TPG is acquiring $73 billion credit and real estate manager Angelo Gordon in a $2.7 billion cash and equity transaction, the two firms announced during TPG's earnings call Monday.
TPG has $137 billion in assets under management in five businesses: capital, growth, impact, real estate and market solutions.
Also Monday, Angelo Gordon said it no longer reports net assets under management but now includes fund-level asset-related leverage resulting in its stated AUM of $73 billion as of Dec. 31. Without leverage, Angelo Gordon had about $53 billion in AUM as of Dec. 31.
Angelo Gordon's two founders, Michael Gordon and the estate of the John M. Angelo, will receive 90% cash and 10% equity. The active Angelo Gordon partners will generally receive 85% equity and 15% cash, with the shares vesting ratably over five years.
TPG's $2.7 billion purchase price is based on TPG's share price as of May 12, including 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. The deal includes an "earnout payment" valued at $400 million conditioned on Angelo Gordon increasing its annual fee-related revenues by at least 16% per year through 2026.
Jon Winkelried, CEO of TPG said on Monday's call that the acquisition of Angelo Gordon will expand its investing capabilities and product offerings. Angelo Gordon will become one of TPG's business units. By comparison, its former credit business, Sixth Street had operated as an independent entity under the TPG umbrella, he said in response to an analyst's question.
When the deal closes, which is expected in the fourth quarter, Angelo Gordon's co-CEOs, Josh Baumgarten and Adam Schwartz, will become co-managing partners of the platform, reporting to Mr. Winkelried.
The two firms expect to expand Angelo Gordon's direct lending credit business, Twin Brook Capital Partners, to include lending to larger companies than its traditional lower-middle-market companies with earnings before interest, taxes, depreciation and amortization of $25 million or less.
Mr. Winkelried also noted that Angelo Gordon was an attractive acquisition target because unlike other private credit managers with which TPG executives met, Angelo Gordon has an array of private credit strategies rather than just one. They include corporate credit, special situations and structure credit in addition to direct lending.
The addition of Angelo Gordon's $18 billion real estate business will help TPG expand its real estate business into other regions, including Europe and Asia.
The deal will allow TPG to expand its investor base in the high-net-worth, retail and insurance channels. Indeed, the Angelo Gordon deal will allow it to expand the products and capabilities for insurance clients that require a mix of traditional fixed income to more structured private debt fixed income and higher-returning private equity, Mr. Winkelried said.
And executives from both firms expect to expand their institutional investor relationships as only 10% of the firms' institutional asset owner investor base is shared.