Blackstone, L Catterton, GTCR and Roark Capital showed no signs of summer slowdown

Deal-making did not abate this summer for various PE firms.

Good morning, Hubsters. MK Flynn here with the Wire.

As August draws to a close, I want to take a moment to highlight a few deals announced this summer that I found particularly interesting and emblematic of current trends.

Blackstone, L Catterton, GTCR and Roark Capital top my list of dealmakers that beat the heat. Details below.

Speaking of Blackstone, Kirk Falconer has an exclusive interview about the firm’s Tactical Opportunities group and the wave of companies needing refinancing and seeking structured equity.

And Obey Martin Manayiti takes a look at Apollo’s recent investment in storage for natural gas and hydrogen.

Summer breeze makes me feel fine
While transactions slowed down for many, some PE firms were very active on the dealmaking front this summer, including some significant exits.

As the owner of a small, space-challenged co-op apartment in Manhattan, one deal that caught my attention was Blackstone Real Estate Income Trust’s sale of Simply Self Storage to Public Storage for $2.2 billion. Announced in July, the transaction is expected to close this quarter.

BREIT bought Simply from Brookfield Asset Management for approximately $1.2 billion back in 2020.

Self-storage is a “highly fragmented sector,” said Frank Cohen, chairman and CEO of BREIT, at the time of the purchase. “Self-storage is a resilient sector through economic cycles because of low tenant turnover, minimal maintenance costs and stable cash flows.”
Simply includes 127 properties in 18 states. BREIT invested in the company to enhance the quality of the portfolio and management team and significantly increase Simply’s net operating income, according to the PE firm.

“Where you invest matters, and this transaction demonstrates the strong investor demand for the high-quality assets and platforms we have assembled within BREIT,” said Nadeem Meghji, head of Blackstone Real Estate Americas, in a statement about the Simply exit. “This sale is a terrific outcome for BREIT stockholders and enables us to further concentrate BREIT’s portfolio in its highest growth sectors. Public Storage is a leader in its space and will be a terrific steward of this portfolio.”

Dazzling debut
Despite the supposedly closed IPO market, L Catterton-backed beauty tech company Oddity made a surprisingly successful public debut on July 19.

L Catterton initially invested in the company in 2017. Oddity’s brands include SpoiledChild, which customizes makeup for individuals using machine learning and AI techniques.
The Greenwich, Connecticut-based PE firm shared details of the deal with investors in a July 19 letter that was viewed by PE Hub:

The shares started trading on NASDAQ this morning under the symbol “ODD” at $35.00 per share, significantly above the initial and revised filing ranges. ODD closed the first day of trading at $47.53 per share, up 36% from the IPO price. At today’s closing price, LCG III’s $50 million investment in ODDITY implies a total value of approximately $900 million, or a Gross MOIC of approximately 18x (12.7x net) and a Gross IRR of 68% (66% net). The Fund’s investment in ODDITY, including unrealized positions, represents approximately 1.5x the entire LCG III fund size of $615 million.

Yesterday, the stock closed at $42.73.

L Catterton has a long and strong track record of growing consumer brands. For example, the firm sold Tula Skincare to Procter & Gamble in 2022.

Looking for another homerun
Another deal announced in July that proved of great interest to PE Hub’s readers was GTCR’s agreement to acquire a majority stake in Worldpay, a provider of payment processing solutions, from FIS.

GTCR will acquire a 55 percent stake in Worldpay, and FIS will retain the remaining 45 percent stake. The deal puts Worldpay at a valuation of $18.5 billion. As part of the agreement, GTCR has committed an additional equity capital investment in Worldpay of up to $1.25 billion to pursue inorganic growth opportunities.

PE Hub’s Rafael Canton spoke with Aaron Cohen, managing director, head of financial services and technology at GTCR. Cohen compared the plans for Wordpay with GTCR’s past success with Paya.

If you didn’t read Rafael’s story then, click here to heck it out now. It was the most popular story on our site in July!

Eat fresh
And most recently, an announcement that proved PE still has an appetite for dealmaking was Roark Capital’s announcement last week that it is buying the popular fast-food chain Subway, in a deal reportedly worth $9.55 billion.

Roark’s portfolio of restaurant companies includes well-known names like Baskin Robbins, Cinnabon, and Auntie Anne’s.

What lies ahead
Blackstone’s Tactical Opportunities, on track to raise nearly $10 billion, is preparing for a coming tsunami of refinancing deals.

Launched in 2012, Tac Opps was designed by Blackstone to be a flexible, opportunistic investor of bespoke, mostly non-control capital in assets, markets and sectors not covered by the private equity giant’s other funds. An all-weather strategy, it is at home in moments of dislocation.

Such a moment has arrived, Tac Opps global head David Blitzer told Kirk Falconer, following “the fastest and highest rate rise in history.”

“I think we have yet to see a lot of the effects in the real economy of rate rises,” he said. “But we expect to see a ton of companies needing to refinance their balance sheets but that can’t refinance them in today’s environment at the debt levels they’re at.”

Businesses that refinanced when interest rates were low, and now have capital structures that are about to come due, will need equity, he said. “I think in most cases they’re going to be looking for structured equity” – a type of hybrid financing offered by Tac Opps.

The focus has been on deals like the majority investment in New Tradition Media, an out-of-home media operator. Another is the $2.3 billion debt financing of CoreWeave, a cloud provider of large-scale, GPU-accelerated workloads, led by Magnetar Capital and Blackstone.

Once a surge of refinancings and other defensive opportunities begins, it will be durable, James said. “Our bet is rates are going to be higher for longer. We’re not going back to a zero interest-rate environment.”

Deep dive
The rising demand for cleaner alternatives to carbon-intensive fossil fuels attracted Apollo Global Management to invest in Composite Advanced Technologies (CATEC), a Houston-based manufacturer of storage cylinders for natural gas and hydrogen, Apollo partner Scott Browning told Obey Martin Manayiti.

“There is real growth in the need for gaseous fuels as part of the energy transition,” Browning said. “In heavy industries, mining or other sectors for example, there may not be a route to decarbonize operations, and they may be using diesel fuel or other heavy fuels with more emissions. Today, you can use compressed natural gas to displace that diesel and in many ways it’s both cheaper for the customer as well as better for the environment,” he added.

That’s all for now. Obey will be back with more tomorrow, and then we’ll all be off for the three-day Labor Day weekend.

Note: There will be no Wire newsletter on Monday. I’ll see you Tuesday.