TPG checks out of Debenhams with £500m profit

The £96m exit marks the end of a turbulent relationship between the retailer and its consortium of private equity owners.

TPG has sold the last of its stake in British department store group Debenhams, ending of one of UK business’ most controversial dalliances with private equity.
TPG sold a block of just over 120 million shares yesterday to an unamed buyer, equivalent to a 9.34 percent stake, for around £96 million (€106 million; $158 million).

Overall TPG made between £480 million and £500 million in profit from the Debenhams investment, a source close to the situation confirmed.

Along with CVC Capital Partners and Merrill Lynch Private Equity, TPG invested £600 million of equity in May 2004 to delist Debenhams from the London Stock Exchange for a total deal value of £1.9 billion.

'Quick-flip' poster child

The firms returned around £1.3 billion to shareholders through two recapitalisations during their ownership, making the deal one of the most  lucrative UK buyouts ever at that time. However, it also made Debenhams a poster-child for the private equity “quick –flip”, as when the three sponsors floated it just two years after taking it private, it was saddled with debts of £1.9 billion.

Merrill Lynch sold its stake in Debenhams in March 2008, while CVC sold its stake this summer.
Debenhams’ share price leapt when news of the sale broke yesterday to 85 pence per share from 81 pence per share. At press time this morning it was trading at around 83 pence per share.
TPG was ranked as the largest private equity firm in the world in this year’s PEI 300, having raised more than $52 billion in the last five years. It is led in the UK by managing partner Philippe Costeletos.
The TPG exit comes at a time when many private equity firms are looking to take advantage of the realtive health of the public markets by preparing portoflio companies for IPO. In Australia TPG is preparing department store chain Myer Group, which it bought in 2006, for an IPO which could, says analysts, value the group at around A$2 billion.