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Wednesday, April 16, 2008

Who Bought American Beacon?

Reported by Neil Anderson, Managing Editor

When the sale of American Beacon Advisors came to light Wednesday, the name TPG Capital was probably familiar to many readers. But there is another East Texas-based backer of Lighthouse Holdings, the official buyer in the roughly $480 million move. That other buyer is a Dallas and Nashville-based private equity firm founded in 1998 called Pharos Capital Group.

Kneeland Youngblood
Pharos Capital Group
managing partner
TPG, formerly Texas Pacific Group, is one of the five largest private equity firms in the world, according to Private Equity International (downloadable PDF), as of May 2007. The Forth Worth, Texas-based firm now claims over $30 billion under management. Founded in 1992, TPG has been involved in a number of deals -- involving Burger King, Continental Airlines and SunGard, among others -- and most recently it announced a deal to buy $2 billion in equity securities from the beleaguered Washington Mutual. The site puts TPG's target investment range as $100 million to $750 million, and the buyout of American Beacon fits in nicely.

But who is Pharos? According to the firm's website, Pharos manages $500 million in three private equity funds. The site describes Pharos' ideal target as an "established, US-based business", especially "healthcare, business services and technology firms," that the private equity firm can put between $5 million and $20 million into, as "lead or co-lead ... along with other institutional investors," making American Beacon a big target for Pharos.

In an exclusive interview with MFWire, Pharos managing partner and co-founder Kneeland Youngblood described the deal as "a great opportunity" for Pharos and its investors. Youngblood, who has served as chairman of the board of the American Beacon Funds, said he has "tremendous confidence in [American Beacon Advisors chairman] Bill Quinn and the management team a American Beacon," pointing to their "track record of performance and success they've managed to have over the years, over multiple cycles." This is Pharos' first buy into asset management, but Youngblood noted that two of his partners hail from Goldman Sachs and added that he himself is not exactly new to this side of the business.

"We could bring resources to bear, as well as relationships," added Youngblood, point to his tenure from 1993 to 1999 on the board of the $100 billion Teacher Retirement System of Texas and his more recent board experience with the City of Dallas Employee Retirement System. (He also serves on the boards of Burger King and Starwood Hotels, according to Pharos' website.)

Youngblood and Owen Blacksilver, a spokesman for both Pharos and TPG, confirmed that they see the move as a "growth investment". And that may mean more asset management moves in the future; Youngblood said that Pharos would consider such opportunities on a case-by-case basis.

This is the second recent private equity buyout of a fund firm. In November 2007, Madison Dearborn Partners closed its acquisition of closed-end specialists Nuveen Investments

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