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BGH Capital raises biggest debut Aussie fund

The firm, formed by ex-TPG Asia head Ben Gray, has raised around A$2.6bn for Australia and New Zealand investments.

BGH Capital, the private equity firm founded by ex-TPG head of Asia Ben Gray, has held the final close on the largest fund raised by a first time manager in Australia.

The Melbourne-based manager, co-founded by Gray, ex-partner at TPG Simon Harle and former head of Macquarie Capital Robin Bishop, raised approximately A$2.6 billion ($1.9 billion; €1.6 billion) for BGH Capital Fund I, according to a statement. The firm launched its Australia and New Zealand-focused fund in October with a A$2 billion target and A$2.5 billion hard-cap, and held a first close on more than A$2.3 billion in February.

Fund I will back companies with enterprise values ranging from A$250 million up to A$6 billion, “where there is significant opportunity to support growth or effect operational improvement”, BGH said in a statement. It will primarily target mid-market transactions, while maintaining the flexibility to execute large buyouts or smaller growth deals.

The fund is also the second-largest raised in Australia. Longstanding firm Pacific Equity Partners closed on A$4 billion in 2008, PEI data show.

New York State Teachers’ Retirement System committed A$20 million and Washington State Investment Board A$390 million, according to PEI data.

Fund I was backed by public and private pension funds, sovereign wealth funds, insurance companies, endowments, foundations and family offices, the firm said in a statement.

It is understood to have raised money from global blue-chip LPs.

Industry sources Private Equity International spoke to voiced concerns about BGH deploying capital in Australia’s largely mid-market buyout landscape. The average deal size is A$75 million, according to data from the Australian Private Equity and Venture Capital Association.

“We didn’t invest in the fund because we don’t know how they are going to deploy it,” said one Hong Kong-based investor. “At that size they will be competing against the large pan-Asian funds, and it really is an issue.”

Notable large Australian deals in the past year include Baring Private Equity Asia acquiring SAI Global for A$1.24 billion by scheme of arrangement, KKR’s A$650 million acquisition of Laser Clinics Australia and the approximately A$1 billion purchase of Real Pet Foods by an Asia-based group of investors including Beijing Hosen Investment Management, New Hope Group and Temasek.

One domestic investor agreed that deploying capital will be a challenge for BGH. “It would’ve been more attractive to LPs were it a A$1.5 billion fund. There are only a few deals around; it is definitely a competitive space. And you do want to stay out of infrastructure because that’s already well shopped within Australia.”

BGH may prove its naysayers wrong. The firm led a consortium of investors including Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan Board, Singapore’s GIC and AustralianSuper in a A$4.1 billion buyout bid for Australian hospital operator Healthscope in April.

“They will be under a lot of pressure to get the money out but they’re not in a hurry and have got a solid pipeline and proprietary ideas that they are working on”, a Sydney-based fund of funds manager told PEI.

“I think that will be the secret sauce over the next couple of years in Australia private equity, it will be about value creation and not just looking at deals coming to the market.”

Kirkland & Ellis served as legal advisor; Park Hill Group was the placement agent.

BGH declined to comment.