TPG, Leonard Green to use J. Crew IPO to recoup investment

TPG Capital and Leonard Green & Partners look like they will get the rest of their money back in J. Crew Group after three years.

The preppy retailer, which TPG and Leonard Green acquired three years ago for nearly $3 billion, is interviewing banks as it weighs launching an IPO later this year, Bloomberg News reported.

The news isn’t very surprising. The IPO market is very receptive to retail deals. Remember Vince? The fashion retailer that was owned by Sun Capital, went public at $20 a share late last year and is currently trading at $27.62. The deal helped Sun put its once-challenged investment in Kellwood Holding in the black, peHUB has reported.

“The valuations in the public markets are great these days,” one PE executive said.

TPG’s and Leonard Green’s investment in J. Crew dates back to March 2011. The PE firms agreed to commit a total $1.2 billion to J. Crew, according to a proxy filing from that time. TPG put in $845 million while Leonard Green contributed $347 million. TPG’s investment came from its sixth fund, while the rest came from Green’s fifth fund. TPG owns about 66 percent while Leonard Green has roughly 25 percent, according to SEC filings.

TPG Partners VI LP collected $19 billion in 2008 and reportedly has $3 billion left to invest. Leonard Green closed its fifth fund at $5.3 billion in 2007. TPG VI is generating an 8.45 percent IRR since inception as of March 31, according to CalSTRS. Green Investors V LP is producing an 18.11 percent net IRR as of Sept. 30, the Public Employees Retirement System of Idaho said.

The PE firms appear to have already gotten roughly half of their investment. In November, J. Crew used debt to fund a $500 million distribution, Moody’s Investor Service said. The retailer in December also amended a $1.2 billion loan to allow a one-time dividend of up to $200 million, according to Thomson Reuters Loan Pricing Corp.

This works out to $462 million for TPG and $175 million for Leonard Green.

Taking J. Crew public should be familiar to TPG since they’ve done it before. TPG first bought the retailer in 1997 and invested about $190 million of equity, according to the Wall Street Journal. The company went public in 2006 but TPG didn’t sell any shares. In fact, TPG increased its stake. After the IPO, and once its lockup period expired, TPG began selling J. Crew stock in the open market. This included a secondary offering of 9.4 million shares in 2007, which generated $339.4 million in proceeds for TPG. The PE firm sold its last stake of 2.8 million shares in April 2009 for an additional $38 million, peHUB has reported.

Officials for TPG and Leonard Green declined comment.

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