Cerberus blood loss stanched with Talecris sale

June 7, 2010

Cerberus has stanched its blood loss with the $3.4 billion sale of Talecris Biotherapeutics  to Spain’s Grifols. The private equity group is in line for more than a 20-fold return on its investment in the healthcare firm. Losses from its funds’ disastrous investments in Chrysler and GMAC threatened to send Cerberus to the underworld. Its roughly $2 billion profit on this one deal offers new life.

The Talecris buyout didn’t seem particularly appealing at first. Cerberus and partner Ampersand bought the unit from healthcare giant Bayer. Talecris, which makes drugs derived from blood, had been a low-growth, non-core headache for the parent firm. The private equity buyers signed up in late 2004 to buy it for $590 million, and Cerberus cut an equity check of around $80 million to acquire majority control.

Once focused on, the problems at Talecris proved amenable to fixing. Through special dividends, shares sold at the time of the initial public offering last year, and now the sale of the company announced on Monday, Cerberus will have collected more than $2 billion in profit. While the final amount may be slightly less — around a quarter of the consideration from the sale of the company comes in Grifols stock, which fell on news of the deal — the bulk is hard cash.

Better still, this one investment more than compensates for Cerberus’ losses on GMAC and Chrysler. The firm’s funds invested around $1 billion in total in those two losing deals, according to a person familiar with the situation. The effect may not be even — all three investments were parceled out among Cerberus funds, perhaps not equally. But overall, the private equity firm suddenly has a better story to tell its investors.

Unfortunately, Cerberus brought along “friends and family” as co-investors in the GMAC and Chrysler deals. The total equity injected in the two failed investments was an order of magnitude greater than what Cerberus’ own funds contributed. While the Talecris sale gives the three-headed dog’s own funds a blood transfusion, these burned co-investors get no such boost. They may not be ready to forget just yet.

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