TPG, PAG lead $1.2b acquisition of property manager DTZ
TPG Capital and PAG Asia Capital, together with co-investor Ontario Teachers' Pension Plan (OTPP) have agreed to buy DTZ, the property services arm of Australia-listed UGL, for an enterprise valuation of A$1.215 billion ($1.2 billion).
UGL bought UK-based DTZ in 2011 as a distressed asset, paying GBP77.5 million (A$129.5 million). Struggling with high debts and declining profits within its core engineering services business, UGL planned to spin out DTZ via a public share sale. However, the company revealed in February that unnamed third-party investors had expressed interest in the asset.
It was subsequently reported that four private equity investors submitted bids.
The transaction is set to close around the end of September, subject to regulatory approvals, no material adverse change and other conditions. The sale is expected to deliver net proceeds to UGL of A$1.0-1.05 billion, the company said in a regulatory filing.
"We see a great opportunity in commercial real estate services to create a best-in-class firm servicing clients on a global basis. We believe DTZ is well progressed on this path, and that together with our co-investors we can accelerate the evolution of its strong platform," said Ben Gray, Asia managing partner at TPG, in a statement.
Weijian Shan, chairman and CEO of PAG Group, added that, in addition to impressive resources and capabilities in Western Europe, Australia, Singapore and North America, DTZ holds the market-leading position in Greater China, the world's fastest growing services marketplace.
Claiming a history that dates back to 1784, DTZ sells and leases office space on behalf of developers and property owners. The business employs 24,200 people in 208 offices in 52 countries, with a global headquarters in Chicago.
It generated A$1.9 billion in revenue for the 2013 financial year, up 21% year-on-year, and accounted for 46% of UGL's total underlying operating revenue. EBIT rose 19% to A$113.4 million, representing a margin of 5.9%. DTZ's order book ended the year at A$3.5 billion.
Tod Lickerman will remain in place as global CEO of DTZ, while Brett White, former CEO of CBRE, is investing in the acquisition alongside the consortium and will join the board of directors once the transaction is completed before becoming executive chairman in March 2015.
TPG recently closed its sixth pan-Asian fund at $3.3 billion. The firm's previous deal in Australia, the purchase of leading poultry producer Inghams Enterprises for around A$900 million, was a cross-over deal that straddled Fund V and Fund VI.
PAG has $10 billion in capital under management across private equity, real estate and absolute return strategies. This is the first investment in Australia for the firm's $2.5 billion debut pan-Asian buyout fund, although it has been active in the country for a number of years through the other strategies.
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