TPG, Pharos acquire asset manager for $480m

The two Texas buyout firms have teamed up to buy American Beacon Advisors, a non-core asset American Airlines’ parent company first shopped in 2003.

TPG Capital and Pharos Capital Group have inked a $480 million (€302 million) deal with American Airlines’ parent company, AMR, to acquire the struggling company’s wholly-owned asset manager, American Beacon Advisers. 

“We’re constantly looking for ways to unlock values for shareholders within the businesses that we’ve created and grown,” an AMR spokesman told PEO. “We thought this was the structure and strategy that made most sense for Beacon.”

American Beacon, which manages some $65 million in assets, will be acquired by Lighthouse Holdings, a joint holding company formed by TPG and Pharos. American Beacon provides several services for AMR, including investment management for AMR’s pensions, 401k and health and welfare plans.

However, in recent years it has expanded its operations to become an asset manager for several institutional and retail investors beyond its parent company. It also manages a series of low-cost, no-load mutual funds.

Specific details of the transaction, including how much TPG and Pharos would pay respectively, or how much debt was involved in the purchase, were not disclosed. However, a statement from AMR called the deal “primarily a cash transaction”.

Under current terms, AMR will retain a 10 percent minority equity stake in American Beacon. If approved by American Beacon’s board of trustees and shareholders, the deal will be completed later this summer.

TPG and Pharos could not be reached for comment.

News of the American Beacon sale came as AMR released dismal first quarter earnings, posting a $328 million loss. Hurt by skyrocketing fuel prices and an aging fleet, AMR began looking at divesting non-core operations last fall. AMR first shopped American Beacon to potential bidders in 2003, but did not pursue the sale because of undervalued offers, according to a 2007 earnings call.

Dallas and Nashville-based Pharos typically invests primarily in the health and technology sectors. It has $500 million in capital under management across three private equity funds.

Fort Worth-based TPG is currently raising an $18 billion mega-buyout fund, according to the Probitas Partners 2008 Private Equity Deskbook.