TPG tries on J.Crew again for $3bn

The firm has teamed with Leonard Green to de-list the iconic clothing retailer, having originally backed it for $500m in 1997 and taken it public in 2006.

TPG Capital and Leonard Green & Partners have entered into an agreement to acquire clothing retailer J.Crew for approximately $3 billion, or $43.50 per share.

The price represents a premium of 29 percent to J.Crew’s average closing price over the last month. J.Crew chairman and chief executive officer Mickey Drexler will continue his role and “maintain a significant equity investment” in the company, according to a statement.

Financing was provided by Bank of America Merrill Lynch and Goldman Sachs. The transaction is expected to close in the first half of fiscal 2011, assuming there is no superior offer before 15 January 2011.

TPG first invested $500 million in J.Crew in 1997, before taking the company public in 2006, raising $376 million in the IPO. On its first day as a public company, shares in J.Crew surged by as much as 27 percent.

The transaction marks at least the third billion dollar deal this week following Carlyle’s $1 billion exit of skincare and cosmetics company philosophy, and Chicago-based Thoma Bravo’s $2.2 billion purchase of computing services company Novell.

Earlier this month, TPG agreed to buy 74.67 percent of cosmetics company Avon Japan for a total cash payment of approximately $90 million. The stake is being purchased from Avon, which is the largest shareholder in the JASDAQ-listed company.

TPG’s latest fund, TPG Partners VI, closed on $19 billion in 2008, but subsequently permitted limited partners to reduce their commitments by as much as 10 percent. As of 31 March, the fund was generating a net IRR of negative 26.8 percent and a return multiple of 0.8x, according to performance data from the California Public Employees’ Retirement System.

Los Angeles-based Leonard Green & Partners is a private equity firm with $9 billion in equity capital under management. The firm is currently investing from its fifth fund, Green Equity Investors V, which closed on $5.3 billion in 2008. As of 31 March, the fund was generating a net IRR of 13.3 percent and a return multiple of 1.2x, according to CalPERS.