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Texas Teachers' Dials Up Direct Deals | Apollo-Backed Constellis Restructures
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Good day! It's no secret that institutional backers of private-equity funds for years have clamored for more co-investment opportunities. Co-investment allocations within limited partner portfolios have grown steadily over the past decade or two. But in recent years some of the larger LPs have wanted more than just a passive role in these deals, instead seeking a seat at the negotiating table where they can co-lead deals alongside the firms in their portfolios. Preeti Singh writes of one such investor this morning with news that the Teacher Retirement System of Texas wants to plow more capital directly into principal investments.
Meanwhile, a bet that Apollo Global Management made on defense contractor Constellis Group does not appear to be going quite as planned. The company is working on a $1.2 billion restructuring, WSJ Pro's Alexander Gladstone reports.
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The Texas Capitol is in downtown Austin, where the Teacher Retirement System of Texas has its operations. PHOTO: RALPH BARRERA/ZUMA PRESS
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The newly installed chief investment officer of one of Texas’s largest public pensions wants to plow more money directly into deals it leads alongside general partners to lower the cost of its private-equity portfolio WSJ Private Equity’s Preeti Singh reports. Jase Auby, who took over as CIO last month at the Teacher Retirement System of Texas, said the pension fund intends to continue increasing its principal investment level to 30% of its private-equity portfolio.
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The spike in Middle East tensions may have come too late for one Apollo Global Management-backed defense contractor, Alexander Gladstone reports for WSJ Pro Bankruptcy. Constellis Group, recently defaulted on its loan agreements and agreed to a forbearance pact with lenders, which are poised to wrest control from Apollo in a $1.2 billion debt restructuring, Alex reports, citing people familiar with the matter.
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L Catterton-backed ThirdLove is taking on Victoria’s Secret by promoting a more realistic body image and apparel more tailored to individuals, the challenges of a competitive sector have helped slow revenue growth at the San Francisco-based lingerie startup, founded in 2013. Annual sales nearly doubled to $109 million in 2018 but slowed by last fall to an expected pace of $125 million, WSJ Pro’s Katie Roof reported. The company is exploring a $100 million financing round to recharge growth, according to people familiar with the matter.
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Dispatches From the JP Morgan Conference
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WSJ Pro's Laura Cooper, who attended the J.P. Morgan health-care conference in San Francisco, sat down with a number of experts on private-equity investing in health care, including Sun Capital Partners' Dan Florian and McDermott, Will & Emery LLP's Ira Coleman.
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J.P. Morgan's annual health-care conference is one of the largest for health-care investors. Photo: Stephanie Keith, Reuters
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Q:
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How do you think the 2020 election will affect private-equity investing in health care?
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A:
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"We’ll know relatively soon if the Democratic nominee will run on a ‘Medicare for All’ reform platform or something more moderate. In either case, much of the year will be defined by uncertainty and investment activity will likely be moderated by that. My guess is we are going to get more of the same. If something unusual happens like [Elizabeth] Warren or Bernie [Sanders winning the nomination], we are all in store for some seismic changes and fundamental negative implications for the PE investor community."— Ira Coleman, chairman, McDermott, Will & Emery LLP.
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A:
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"Regardless of who is in the White House or controls Congress, Americans value healthy teeth, skin, and other essential aspects of overall wellness, delivered by qualified providers. Our in-house operational resources help portfolio companies achieve above-market growth and mitigate downside electoral and regulatory risks. We do think some health-care businesses will be negatively impacted by inflated marketing costs this year, and we may see some investors shy away from certain sectors of the industry that can receive negative attention in political campaigns."—Dan Florian, managing director, Sun Capital Partners
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This is the bar at Dave & Buster's with eight 80-inch televisions. KKR disclosed a minority stake in the company on Friday./IMarla Brose/Albuquerque Journal via ZUMA Wire
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KKR & Co. disclosed a 6.3% stake (or 10.7% including options), in Dave & Buster's Entertainment Inc., sending the arcade-restaurant operator's shares up more than 9% in morning trading. The private-equity firm has held discussions with the company's management or board about its business and plans to continue to do so, it said in a regulatory filing. KKR also said it may discuss possible transactions, including mergers and acquisitions, with Dave & Buster's or other shareholders.
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A Fortress Investment Group-backed “blank check” company run by David Maura, Spectrum Brands Holdings Inc.’s executive chairman, has closed a deal to take Provo, Utah-based Vivint Smart Home Inc. public with an enterprise value of about $4.2 billion. Mosaic Acquisition Corp. raised $345 million in October 2017 to pursue acquisitions, with SoftBank Corp.’s Fortress unit holding about half its equity. Blackstone Gorup Inc. is also an investor in the company.The deal, originally reached in September, included $488 million of additional equity. Vivint shares will start trading Tuesday on the New York Stock
Exchange.
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Consumer-focused private-equity firm Brand Velocity Partners said it has acquired Original Footwear, a producer of footwear brands used by military and law enforcement personnel. The acquisition is the first deal by Brand Velocity since its formation last year. Regional investment bank Pinnacle Financial Partners and Small Business Investment Company fund Invision Capital also participated in the deal, according to a news release.
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European investment firm Peninsula Holding is acquiring a minority stake in European luxury clothing brand Zadig & Voltaire from private-equity firm TA Associates. TA originally acquired a roughly 30% stake in the clothing brand back in 2012, WSJ Pro reported at the time.
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Ardian has agreed to buy home medical-assistance company Santé Cie, investing alongside previous backers HLD and UI Gestion, who both bought into the business in 2015. Based in Lyon, France, Santé Cie had revenue of €240 million ($266 million) last year from its 80 agencies across the country.
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TPG Sixth Street Partners increased its investment in AvidXchange Inc. as part of a $260 million infusion into the Charlotte, N.C.-based provider of invoice and accounts payable automation software. TPG, which first invested in the company in 2015, was joined by “other leading investors” in the latest financing round, AvidXchange said.
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Private-equity firm CIP Capital has invested in Dallas-based consulting firm Sales Benchmark Index. New York-based CIP makes growth investments in middle-market companies engaged in business and technology-enabled services.
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H.I.G. Capital has invested in a residential complex near Venice, Italy, called Portopiccolo. The Miami-based firm said the business includes a hotel, 203 apartments and a 100-berth marina.
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The Take: Take Aways from J.P. Morgan's Health-Care Conference
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Thousands of health-care dealmakers and executives flocked last week to San Francisco for the annual J.P. Morgan Healthcare Conference. Private-equity sponsors sat through days of meetings with bankers and executives to learn more about companies that would be looking for investors in 2020.
Overall, the mood among health-care dealmakers I met with was one of optimism about the pipeline for new deals, at least for the start of the year. Here are a few other key themes that were top of mind among conference attendees. Read More in Cooper's Take.
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Img caption/IMG CREDIT HERE
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Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.
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Private-equity firm Bayou City Energy Management and energy company Mach Resources LLC for bankrupt Alta Mesa Resources Inc. with a $320 million offer for the oil and gas driller and its pipeline and storage subsidiary, Kingfisher Midstream LLC, WSJ Pro’s Andrew Scurria reported. The winners prevailed over bondholders who bid in part by adding $10 million to a previous offer, court records show. A court hearing on the deal is set for Tuesday.
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O2 Investment Partners-backed countertop maker Clio Holdings LLC, created from the roll-up of a number of smaller players, is closing its doors after failing to integrate its businesses and suffering from both U.S.-China trade war tariffs and more recent duties on imported Chinese quartz. Founded in 2016 with an aim of consolidating countertop players in a fragmented industry, Clio filed Wednesday to liquidate under chapter 7, WSJ Pro’s Becky Yerak reports. Debt and equity financier Tecum Capital Partners is among the company’s investors.
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Executives from the Irish investment team of the Carlyle Group have completed a spin ouf of the firm to form their own Melior Equity Partners. Melior's co-founders, Jonathan Cosgrave and Peter Garvey previously co-led Carlyle's investment activities in Ireland out of a Dublin office. Melior said it plans to launch its own standalone fund with help from placement agent Asante Capital.
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Citigroup Inc. is entering the market for growth-stage private investments. The big commercial bank is drawing $150 million of its own capital for its Citi Impact Fund to make growth equity investments of as much as $10 million in private companies that strive to have a positive social impact, the New York-based institution said Friday. Citi, with more than 200 million customer accounts and operations in over 160 countries, said it would look for companies focused on four categories—workforce development, financial capability, physical and social infrastructure, and sustainability.
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TPG is adding McAfee LLC Chief Executive Chris Young to its senior adviser ranks, The Wall Street Journal’s Kimberly Chin reported. Mr. Young helped establish McAfee as a stand-alone business in 2016, when it was carved out of Intel Corp. and TPG acquired a 51% stake valued at $4.2 billion including debt. Thoma Bravo also invested in the business.
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Ted Bunker, Laura Cooper, Chris Cumming, Luis Garcia, Laura Kreutzer, William Louch, Preeti Singh, Chitra Vemuri.
Follow us on Twitter: @wsjpe, @LCooperReports, @LHVGarcia, @LauraKreutzer, @william_louch.
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