Reacting to the changing private equity landscape in India with the entry of global big brothers like the Blackstone Group, the Carlyle Group, General Atlantic Partners, Warburg Pincus, Kohlberg Kravis Roberts and Temasek Holdings, the Texas Pacific Group (TPG) has decided to put its muscle behind Newbridge Capital, its Asian affiliate, in a merger deal to blend Asian and Western businesses.
TPG and Newbridge will go to the market as an integrated entity by the year-end, TPG's Managing Director Vivek Paul, who was earlier software leader Wipro's vice-chairman, told Hindustan Times.
"We increasingly realized the need to integrate the strengths of the two funds to tap the potential, especially in India," Paul said.
The entry of private equity giants and the TPG-Newbridge merger also underlines the maturity of the mergers and acquisitions market in India and further consolidation underway in key sectors, industry officials say.
The integration will include the merging of privately held TPG’s portfolio across the US and Europe and Newbridge’s investments across Asia. While TPG has just raised its fifth fund of $17 billion, while Newbridgel manages over $3.2 billion.
While Newbridge’s recent investment in India include $100 million invested in three companies of the Chennai-based Shriram Group, it also has pharma majors like Matrix Laboratories in its Indian portfolio. The Matrix deal is the largest private equity transaction to date in the Indian pharmaceutical industry. The other major deal in Asia where the two partners came together was when Chinese computer maker Lenovo acquired IBM’s Personal Systems Division for around $1.75 billion.
“With the merged entity, we will be able to raise the average deal size in India to $20 million and above in the wake of the huge potential offered in verticals like manufacturing, technology services, pharma, retail and animation,” Paul said.
While Newbridge Capital India Managing Director Puneet Bhatia refused to comment on the deal, industry sources confirmed that the merger makes for a very compelling business logic for both partners. “This deal is ideal as there is no geographical conflict involved. With Indian companies going global and multinationals thronging India, it makes more sense for investors to have a global platform rather than having to deal with regional affiliates,” said an official from one of TPG's competitors.
Newbridge is largely owned by Fort Worth-based TPG led by David Bonderman and Richard C. Blum & Associates of San Francisco. Together, TPG and Newbridge manage more than $20 billion in capital.
For the past few months, TPG and Newbridge have been increasingly courting deals together. But an official announcement on their merger is yet to be made, and is expected in the next few weeks.
The two sides are currently working on how best partners on both sides can gain most from the integration.