off early cellular networks.

KKR will initially pump about $100 million into the partnership, but it could contribute more later, some of the people said. The way the deal is structured, KKR is making minority investments in three businesses managed by Associated Partners.

In its latest ventures, Associated Partners is aiming to ramp up its business upgrading wireless systems in rural areas, which generally lag behind those in urban areas in datahandling capacity. The firm has about 20 teams around the country working on rewiring hard-to-reach cell sites with the latest high-speed equipment on behalf of major carriers such as Verizon Wireless and AT&T Inc.

KKR's tie-up with Associated Partners, expected to be announced Monday, comes as the New York private-equity firm and its rivals are expanding beyond the traditional buyout.

The Associated Partners deal has similarities to partnerships KKR has struck in the oil patch with such companies as Chesapeake Energy Corp. and Schlumberger Ltd. It's also a bet that just as the boom in U.S. oil-and-gas drilling has operated up big investment opportunities building new pipelines, Americans' love affair with smartphones has created a need to revamp wireless networks.

KKR is investing in the ventures out of its infrastructure found, which targets deals with lower risk and typically lower returns than the pools of money it taps for corporate takeovers. Other KKR infrastructure investments involve solar power production and parking lots in Spain, a New Jersey municipal water system and a French wind farm.

Most of KKR's investment Associated Partners will be to upgrade the wiring supporting rural cellphone to the people said.

About 30% of the money is aimed at buying interests in ground and rooftop leases for cell sites, they said. Like KKR's agreement with Chesapeake to acquire mineral-extraction rights on U.S. land, this business seeks to buy royalty-payment stream from cell-site lessors that looking to cash out.