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TPG acquires Angelo Gordon in $2.7B diversification play

Private equity firm TPG is buying a veteran credit investor as part of an effort to bolster its position in the credit market.

Private equity firm TPG is buying a veteran credit investor as part of an effort to bolster its position in the credit market.

TPG said Monday it is acquiring Angelo Gordon, an alternative investment manager with $73 billion in AUM that specializes in credit and real estate investing, for $2.7 billion in a cash-and-equity deal. This marks TPG’s first substantial move to re-enter the credit market since the firm parted ways with its credit investing arm, Sixth Street, in 2020.

TPG has only extended credit to seven companies since it announced the spinoff of Sixth Street, PitchBook data show.

The acquisition of Angelo Gordon will allow TPG to strengthen its credit investing business at a time when the tightened lending market presents increased opportunities for private debt investors.

Angelo Gordon, a distressed debt investor that specializes in trading the debt of troubled companies, manages a $55 billion credit platform that spans strategies including opportunistic credit, structured credit and direct lending. It also runs an $18 billion real estate business.

The firm was involved in the bankruptcies of cosmetics company Revlon and mattress manufacturer Serta Simmons Bedding. Additionally, Angelo Gordon, coupled with a group of other distressed-debt investors, provided $2.6 billion in rescue financing to help Envision Healthcare, a KKR-owned physician-staffing company, repurchase existing debt. Envision Healthcare filed for bankruptcy Monday.

US bankruptcy court filings have spiked this year amid fears of a potential recession. There were 183 corporate bankruptcy filings in Q1, the highest level in the last 12 years, according to S&P Global Market Intelligence.

TPG’s executives say Angelo Gordon’s product offerings run across the credit spectrum and offer compelling growth trajectories. The PE firm also sees an opportunity to help Angelo Gordon’s direct lending business, which targets lower-middle-market companies with less than $25 million in EBITDA, to provide debt financing to larger businesses.

“There’s a real significant opportunity in the direct lending area,” said TPG CFO Jack Weingart, on the firm’s earnings call Monday.

TPG said it would pay $970 million in cash, with the remaining amount to be paid through the issuance of up to 62.5 million new shares. The transaction also includes earnout payments valued at up to $400 million, which hinge on Angelo Gordon’s future performance. TPG’s stock declined by 4.4% in morning trading and recouped losses to close 2.21% higher Monday at $27.79.

The transaction is priced at a multiple of 20.6x to 23.6x over Angelo Gordon’s fee-related earnings, depending on whether Angelo Gordon meets earnout milestones, Evercore ISI analysts estimate. TPG will not only gain a 20% share of Angelo Gordon’s unrealized carry, but will also diversify its LP base, the analysts said in a note.

As of the end of last year, the two firms had $208 billion in combined AUM.

Specialized credit shops are becoming attractive targets to large asset managers seeking to expand their footprints in the credit world. Abu Dhabi’s sovereign wealth fund Mubadala has been in talks to buy SoftBank-owned Fortress Investment Group since last year. And in May, PGIM, the investment arm of Prudential Financial, announced the purchase of Deerpath Capital Management, a New York-based direct lender serving lower-middle-market companies.

Private debt managers stand to benefit from the tightening credit market as banks have increasingly imposed stricter loan standards to household and corporate borrowers in recent months. Firms such as Blackstone and Ares Management have shown interest in gaining greater market share as banks pull back from markets including direct lending, consumer loans and asset-backed lending.

Featured image by Panchenko Vladimir/Shutterstock

  • Madeline Shi July 2024.jpg
    About Madeline Shi
    Senior reporter Madeline Shi writes about private equity and the debt markets for PitchBook News. Previously she has written for news outlets including Debtwire, With Intelligence (formerly Pageant Media), Business Insider and CoinDesk. Madeline earned a graduate degree from New York University’s school of journalism and is a graduate of Northeast Normal University in China. She is based in Seattle.
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