IPO Could Free TPG From Maddening Coffee Investment

Jul 11 2014 | 6:23am ET

After six long years that must feel more like 60 for TPG Capital, the private-equity giant is nearly free of an investment that has made it money, but at a price.

TPG and Strauss Group are near a deal to list Strauss Coffee, the Israeli company in which TPG took a 25% stake in 2008. The deal will allow TPG to exit an investment that has produced more headaches and disappointment than solid returns.

When TPG and Strauss consummated their partnership, both had grand expansion plans and hopes to build a global coffee giant. But TPG’s purchased closed just days before Lehman Brothers collapsed, and the deal-making environment dried up, giving Strauss Coffee few takeover targets. In addition, the company struggled in regions like Russia and Eastern Europe.

TPG’s deal with Strauss gave it an out after four years. But plans to sell the coffee company’s Russian and Eastern European business to pay off the private-equity firm fell through. A year later, TPG began pushing for an initial public offering. In May of 2013, it learned—when Strauss’ lawyer mistook a TPG executive for his own lawyer—that Strauss planned to “block” the same.

TPG sued—but saw its case dismissed.

“We are hopeful that we will be able to reach an agreement on all significant outstanding issues,” TPG and Strauss Group, which owns a majority stake in the coffee company that bears its name, said in a joint statement.

TPG is in line to earn a roughly 10% return on its investment.

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