Founder Lionel I. Pincus
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The London based private equity firm Warburg Pincus last week sold its entire approximately 34% stake in Australian waste management company Transpacific Industries Group through an offering conducted on its behalf by UBS AG.
Their shares were finally sold at about US$ 0.99 (A$1.05) per share to a variety of Australian domestic and institutional shareholders and the transaction was conducted at approximately a 6.7% discount to the closing share price on Friday, on the Australian securities exchange. The sale netted Warburg Pincus, who was Transpacific’s largest shareholder, about US$531 million (A$562 million) in cash.
As a result of the sale Jeffrey Goldfaden, who represented Warburg Pincus on the Transpacific Board of Directors, is now stepping down. On Monday, Transpacific’s Chairman Martin Hudson paid tribute to Warburg Pincus, and also to Mr Goldfaden, stating that without the Warburg Pincus investment Transpacific would likely not be in the position it is in today.
“Jeff and Warburg Pincus have made a significant contribution to the governance and also to the direction of TPI since making their investment in 2009, ” he said.
“While we are sorry to lose Jeff’s expertise on the board, we are pleased with the strong support from institutional investors evident in the robust pricing and expedient disposal of the stake.”
Warburg Pincus are getting out of Transpacific with their skin intact therefore, in what basically looks, of course with the benefit of hindsight, to have been an unusually poor investment choice for them.
Warburg Pincus bought into Transpacific, which is based in Brisbane, in 2009 as part of a recapitalization which basically rescued the company then from bankruptcy. They bought their shares in two stages in then, by an initial placement and subsequent rights offering. Warburg Pincus then participated again in another rights offering in 2011 as the company continued to drain cash.
Warburg Pincus has stated to Reuters that it had invested a total of about US$493 million (A$521) million in Transpacific, which has also actually been the only investment they have made to date in Australia. So it is an exit with honour as they now come out whole, though with not much else to show for it.
Transpacific had got into trouble when it loaded up on debt, to buy the Cleanaway trash collection business, in the boom times of 2007. Since then it has reported repeated heavy annual losses, and been forced to execute continued asset sales while under pressure, and also to make share offerings at low prices, in order to continue to meet its liabilities.
In its last fiscal year through June 30th 2013, Transpacific incurred a net loss of US$190 million alone (A$200 million), and in July had agreed to sell its commercial vehicle group to US automotive retailer Penske Automotive for US$206 million (A$219 million).
The Warburg Pincus sale comes indeed just a very short time after Transpacific shares got quite a boost from its decision, announced early last week, to put its New Zealand waste management unit up for sale to help make a serious dent in its heavy debt load. The company has indicated it hopes to clear nearly US$750 million (over NZ$900 million) from the sale there, according to a Reuter’s source.
Having got all their money back therefore, with a bit left over to pay for the expenses of their adventure down-under, it may be a while now before Warburg Pincus ventures to put its toe back in the water again with another deal in Australia.
They should also be quite grateful to UBS AG who managed the sale for them and did an excellent job in a short period of time. Sometimes, indeed, investment bankers do indeed earn their fees and this is likely one of them.
About Warburg Pincus
Warburg Pincus, LLC is a global private equity firm with offices in the United States, Europe, Brazil, China and India, with approximately $30 billion in assets. Warburg Pincus has holdings in more than 125 companies and has to date raised 13 private equity funds which have invested more than $40 billion in over 650 companies in more than 30 countries.
The firm was founded in 1939, by Eric Warburg of the German Warburg banking family when he fled to London from the Nazis. In 1966, E.M. Warburg merged with Lionel I. Pincus & Co, forming a new company that eventually became known as E.M. Warburg, Pincus & Co.
In 1965, when Eric Warburg retired and went back to live in Germany, control was handed to Lionel Pincus, a partner in the Ladenburg Thalmann investment bank, and the working language of the office switched from German to English. Lionel ran the company from 1966 to 2002, and died in 2009.
Warburg Pincus began investing in Europe in 1983 and opened its first office in Asia in 1994. It has invested more than $5 billion in Europe; more than $3 billion in India and more than $3.3 billion in China.
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