TPG’s preliminary return from its Saxo Bank investment


Following Saxo Bank’s announcement last week of its 2011 results and Annual Report, we now have a better idea of the parameters of the Texas Pacific Group (or “TPG”) investment in Saxo Bank. In the biggest M&A transaction last year in the Forex sector, TPG acquired 30% of Saxo Bank for $560 million, buying out most of Saxo Bank’s non-management  shareholders, the largest of which were private investment fund General Atlantic and Portuguese bank Banco Espírito Santo. The deal was announced in August, but closed just last December.

Given that Saxo Bank paid out dividends in 2011 of DKK 246 million (or about $44 million), and had net income of DKK 618 million ($111 million) – with both numbers roughly the same as in 2010 – it turns out that TPG:

  • will earn a dividend yield of about 2.4% on its investment,
  • made its investment based on a P/E (or investment-to-earnings) ratio of 16.8x.

By comparison (see chart below), P/E ratios for leading publicly traded retail Forex / online trading firms range from about 16x on the high end (Swissquote) to 11-13x on the low end (e.g. FXCM, IG Group). Were Saxo Bank to pursue an IPO at this stage, it doesn’t look like TPG would make any money on its investment, unless the IPO could be priced at a premium to each of those companies.

For more details on Forex M&A and Forex company valuations see the LeapRate-Dow Jones Forex Industry Report.

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TPG's preliminary return from its Saxo Bank investment

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