TPG ready to ride off with RM Williams

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Global buyout firm TPG Capital is in exclusive talks to acquire Australian boots, saddles and outdoor clothing manufacturer RM Williams.

Street Talk can reveal TPG's top dealmaker in Australia, Joel Thickins, has his team locked in late-stage due diligence and seeking debt funding for a deal that would value RM Williams at more than $250 million.

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There's a new private equity investor kicking around the stables at RM Williams.  AFR

TPG is understood to be keen to make the acquisition via its global growth investment arm, TPG Growth, which targets deals that may otherwise be considered too small for its buyout funds, based on the target company's earnings.

If TPG is able to agree on a deal in the coming fortnight as expected, RM Williams could be one of the first investments into the firm's new fund TPG Growth V, which is reportedly in the middle of a $US4 billion raising.

It is understood TPG recently approached RM Williams owner, the LVMH Group-backed private equity firm L Catterton, with an indicative offer and the request for an exclusive look at the Australian business' books. Sources said TPG considers RM Williams as a regional growth play - something that can sell a lot more boots outside of Australia than inside.

TPG's approach came after L Catterton had investment bank Goldman Sachs kick off an auction for RM Williams late last year, but the auction fizzled out as the COVID-19 pandemic hit financial markets and businesses, including RM Williams, which was forced to close its South Australian factory and stand down staff.

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RM Williams CEO Raju Vuppalapati at the RM Williams factory.  James Elsby

It is understood Bain Capital - the incoming owner of Virgin Australia - and Andrew Forrest's Minderoo were among potential buyers in the auction, as well as Arrium-owner Sanjeev Gupta.

Those investors, and others, were told RM Williams recorded $23 million in earnings before interest, tax, depreciation and amortisation in the 2019 financial year, and to expect $34 million in 2021 and $83 million in 2024.

Flagship deal in the works

Those forecasts are expected to have been revised, in light of the economic conditions. The question is how much - and that's a key consideration for TPG, as it works through the due diligence materials.

Should TPG be able to stack up its offer - and win L Catterton's blessing - it would be a flagship investment for the firm in Australia, and come after a string of wins include its Inghams exit and its hiring of Steve Duncan. RM Williams may be smaller than many of its past deals, but it has a strong and well-recognised brand name and public profile.

It would also be interesting to see TPG seek to anchor the new growth fund, which has a global remit, with an Australian investment. Its most recent local deal, pets and vets company Greencross, was acquired using equity from its Asia buyout and growth funds.

L Catterton has owned RM Williams in full since 2014, when it paid former News Corp executive Ken Cowley about $110 million, having already owned a minority stake.