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TPG bests PE rivals to win GlobeOp

by Jonathan Braude | Published February 1, 2012 at 2:07 PM

Buyout firm TPG Capital announced an agreed £508 million ($806.2 million) offer Wednesday, Feb 1, for the shares of GlobeOp Financial Services SA, an external financial administrator to the financial services industry, in one of very few public to private deals since the U.K. regulator tightened the rules on takeovers in the quoted sector.

Fort Worth-based TPG beat rival private equity house Advent International Corp. to clinch the deal, following a tightly controlled sale process run by investment bank Evercore Partners Inc. over a period of months since London-listed GlobeOp first decided to review its options last year.

Established in 2000 and listed in July 2007, GlobeOp provides middle and back-office services and integrated risk reporting to hedge funds, managed accounts and fund of funds. It also provides expertise to asset management firms and other sectors, including family wealth offices, insurance companies, pension plans, corporate treasuries and banks. It assets under administration totaled $173 billion as of Nov. 30.

TPG's 435 pence a share offer comes in at a premium of 48.5% to the company's closing price of 293 pence on Jan. 5, the day before GlobeOp first revealed it was in talks, breaking months of carefully preserved silence and setting the clock ticking on Takeover Panel rules giving the bidders just 28 days to announce a firm offer.

The time pressure continued until at least Jan. 19, when Advent was still sufficiently optimistic of winning the deal to announce its opening holding (of zero shares) in the company, as required by the revised Takeover Code. TPG made a similar announcement the following day.

To add to the pressure, TPG, which insisted that GlobeOp managers retain a large stake in the business after a buyout - in the end persuading them to reinvest £118 million, or about 70% of their proceeds from the sale - was only authorized to talk to them after the 435 pence was accepted by the independent directors.

In a joint statement, Wednesday, TPG and GlobeOp said the enterprise value represented a multiple of roughly 11 times the company's adjusting operating profit for the 12 months ended June 30.

The exact enterprise value was not directly disclosed, and the company, which is registered in Luxembourg, reports in dollars. But interim results for the six months to June 30 showed the company's adjusted operating profits for the period from July 2010 to June 2011 were $63.1 million -- and a footnote to Tuesday's announcement said the enterprise value was based on net cash of $106.8 million and an exchange rate of £1 to $1.5752. The enterprise value can therefore be calculated at roughly £440 million.

Perhaps a more important comparator for the company is that the offer is at a premium of 59.3% to its volume weighted average closing price per share of 273 pence for the three months ended Jan. 5. The statement makes it clear that Evercore was brought in to examine a possible sale only after the publication of the interim results last summer failed to give the boost to the share price that the company's owners expected.

"Since the announcement of its interim results ... in August 2011," the statement said, "the Company's share price has materially underperformed the broader stock market. The GlobeOp Board concluded that the share price significantly undervalued the prospects of the business."

TPG will finance the deal with $291 million of debt provided in an interim facility by Credit Suisse Group.

TPG was advised by Barry Weir and James Thomlinson of J.P. Morgan Cazenove Ltd. and took legal advice on the acquisition from Carlton Evans and Charlie Jacobs of Linklaters LLP. Duane McLaughlin, David Billington, James Modrall and James Duncan of Cleary Gottlieb Steen & Hamilton LLP advised TPG on financing, U.K regulatory and competition and U.S. tax matters.

Jonathan Earle and Stephen Lloyd of Ashurst were legal advisers to GlobeOp's independent advisers. The Evercore team was led by Jane Gladstone and Edward Banks and included Rafael Polanco, Andrew Price, Ken Auspaker, Stefano Bertolotto, Michael Wang and Ilya Svintsitski.

The management team was advised by Jamieson Corporate Finance LLP and the law firm Travers Smith LLP.

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TPG bests PE rivals to win GlobeOp

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