TPG Capital, the buyout firm started by David Bonderman and Jim Coulter, sold a minority stake to the Government of Singapore Investment Corp. and the Kuwait Investment Authority, according to a person briefed on the decision.
The firm, which is based in Fort Worth, Texas, told investors it plans to use proceeds from the sale to finance expansion of new and existing lines of business and into emerging markets, said the person, who declined to be identified because the matter is confidential. The proceeds will remain in the firm and won’t be used to buy the stakes of the founders.
TPG joins the largest private-equity firms, including Apollo Global Management LLC, Blackstone Group LP (BX) and the Carlyle Group, all of which have sold stakes in their management companies or a planning to. The firms are seeking capital to expand beyond buyouts as private-equity fundraising remains at an eight-year low, even after the financial market rally fueled a rebound in deals. Outside stakeholders also make it easier for the firms’ founders to cash out.
“Going down this path, you don’t have to open up the kimono,” said Paul Schaye, managing partner of New York-based Chestnut Hill Partners, which helps buyout firms evaluate investments. “They can stick to their knitting without a ticker symbol hanging over their head.”
Officials at TPG declined to comment. The Wall Street Journal reported the TPG sale earlier today.
$48 Billion Assets
Bonderman and Coulter, who worked together for Texas billionaire Robert Bass in the 1980s, left that organization to pursue a buyout of Continental Airlines Inc., a deal that led the formation of what was then known as Texas Pacific Group.
The firm now manages about $48 billion in assets and counts among its investments Energy Future Holdings Corp., the Texas power producer whose $43.2 billion leveraged buyout in 2007 was the largest in history.
More recently, TPG paid $3 billion to acquire J. Crew Group Inc., the retailer it first bought in 1997 and then took public in 2006. TPG, which houses most of its top executives in San Francisco, also owns broadcaster Univision Communications Inc. and casino giant Caesars Entertainment Corp.
The largest private-equity firms increasingly are looking beyond buyouts for fees and profits. At Blackstone, the fund of hedge funds business is now the firm’s largest by assets. KKR & Co. recently hired a partner to oversee real estate investments and plans to start its first long-short hedge fund later this year.
TPG is looking abroad and in emerging markets for deals, as well as seeking to build expertise in areas such as energy and real estate. Its ranks have swelled to 278 employees in 14 offices.
TPG chose to sell a stake as an alternative to raising money through the public markets, a path that Apollo and Blackstone pursued. Apollo completed its initial public offering this week, selling shares at the top end of the predicted range. The stock has dropped 5 percent since its debut.
Blackstone, which went public in 2007, is trading about 41 percent below its $31-a-share IPO price, even after gaining 46 percent in the past six months. Blackstone founders Stephen Schwarzman and Peter G. Peterson sold shares worth a combined $2.33 billion in the firm’s IPO. Schwarzman still owns about 231 million shares, valued at about $4.2 billion at the current stock price.
KKR, which gained a public listing in New York last year, in September registered the 70 percent interest in the firm that’s still privately held, to allow executives and employees to sell stakes. Henry Kravis and George Roberts, who created the company in 1976 with Jerome Kohlberg, still run the firm and have yet to sell any of their stock.
Carlyle, the Washington-based firm founded in 1987 by William Conway, David Rubenstein and Daniel D’Aniello, is weighing a public offering as soon as this year, people familiar with the firm’s plans have said.