Exclusive: TPG nears $10 billion private equity fundraising close

(Reuters) - TPG Capital LP [TPG.UL] is close to finishing a two-year effort to raise its latest global private equity fund, amassing $10 billion, according to people familiar with the matter, a key step in the firm’s plans for an eventual initial public offering.

The move is representative of a comeback in leveraged buyouts for one of the world’s largest private equity firms. Founded in 1992, TPG enjoyed early successes followed by some high-profile missteps in the runup to the 2008 financial crisis.

TPG has secured $9.8 billion from investors for its latest buyout fund, TPG Partners VII, and has commitments well in excess of its $10 billion hard cap limit, the people said this week. It expects to formally end fundraising this spring, the people added.

The sources asked not to be identified because details of the fundraising process are confidential. TPG declined to comment.

Raising this flagship fund will allow TPG to turn its focus to a possible IPO. Its executives, including founders David Bonderman and James Coulter, have acknowledged the possibility of TPG going public, joining peers Blackstone Group LP BX.N and Carlyle Group LP CG.O. But they have not given a time frame.

TPG has also built major businesses in credit investments, growth equity and real estate, and now manages more than $70 billion. Among its investments are popular startups Uber Technologies Inc [UBER.UL] and AirBnb Inc.

This diversification, in conjunction with its hiring of Goldman Sachs Group Inc GS.N veteran Jon Winkelried last year as co-CEO, has brought TPG closer to a potential IPO.


The fact that TPG took two years to raise TPG Partners VII reflects the challenges it faced and its gradual recovery in private equity. Peers such as Blackstone and Warburg Pincus LLC [WP.UL] have raised larger funds in less than a year.

TPG Partners VI, the firm's previous fund which amassed $19 billion and launched in 2008, made some big bets that went sour. These included casino operator Caesars Entertainment Corp CXR.O and struggling bank Washington Mutual Inc.

Caesars was created after TPG and private equity firm Apollo Global Management LLC APO.N took Harrah's Entertainment private for $30.7 billion in 2008. Harrah's was formerly one of the world's largest casino operators. One of its units has since filed for bankruptcy.

TPG's $1.35 billion investment in Washington Mutual was wiped out in a mere five months, after the 2008 financial crisis prompted the U.S. government to shut the bank and sell its assets to JPMorgan Chase & Co JPM.N.

Sensing weak investor appetite, TPG started fundraising at the start of 2014 seeking a $2 billion bridge fund that would allow it to be active in leveraged buyouts until TPG Partners VI had recovered sufficiently for the firm to start fundraising in full force.

It began formal fundraising for TPG Partners VII in August 2014, and rolled the bridge fund into it.

Over time, several other private equity investments of TPG started to pay off handsomely. TPG made seven times its $868 million equity investment in Par Pharmaceutical Holdings Inc by agreeing to sell the company last year to Endo International Plc ENDP.O.

Other successes included U.S. pet store chain Petco, where TPG and its investment partner Leonard Green & Partners LP made 4.5 times their $765 million investment. Healthcare, however, emerged as a particularly lucrative sector for TPG in leveraged buyouts, earning its healthcare investments chief Todd Sisitsky the title of North American private equity head.

Gradually, the valuation of TPG Partners VI improved, and investors took note. That fund was valued at 1.55 times its investors’ money as of the end of September 2015, according to the Oregon Public Employees Retirement Fund. That is up from 1.25 times at the end of September 2013, a few months before TPG started raising the bridge fund.

Reporting by Koh Gui Qing in New York; Editing by Matthew Lewis