NEW YORK - In a move set to reshape the landscape of income-focused investment funds, KKR Income Opportunities Fund (NYSE: KIO) has entered into a definitive agreement to acquire the assets of Insight Select Income Fund (NYSE: INSI). The transaction, unanimously approved by the boards of both funds, is anticipated to close in the fourth quarter of 2024, pending necessary shareholder and regulatory approvals.
This acquisition will result in the delisting of INSI shares from public markets, while KIO will continue to operate on the New York Stock Exchange under its existing ticker. KIO aims to maintain its investment strategy, focusing on secured loans, unsecured loans, and high yield corporate debt instruments.
Jeremiah Lane, Co-Head of Global Leveraged Credit at KKR, expressed enthusiasm about the merger, citing a "compelling opportunity in credit" and confidence in delivering strong outcomes moving forward. Similarly, David Leduc, CEO of Insight North America, lauded the expertise of the KKR team and the potential benefits for INSI shareholders.
Key advantages of the transaction include increased fund size and scale, potentially leading to enhanced earnings profiles due to greater investment opportunities. KIO's monthly dividend rate, as of September 30, 2024, stands at 9.9% annually, with dividends set to continue at $0.1215 per share for the closing quarter of the year.
The merger is also expected to yield improved trading liquidity and investor visibility, as well as operating expense savings for KIO shareholders due to economies of scale. Additionally, INSI shareholders will gain access to KKR's credit platform, which boasts $237 billion in assets under management as of June 30, 2024.
In line with the acquisition, KKR will offer a temporary management fee waiver, reducing the fee from 1.10% to 0.99% for a year post-acquisition. INSI shareholders will receive KIO shares and may opt for up to 5% of the consideration in cash, with the transaction structured as a tax-free reorganization.
Financial advisory services for the transaction were provided by UBS Securities LLC to Insight North America LLC, with legal counsel from Dechert LLP to KIO and KKR Credit Advisors (US) LLC, Clifford Chance LLP to Insight, and Troutman Pepper Hamilton Sanders LLP to INSI.
The forthcoming proxy statements/prospectuses will be made available to shareholders of both funds for review at their respective meetings and will be filed with the U.S. Securities and Exchange Commission in due course.
This article is based on a press release statement. Investors are advised to consider the investment objectives, risks, charges, and expenses of KIO and INSI carefully before investing.
InvestingPro Insights
As the acquisition of Insight Select Income Fund (NYSE: INSI) by KKR Income Opportunities Fund (NYSE: KIO) unfolds, it's worth examining INSI's current financial position and market performance. According to InvestingPro data, INSI boasts a market capitalization of $185.66 million and a P/E ratio of 18.89, indicating a moderate valuation relative to earnings.
INSI's revenue growth of 6.99% over the last twelve months and 4.23% in the most recent quarter suggests steady, if modest, expansion. The fund's gross profit margin stands at an impressive 100%, reflecting its nature as an investment vehicle.
Notably, INSI offers a dividend yield of 4.62%, which aligns with its income-focused strategy. This aspect is particularly relevant given that one of the InvestingPro Tips highlights INSI's remarkable track record of maintaining dividend payments for 53 consecutive years. This consistency in dividend payments could be an attractive feature for KIO shareholders post-acquisition.
Another InvestingPro Tip points out that INSI is trading near its 52-week high, with its price at 97.18% of the 52-week peak. This strong performance is further evidenced by the fund's year-to-date total return of 11.08% and a one-year total return of 22.35%, demonstrating solid momentum leading up to the acquisition.
It's worth noting that InvestingPro offers additional insights beyond these highlights, with 6 more tips available for INSI. These could provide valuable context for investors assessing the implications of this merger.
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