If you are thinking the proposed $3 billion acquisition of J. Crew by buyout firm TPG has a familiar ring to it, you are right. Back in 1997, TPG took J. Crew private in a $560 million buyout. TPG and others invested about $188 million in the acquisition. It took a while, but in 2006 J. Crew was brought public again. TPG didn’t sell any shares in the offering but, according to Dow Jones LBO Wire last year, TPG sold its shares piecemeal into the market and via a secondary offering.
It’s profit – a handsome 7 times over its initial investment. Some of the sales occurred as low as $14 (shortly after the Lehman bankruptcy). And some occurred around $44. Clearly, the buyout at $43.50 has TPG thinking there is more upside in the company. It profited nicely the first go-around. The question is whether TPG can book the same kind of returns with this buyout.
Investing alongside TPG in the buyout is another buyout shop, Leonard Green, and the chairman and CEO, Millard “Mickey” Drexler. The company’s press release didn’t indicate how much Drexler is investing but he will certainly have some cash on hand to do so once the deal closes. He owns 7.54 million J. Crew shares worth $328 million at the buyout offer price of $43.50.