TPG has agreed to buy debt and real estate manager Angelo Gordon for $2.7 billion as the U.S. private equity group diversifies into credit-based investments with its first major acquisition since going public last year.
The acquisition of New York-based Angelo Gordon, a major investor in the private credit markets and an experienced distressed debt dealer, will be predominantly in equity.
TPG it said it would pay $970 million in cash and the remainder in stock by issuing 62.5 million new shares in a deal it expects to boost its fee-based earnings by up to 10% next year. In first-quarter results released Monday, the buyout group generated $99 million in fee-related earnings, generally beating analyst forecasts.
TPG floated its shares last year as part of a growth push by the $137 billion group of assets that many expected would help it acquire a credit-based investment manager, broaden its portfolio that is primarily focused on growth-oriented corporate acquisitions and its “Rise” platforms focused on sustainability and climate-based investments.
Angelo Gordon, who manages $73 billion in assets with 650 employees worldwide, has had major roles in managing recent bankruptcies such as Revlon AND Imagine healthcare. It also has extensive real estate financing operations.
TPG, which went public in January 2022 at a $9 billion valuation, slightly higher than its current market capitalization, hopes to use its increased size to appeal to large pools of capital that increasingly prefer to deal with small numbers of investment managers.
TPG co-founder James Coulter said in an interview that Angelo Gordon has an expansive presence in the credit markets that would scale the size of the acquiring group and be welcomed by clients.
Josh Baumgarten, co-CEO of Angelo Gordon, said the company’s decision to sell came as its investors sought “strategic” relationships with a smaller number of companies. “The world is moving towards bigger, broader scale, fully diversified companies that can deliver what customers are looking for,” he said.
The combined company expects to capitalize on new investment opportunities emerging from rising interest rates and a looming credit crunch that could trigger an increase in delinquencies, Chief Executive Officer Jon Winkelried said.
The transaction comes as private loan managers increasingly replace traditional banks in financing acquisitions and even in making large real estate and corporate loans. The deal adds to a wave of consolidation in private capital as asset managers look to strengthen their credit investment capabilities.
Several large debt groups have been acquired in recent months and another major player in the industry, Fortress Investment Group, is expected to be acquired Mubadala, the Abu Dhabi-based sovereign wealth fund, the Financial Times reported last week.
TPG had a partnership with credit specialist Sixth Street Partners, which the parties terminated in 2020.
Shares of TPG are up 2% on Monday.
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