TPG pushes into credit investing with $2.7bn deal for Angelo Gordon
Buyout group will pay $970mn in cash but predominantly use stock to complete the acquisition
TPG has agreed to buy debt and real estate manager Angelo Gordon for $2.7bn as the US 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, one of the largest investors in private credit markets and a savvy distressed debt player, will be predominantly made in stock.
TPG said it will pay $970mn in cash and the remainder in stock by issuing 62.5mn new shares in a deal it forecast would increase its fee-based earnings by nearly 10 per cent next year. In first-quarter results released on Monday, TPG generated $99mn in fee-related earnings, generally beating analyst forecasts.
TPG listed its shares last year as part of a growth push by the $137bn in assets group that many expected would help it acquire a credit-based investment manager, broadening its portfolio that is mostly focused on growth oriented corporate buyouts and its “Rise” platforms focused on sustainability and climate-based investments.
Angelo Gordon, which manages $73bn in assets with 650 employees worldwide, has had important roles in steering recent bankruptcies like Revlon and Envision Healthcare. It also has extensive operations financing real estate.
TPG, which went public in January 2022 at a $9bn valuation, slightly higher than its current market capitalisation, hopes to use its bigger size to appeal to the large pools of capital that increasingly prefer to deal with a limited number of investment managers.
TPG’s chief executive Jon Winkelried said on Monday that the acquisition “underscores our continued focus on growing and scaling through diversification, while driving long-term value for our shareholders”.
Josh Baumgarten, co-chief executive of Angelo Gordon, said the merger would add “scale” to its investment operations during a time of strong opportunities in credit and real estate markets.
The transactions come as private credit managers increasingly replace traditional banks in financing buyouts 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 bolster their credit investment capabilities.
Several large debt firms have been acquired in recent months and another prominent player in the sector, Fortress Investment Group, is expected to be acquired by Mubadala, the Abu Dhabi-based sovereign wealth fund, the Financial Times reported last week.
TPG previously had a partnership with the credit specialist Sixth Street Partners, which the sides terminated in 2020.
Gapping down
In reaction to earnings/guidance:
- CTXR -5%, EIX -0.5%
Other news:
- GNLX -9.8% (announces a private placement of 1,665,247 shares of the Company's common stock at a price of $20.00/share, for gross proceeds of ~$33 mln)
- HRB -9.5% (IRS mulling creation of government run tax preparation option, according to WSJ)
- OKE -5.8% (Magellan Midstream to be acquired by ONEOK (OKE) for implied value of $67.50 per unit)
- INTU -4.8% (IRS mulling creation of government run tax preparation option, according to WSJ)
- TUR -4.4% (Turkey election will be headed for a runoff)
Analyst comments:
- CX -0.8% (downgraded to Neutral from Buy at BofA Securities)
- GOOGL -0.7% (downgraded to Hold from Buy at Loop Capital)
- FSLR -0.6% (downgraded to Peer Perform from Outperform at Wolfe Research)
Atlanta Fed President Raphael Bostic (not a voting FOMC member) CNBC interview: Inflation is not going to come down very quickly and cutting rates doesn't fit into that scenario; He is not seeing banking issues in his district; He probably would not cut rates if there were a recession
Mr. Bostic said:
- Inflation is not going to come down very quickly and cutting rates doesn't fit into that scenario.
- Markets have been optimistic about inflation coming down.
- Fed has seen tightening, but it has been gradual.
- Appropriate policy is just to wait and see.
- Fed is looking at interest rate risk on the books of banks.
- He is not seeing banking issues in his district.
- He does not think there will be a recession.
- He probably would not cut rates if there were a recession.
Gapping up
In reaction to earnings/guidance:
- MNDY +15.4%, PROC +3.2%, TSEM +2.4%, AI +2.2%, BHVN +0.8%, BOC +0.7%
Other news:
- NGMS +119.3% (to be acquired by Aristocrat for $29.50 per share in cash)
- SRPT +28.7% (receives Positive Vote from FDA Advisory Committee Meeting for SRP-9001 gene therapy to treat duchenne muscular dystrophy)
- MMP +14.1% (Magellan Midstream to be acquired by ONEOK (OKE) for implied value of $67.50 per unit)
- SD +10.2% (announces one-time $2.00 per share dividend, a $75 million stock repurchase program, and an on-going planned quarterly dividend of $0.10 per share planned to commence in August 2023)
- QURE +7.4% (entered into a definitive agreement to sell a portion of the royalty rights due to uniQure from CSL Behring from the net sales of HEMGENIX to HealthCare Royalty and Sagard Healthcare for a gross purchase price of up to $400 mln in cash)
- ALTI +6.7% (to delay 10-Q filing)
- MNOV +1.9% (receives a notice of intention to grant for a new patent covering MN-166 (ibudilast) for patients with microorganism infection in Europe)
- BTI +1.4% (appoints Tadeu Marroco as CEO)
- NEM +0.8% (acquires Newcrest)
- LRMR +0.8% (announces preliminary top-line data from the 25 mg cohort of its Phase 2, four-week, placebo-controlled, dose exploration trial of CTI-1601 in participants with Friedreich's ataxia) .
Analyst comments:
- AGS +6.8% (upgraded to Buy from Hold at Jefferies)
- NVRO +3.7% (upgraded to Outperform from Perform at Oppenheimer)
- ALB +2.6% (upgraded to Outperform from Neutral at Robert Baird)
- BWA +1.8% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
- META +1.2% (upgraded to Buy from Hold at Loop Capital)
Research Calls
- Upgrades:
- Albemarle (ALB) upgraded to Outperform from Neutral at Robert W. Baird; tgt raised to $288
- BorgWarner (BWA) upgraded to Overweight from Equal-Weight at Morgan Stanley; tgt raised to $50
- Charles Schwab (SCHW) upgraded to Outperform from Mkt Perform at Raymond James; tgt $63
- DuPont (DD) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $80
- Ellington Financial (EFC) upgraded to Outperform from Mkt Perform at Keefe Bruyette; tgt $13.75
- LXP Industrial Trust (LXP) upgraded to Overweight from Sector Weight at KeyBanc Capital Markets; tgt $12
- Meta Platforms (META) upgraded to Buy from Hold at Loop Capital; tgt raised to $320
- Nevro (NVRO) upgraded to Outperform from Perform at Oppenheimer; tgt $40
- PlayAGS (AGS) upgraded to Buy from Hold at Jefferies; tgt raised to $10
- Sabre (SABR) upgraded to Mkt Perform from Underperform at Bernstein; tgt $3.50
- Sun Life (SLF) upgraded to Outperform from Sector Perform at RBC Capital Mkts
- Tapestry (TPR) upgraded to Outperform from Mkt Perform at Bernstein; tgt raised to $55
- Washington Trust (WASH) upgraded to Neutral from Underweight at Piper Sandler; tgt lowered to $26
- Downgrades:
- Alphabet A (GOOGL) downgraded to Hold from Buy at Loop Capital; tgt $125
- Camden Property (CPT) downgraded to Peer Perform from Outperform at Wolfe Research
- Catalent (CTLT) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $29
- CEMEX S.A. (CX) downgraded to Neutral from Buy at BofA Securities; tgt raised to $7.20
- Essex Property (ESS) downgraded to Underperform from Peer Perform at Wolfe Research; tgt $204
- First Solar (FSLR) downgraded to Peer Perform from Outperform at Wolfe Research
- Invitae (NVTA) downgraded to Underperform from Mkt Perform at Raymond James
- LifeStance Health Group (LFST) downgraded to Market Perform from Outperform at TD Cowen; tgt raised to $9
- Mid-America Aptmt (MAA) downgraded to Underperform from Peer Perform at Wolfe Research; tgt $137
- Park National (PRK) downgraded to Underweight from Neutral at Piper Sandler; tgt lowered to $103
- Silk Road Medical (SILK) downgraded to Underperform from Peer Perform at Wolfe Research; tgt $27
- SoFi Technologies (SOFI) downgraded to Underperform from Neutral at Wedbush; tgt lowered to $2.50
- UDR (UDR) downgraded to Peer Perform from Outperform at Wolfe Research; tgt $71
- Others:
- AerCap (AER) initiated with a Buy at Citigroup; tgt $71
- Air Lease (AL) initiated with a Neutral at Citigroup; tgt $41
- FactSet (FDS) initiated with a Market Perform at BMO Capital Markets; tgt $424
- WisdomTree (WT) initiated with an Outperform at Oppenheimer; tgt $9
Early premarket gappers
- Gapping up:
- NGMS +119.8%, SD +9.6%, MMP +8.3%, VERU +6.1%, PROC +3.2%, MNOV +1.9%, BTI +0.9%, BHVN +0.8%, BOC +0.7%
- Gapping down:
- TUR -7.4%, ALTI -5.6%, OKE -4.5%, SRDX -0.7%, DFS -0.5%, EIX -0.5%, JEF -0.5%
>>> Up
* Albemarle Raised to Outperform at Baird; PT $288
* Carlsberg Raised to Buy at Citi; PT 1,275 kroner
* DuPont de Nemours Raised to Buy at Deutsche Bank; PT $80
* EFG International Raised to Buy at Citi; PT 9.80 Swiss francs
* Eli Lilly PT Raised to $507 from $478 at Morgan Stanley
* Eli Lilly PT Raised to $507 from $478 at Morgan Stanley
* Flutter Raised to Buy at Citi; PT 19,000 pence
* Munters PT Raised to 125 kronor from 114 kronor at Berenberg
* National Bank of Greece Raised to Buy at Citi; PT 6 euros
* Royal Unibrew Raised to Neutral at Citi; PT 625 kroner
* Trainline Raised to Buy at Stifel; PT 355 pence (+)
>>> Down
* Altamir Cut to Neutral at Oddo BHF; PT 25 euros (+)
>>> Down
* Altamir Cut to Neutral at Oddo BHF; PT 25 euros (+)
* Lotus Bakeries Cut to Hold at KBC Securities (+)
>>> Initiation
>>> Initiation
* Castellum Rated New Buy at Arctic Securities; PT 138 kronor
* Elixirr International Rated New Buy at Investec; PT 817 pence (+)
* Gimv Reinstated Hold at Kepler Cheuvreux; PT 51 euros
* Gimv Reinstated Hold at Kepler Cheuvreux; PT 51 euros
* Tecnicas Reunidas Re-Initiated Neutral at Oddo BHF; PT 10 euros (+)
* Watches of Switzerland Rated New Outperform at RBC
>>> Call
>>> Call
* Bayer Likely 2H Profit Warning May Boost Breakup Case: Berenberg (+)
* Citi Says Julius Baer Ranks Among Its Top European Banks Picks (+)
* More Oil Stocks to Cut Buybacks in 2H, Aramco Downgraded: MS
* JD Sports Get Positive Catalyst Watch at JPM; Adidas Overweight
* Citi Bullish on European Beer Stocks; Raises Carlsberg, Unibrew
* Flutter Upgraded at Citi on US Opportunity, Entain Also a Buy
* Flutter Upgraded at Citi on US Opportunity, Entain Also a Buy
* Siemens Energy’s 2Q to Be Taken Positively as Orders Beat: Citi (+)
* Watches of Switzerland a Growth Story, New Outperform at RBC