TPG Buying Angelo Gordon to Gain $55 Billion

(Bloomberg) — Private equity firm TPG is buying credit shop Angelo Gordon for $2.7 billion, gaining a foothold to muscle into the business of lending as banks retreat from making loans. 

The purchase of New York-based Angelo Gordon will create an investment manager running a collective $208 billion, TPG said Monday. The firm will secure a $55 billion credit business to compete against rivals, such as Blackstone Inc. and Apollo Global Management, which are now major providers of financing to corporations. 

Nonbank lenders are becoming bigger players on Wall Street. TPG is poised to jump into the lending business as small banks get hit by rising interest rates, regulatory burdens and consolidation. 

“There’s a whole range of things regional banks have historically done,” Chief Executive Officer Jon Winkelried said in an interview with Bloomberg. “Private sources of credit will be stepping into that breach in a number of different ways.”

TPG, based in Fort Worth, Texas and San Francisco, has been looking for a credit business since 2020, when TPG’s debt business, Sixth Street Partners, split from the firm. 

The private equity shop shaped by David Bonderman and Jim Coulter went public last year, and Winkelried faces the task of expanding TPG beyond its buyout roots and showing shareholders it can deliver steady fee streams in all markets. 

“This transaction offers multiple ways to accelerate growth,” he told shareholders on Monday.  

Shares of TPG rose 1.4% to $27.56 at 12:40 p.m. in New York.

Pressure to Diversify

A dealmaking slump and diminishing appetite by pensions and endowments to back mega-buyout funds heightens the pressure on TPG to diversify its business. TPG said on its investor call that it expected its flagship funds to collectively be smaller than it initially projected.

Winkelried told Bloomberg the purchase “will give us more firepower” to invest for insurers. 

TPG is angling for a bigger role in connecting businesses in need of financing with life insurers and annuities providers. Private equity firms’ growing role as an intermediary between companies and insurers is shifting the power center on Wall Street from banks. 

Angelo Gordon, founded in 1988, made its name on Wall Street as a hard-knuckled investor that could swoop in on distressed companies and shape bankruptcies. It has since grown in the business of direct lending, structured credit and commercial real estate lending. 

TPG also gains Angelo Gordon’s $18 billion real estate business, enabling the firm to snap up properties as rising interest rates and a slowing economy depress valuations. 

TPG will pay an estimated $970 million in cash and up to 62.5 million common units of the TPG operating group and restricted stock units of TPG. TPG is paying the estate of John Angelo, who died in 2016, and co-founder Michael Gordon mostly in cash. It plans to spread stock in TPG more broadly among Angelo Gordon employees.

The purchase is expected to close in the fourth quarter, and Angelo Gordon will become a platform within TPG. 

That business will be run by Angelo Gordon’s current co-CEOs, Josh Baumgarten and Adam Schwartz, who will report to CEO Winkelried.

(Updates with comments from CEO interview in fourth and 10th paragraphs)

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