Bain Capital Takes 60% Stake in Unisource –

Bain Capital may have lost out on the biggest deal in recent memory — the $7 billion acquisition of Qwest Communications’ phone book unit – but the private equity goliath has continued to show a voracious appetite for deals.

Last week’s $850 million deal for the Unisource Worldwide unit of Georgia-Pacific is one example. Atlanta-based Georgia-Pacific, the maker of Brawny paper towels and Dixie paper cups, agreed to sell a controlling 60% interest in its paper distribution subsidiary to Bain. Georgia-Pacific will retain a 40% ownership in Unisource and provide $170 million in a loan to Bain.

Through a spokesman, Bain Capital declined comment.

Georgia-Pacific is trying to reduce its $12.1 billion debt load, which caused rating agency Moody’s Investors Service in May to cut the company’s debt ratings to junk status.

The spinoff of its consumer products unit is expected to occur in the first half of 2003.

After writing off the value of Unisource and other assets as required by new accounting rules, the company said it now had a loss from continuing operations of $83 million in the second quarter, down from previously stated net income of $87 million. For the first six months of the year, the company posted a net loss of $567 million, compared with a net profit of $148 million as stated earlier.

Under terms of the deal, Georgia-Pacific will enter into a sale-leaseback agreement with third parties for certain real estate assets now owned by Unisource, it said.

The Unisource deal is the latest corporate carveout for Bain. Last year, R.R. Donnelley & Sons Co. sold Bain Capital a 93% equity interest in Stream International, and in 1999 it received an 86% stake in Corporate Software and Technology Holdings Inc.

It was also the second big deal in as many months for Bain, which has $12 billion in capital under management. In July, it bought Diageo’s Burger King chain with Texas Pacific Group and Goldman Sachs Capital Partners for $2.26 billion. The deal leaves Burger King’s management in place and could lead to more capital for the Florida-based chain, which operates 11,435 restaurants in 57 countries.

British-based Diageo, the world’s largest producer of alcoholic beverages, is focusing its efforts on growing popular liquor brands such as Johnny Walker Scotch and Smirnoff Vodka. Diageo aims to close the Burger King sale in the fourth quarter.