Blackstone, TPG in Talks to Buy Mortgage-Lender Kensinton


Negotiations have advanced between The Blackstone Group L.P. (BX) and TPG Capital LP, regarding the purchase of U.K.’s sub-prime mortgage lender – Kensinton – from its South African parent company, Investec. The news was first reported by Sky News.

However, the deal has not been finalized yet. If the transaction is consummated, it would likely be announced later this week.

Notably, Kensinton will be purchased by Blackstone’s Tactical Opportunities division and TPG Capital's TSSP special situations and credit platform. Further, both the companies will infuse additional capital into the acquired business.

Blackstone and TPG Capital foresee tremendous growth in the U.K.’s mortgage market. The house prices have been appreciating in the country, with 1.4% rise in Jul 14, as per Halifax.

Kensinton was acquired by Investec in 2007 for £283 million ($473 million). However, the transaction turned out to be ill-timed, as a then heated-up mortgage market lead to a fall in profitability.

Post the financial crisis, Investec has been keen on simplifying its operations. Its decision to divest Kensinton in Feb 2014 reflects the same target. Other firms like Lonestar, a U.S. property investor, Virgin Money and The Goldman Sachs Group, Inc. (GS) had also shown interest in the division

We believe that the deal, if finalized, will aid Blackstone and TPG Capital to leverage the presently lucrative U.K. housing market.

Separately, Blackstone recently announced a deal to acquire 50% Haynesville assets of SWEPI LP and Shell Gulf of Mexico Inc., affiliates of Royal Dutch Shell plc (RDS.A) for $1.2 billion, thus marking its foray into the energy sector. Blackstone Energy Partners, along with Vine Oil & Gas LP, will be acquiring assets consisting over 107,000 net acres in North Louisiana, located in the core of the Haynesville Shale natural gas shale basin.

Notably, the transaction, subject to regulatory approvals and customary closing conditions, is expected to complete by the end of this year. Blackstone and Vine Oil & Gas were advised on the deal by Evercore Partners Inc. (EVR) and Kirkland & Ellis LLP.

Currently, Blackstone carries a Zacks Rank #2 (Buy).

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