Merrill and TPG in co-investment talks(2)

The US bank and the global buyout firm have held talks about the possibility of strengthening co-investment ties, after Merrill Lynch sounded out TPG last year on the possibility of receiving a capital injection from the buyout firm.

Merrill Lynch, the US bank, has had talks with TPG to discuss joint opportunities, according to a source close to Merrill.

David Bonderman:
Merrill Lynch
co-investment talks

Partially confirming a report by Financial Times, the UK newspaper, she said: “The talks were a client dinner to talk with TPG about investing with them, which is certainly a possibility.”

The FT said that TPG’s talks with Merrill also included discussions of a capital increase for the bank from the global buyout firm. The source said Merrill is not looking for a capital increase from TPG.

She said Merrill had had talks with TPG last Autumn to discuss a capital increase at that time. But the bank had eventually decided to seek funding from a consortium led by Temasek, the Singaporean government-owned investment firm, and the Kuwait Investment Authority.

The bank received $12.2 billion in funding from the group which also included Mizuho, the Japanese bank, Korea Investment Corportation, the South Korean sovereign fund and TPG-Axon Capital, an affiliate of TPG.

TPG and Merrill Lynch Private Equity have co-invested together on a number of deals in the past, including the buyout of Debenhams, the UK department store, which was at the time of flotation in 2006 the most profitable buyout in UK history. CVC Capital Partners was also a partner in the Debenhams buyout.
TPG has in the last month made one of the largest investments by a buyout firm in the financial sector since the credit crunch, leading a consortium to buy a $7 billion stake in Washington Mutual, the US savings and loans company. TPG invested $2 billion, paying $8.76 per share. WaMu’s share price was trading well above the price of the capital injection at $12.10 per share at yesterday’s close.