TPGTPG (formerly Texas Pacific Group)

Headquarters: Forth Worth, Texas

The Company

Founded in 1992, shortly after turning twice-bankrupt Continental Airlines into a serious contender in the airlines market, TPG is regarded as a turnaround expert and specialist in complex investments. In 2006, TPG was involved in $101 billion worth of deals. TPG’s latest fund is worth $15 billion.

TPG’s industry areas of focus are airlines, media and telecommunications, industrials, technology, and health care. Either alone or as part of club deals, TPG has bought out such well-known companies as the J. Crew Group, Neiman Marcus, Burger King, MGM, and Harrah’s Entertainment, the world’s largest gaming company. TPG currently is seeking to buy three international airlines, Qantas in Australia, and Alitalia and Iberia in Europe.

TPG has lost at least one deal because of the risks posed by its management approach. In 2005, the Oregon Public Utility Commission rejected TPG’s bid for Portland General Electric, citing debt burden and quick flip as major risks of the deal. In addition, internal deal documents leaked to the press revealed TPG’s plans for “wholesale layoffs and dramatic cuts in maintenance.” 

At present, the firm owns companies producing more than $65 billion in revenues that together employ nearly 300,000 workers. TPG’s portfolio constituted one publicly traded corporation, it would hold spot No. 21 in the Fortune 500.

The Moneymakers

Bonderman.David Bonderman: Bonderman, a former civil rights attorney,is the co-founder and chair of TPG, and is seen as the primary force behind the firm’s development. He is worth approximately $1 billion, He serves on the board of several companies as well as several environmental groups, including The Wilderness Society, The Grand Canyon Trust, The World Wildlife Fund, and the American Himalayan Foundation.

James Coulter: A co-founder of TPG, Coulter started up the California office of TPG. Coulter serves on a number of TPG portfolio company boards, including J. Crew Group Inc., Lenovo Group Limited, Neiman Marcus Group Inc. and Seagate Technology.He is co-chair of the Stanford University Development Steering Committee and a member of the Stanford Challenge Leadership Council.

Printing Money

• TPG made a sevenfold return on its $42 million investment in a one-year quick flip of European air carrier Ryanair in the late 1990s. Michael O’Leary, president of Ryanair, offered his take on what happened: “[Bonderman] was looking for dumb companies that didn’t realize they were on to a good thing. He kind of raped us. He got 20 percent for pretty much nothing. Sold us in ’97 and made a fortune.” 
• In October 2000, Petco was acquired by TPG and Leonard Green & Partners LP, in a $600 million deal. TPG and Leonard Green invested $200 million in the deal, but then collected an estimated $23.8 million in management fees, and a $1.2 billion payout as they made Petco public through a number of public offerings from 2002–2004, according to allegations in a recently filed class action suit. In July 2006, TPG and Leonard Green acquired Petco for a second time, in a $1.8 billion deal. Days after the acquisition, Petco shareholders filed a class action law suit claiming “self-dealing and breach of fiduciary duty” in the Superior Court of California. The plaintiffs charge Petco with blocking a $33/share offer by PetSmart, and entering into a $29/share deal that benefits Petco management and the buyout funds at the expense of shareholders. The case is pending.