TPG faces City backlash after shareholders rage at U-turn

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The Independent Online

Angry shareholders railed against Texas Pacific Group yesterday in the wake of its shock decision to pull its £179m investment in Bradford & Bingley.

Investors were left fuming after TPG withdrew its offer to buy 23 per cent of B&B after ratings agency Moody's cut the bank's credit rating. One source at a significant B&B shareholder said: "Investors are extremely annoyed at TPG. There is an enormous sense of disappointment at their actions at a time that has seen a huge destruction of value in B&B's share price."

Peter Montagnon, director of investment affairs at the Association of British Insurers, which represents institutional shareholders, said: "Our members were never happy with the original plan of a lopsided deal that gave TPG special privileges and the ability to walk away as it did. They couldn't understand it."

The nature of the deal was always likely to be challenging for TPG, according to one source at a private equity rival. "When the target is in a sensitive area and is a household name, buyout firms have to be so careful. You do stand a chance of damaging your reputation in the short term."

The UK Shareholders Association, which urged the bank's 930,000 minority shareholders to reject B&B's funding plan, said: "TPG's decision rather vindicates our recommendations."

Justin Urquhart Stewart, co-founder of Seven Investment Management, said: "This whole B&B saga has been like a soap opera. You couldn't make it up."

However, while TPG now faces a battle to salvage its reputation in London, where its prospects of completing other deals could now be damaged, not all City commentators were united against it.

Alex Potter, an analyst at Collins Stewart, backed TPG's decision. "Very sensibly, TPG had safety valves in place. A ratings cut would have materially changed the deal."

TPG is one of the biggest private equity firms in the world. It was set up in 1992 by three Americans, David Bonderman, James Coulter and William Price, who raised $720m (£360m) for its first fund. The group has expanded aggressively, and has offices across the US as well as in countries including China, Russia, Japan, France and the UK.

Last year, it rebranded to TPG Capital and currently has $50bn under management. The B&B deal was overseen by head of European operations Philippe Costeletos, who worked on the leveraged buyout of Debenhams.