TPG closed its new $US4.6 billion-plus ($6.4 billion-plus) Asia fund early this month. It joins other global firms raising funds: Bain Capital closed its new Asia fund at $US4.65 billion in December and China’s Hillhouse Capital raised $US10.6 billion in September.
TPG Asia VII has so far committed more than 40 per cent of the capital across 12 companies, including Healthscope’s Asian pathology assets, bought last year, and Greencross.
”As our fund size has grown — and as we have gone deeper into sectors – clearly our strategy has been more frequency of deployment,” Thickins tells the Financial Review.
He says there is more dry powder globally for private equity, including in Australia: “The weight of money is there and therefore those of us that have large incumbent positions, we all need to continue to evolve our offering.”
It is imperative that TPG brings more than just capital to deals, he says, pointing to the company’s ability to tap into Asia’s growth and offer the global expertise and insights that a country fund might not have.
This view is reaffirmed by Greencross chief Simon Hickey, who views TPG as a “strategic investor” rather than just a financial backer because of its focus on the consumer and knowledge of the pet sector — it has owned four other pet businesses — and its access to Asia.
TPG’s sweet spot
Thickins personally met all the directors at Greencross to ensure they were receptive to TPG’s approach and reassure them he was not going to be hostile or form a consortium. TPG’s previous bid alongside private equity firm Carlyle was rejected by the Greencross board.
The current deal sits in TPG’s sweet spot at an intersection of consumer and healthcare. Greencross — which operates the City Farmers, Pet Barn, Animates (in New Zealand) and Greencross Vets brands — has been looking to build on both its bricks-and-mortar and online capabilities, relaunching its Pet Barn website. It aims to educate owners about pet care while creating an integrated offering, as it battles for sales with online retailers such as Amazon and Chewy.
Hickey, the former head of Qantas International, is very familiar with persuading customers to be loyal to a brand. He notes Greencross has created a “club” where customers can build a bespoke product and service profile, and get pet-food discounts and prompts to help them with pet care.
Thickins — who owns a cavoodle, a king charles spaniel-poodle cross — says pet owners are resilient consumers, willing to spend on furry family members despite falling house prices and political uncertainty. He says Greencross will focus on the highly fragmented, fast-growing pet services segment including veterinarian services, grooming, washing, walking and doggie daycare. Specialities such as oncology and MRIs for pets are services people are willing to pay for, says Hickey, who owns a miniature poodle.
The pet market is tipped to reach $10 billion in value within four years.
Since taking over the top job at TPG Capital three years ago, Thickins has worked to pivot the local brand to appear more trustworthy and open, following a decade punctured by deals such as the Myer one that painted the firm in a bad light. The department store failed to live up to the hype of its 2009 $2.2 billion float; it listed at $4.10 a share and now trades at about 37¢.
“I view my role as being the steward of the brand in this region, and therefore how one conducts oneself and how the firm conducts oneself is critical,” he says.
With the aged care royal commission in progress, Thickins declined to comment on whether now might be a good time to buy into the sector — saying only that there are merger and acquisition opportunities across the healthcare sector and complimenting Brookfield on its innovative deal structure for its takeover of Healthscope.
He notes fellow suitor BGH Capital’s tie-up with Healthscope’s major shareholder, AustralianSuper, shows investors are becoming more aggressive, and looking to be more creative in problem-solving and maximising influence. BGH was founded by former Macquarie Group banker Robin Bishop and ex-TPG deal-makers Ben Gray and Simon Harle.
In the post-Gray era, Thickins is looking to leverage TPG’s global relationships and “unique” pan-Asia footprint. “These are the competitive advantages I’m leaning into,” he says.