TPG runs process to allow LPs in Asia Funds V and VI to sell stakes

  • Lazard working as intermediary on the process
  • Involves Asia Funds V and VI
  • TPG seeks shot of fresh capital into Fund VII

TPG Capital is working on a process to allow limited partners in its fifth and sixth Asia funds to sell their interests in the pools, three sources told Buyouts.

The firm, working with Lazard on the process, also is seeking a shot of fresh capital into its new Asia fund, which is in market targeting about $4.5 billion.

TPG did not respond to a request for comment.

TPG makes control and growth investments in Asia in sectors like financial services, consumer/retail, healthcare and technology, media and telecom, according to a New Mexico State Investment Council document.

The firm raised $4.25 billion for Fund V in 2008 and $3.3 billion for Fund VI in 2014. TPG actually allowed LPs in Fund V to reduce commitments to the pool by up to 10 percent, or $420 million total, Reuters previously reported.

Sources said TPG would like LPs to decide whether to sell into the tender-offer process toward the end of October.

In a tender offer, a GP preselects a buyer or buyers with a set price, and LPs can decide to sell or not. Such processes sometimes include an injection of fresh capital from the buyer or buyers, known as a staple.

Providence Equity ran one of the larger recent tender offers, allowing investors in Fund VII to cash out their stakes in the fund. Estimates showed the process garnered between $800 million and $900 million of existing LP interests trading, sources told Buyouts at the time. Buyers in the process were Canada Pension Plan Investment Board, which led the consortium that included HarbourVest Partners and StepStone Group.

The Providence process also included a staple aspect into the firm’s eighth fund, targeting $5 billion with a $6 billion cap, Buyouts reported.

The challenge in a tender-offer process is to get existing LPs to sell their stakes. Such deals have fallen apart because not enough existing LPs sold their interests, forcing buyers to walk away.  

TPG Asia V generated a 6.7 percent net internal rate of return and 1.4x multiple as of Dec. 31, 2017, performance information from California Public Employees’ Retirement System shows. Updated performance information on Fund VI could not be found.

Action Item: Check out TPG’s Form ADV here: