Updated from 5:41 p.m. ET to include comments from Leon Cooperman of Omega Advisors.
NEW YORK (TheStreet) -- Private equity giant KKR & Co. (KKR) is buying its publicly traded specialty finance arm KKR Financial (KFN) in a $2.6 billion all-stock transaction that the Henry Kravis and George Roberts-run company says will boost its earnings per share.
Shareholders of KKR Financial will receive 0.51 common units of KKR for each common share they own, valuing the company at $12.79 a share based on Monday closing prices. The deal implies a 35% premium to the Monday closing price of KKR Financial, KKR said in a statement.
KKR Financial shares were rising over 30% to $12.43 in after-hours trading. KKR shares were trading lower by just over 1% to $24.80.
"The deal makes sense. The price is fair. We own KKR and KFN and look forward to owning more KKR," Leon Cooperman, head of hedge fund Omega Advisors, said in an e-mail to TheStreet.
Omega Advisors is the second largest shareholder of KKR Financial, with an over 7% stake in the company's shares according to quarterly Securities and Exchange Commission filings as of Sept. 30. Omega also is an investor in KKR shares with an over 1% stake, the filings show.
KKR Financial has a $2.9 billion portfolio that is invested in collateralized loan obligations, special situations investments and traditional private equity. The merger is expected to combine complimentary investment portfolios, make use of KKR Financial's fully invested funds and improve the overall entity's financial structure.