TPG pushes debt investment with $2.7 billion deal for Angelo Gordon

TPG has agreed to buy loan and real estate manager Angelo Gordon for $2.7 billion as the US private equity group diversifyes into credit-based investing with its first major acquisition since going public last year.

The acquisition by New York-based Angelo Gordon, one of the largest investors in the private debt markets and a savvy distressed debt player, will be conducted primarily in stock.

TPG said it would pay $970 million in cash and the remaining stock by issuing 62.5 million new shares in a deal it expects will boost its fee-based earnings by 10 percent next year. In first-quarter results released Monday, the buyout group generated $99 million in fee-related income, generally beating analysts’ forecasts.

TPG listed its shares last year as part of a growth push by the $137bn-in-assets group, which was expected to help it acquire the credit-based investment manager, widen its portfolio Which is mostly focused on growth-oriented corporate buyouts and so on. The “Rise” platform focuses on sustainability and climate-based investing.

Angelo Gordon, who manages $73 billion in assets with 650 employees worldwide, has had key roles in recent bankruptcies such as Revlon and Envision Healthcare. It also has extensive operations in real estate financing.

TPG, which went public in January 2022 at a valuation of $9 billion, which is slightly higher than its current market capitalization, hopes to use its large size to appeal to a larger pool of capital that can invest in a limited number of investors. Prefers dealing with managers.

TPG co-founder James Coulter said in an interview that Angelo Gordon has a broad presence in the credit markets that the buyout will bring to the group’s scale and will be welcomed by clients.

Angelo Gordon co-chief executive Josh Baumgarten said the firm’s decision to sell came because its investors were seeking “strategic” relationships with a smaller number of firms. “The world is moving towards large scale and fully diversified businesses that can meet what customers are looking for,” he added.

The combined company hopes to capitalize on new investment opportunities that emerge from rising interest rates and the looming credit crisis that could lead to an increase in defaults, said Chief Executive John Winkelried.

The transaction comes as private credit managers increasingly replace traditional banks in financing purchases and making even larger real estate and corporate loans. The deal adds to a wave of consolidation in private capital as asset managers seek to strengthen their credit investment capabilities.

Several large debt groups have been acquired in recent months and another major player in this sector, Fortress Investment Group, is expected to be acquired by Mubadala, an Abu Dhabi-based sovereign wealth fund, the Financial Times reported last week. Was.

TPG had a partnership with credit specialist Sixth Street Partners, which the two parties ended in 2020.

Shares of TPG rose 2 per cent on Monday.