Bear Merchant Banking continues to do deals

It’s business as usual at Bear Stearns Merchant Banking—at least according to one executive who works there.

Gwyneth Ketterer, COO at Bear Stearns Merchant Banking, the company’s private equity affiliate, which invests in leveraged buyouts, recapitalizations and growth capital deals, says that she believes JPMorgan Chase would honor Bear Stearns $500 million commitment to Bear Stearns Merchant Banking III, which closed in 2006.

“From our [perspective], there’s no reason to believe life won’t go on,” Ketterer says.

Indeed, shortly after the announcement earlier this month of JPMorgan’s proposed takeover of Bear Stearns—Bear Stearns Merchant Banking’s investment committee approved an add-on acquisition for Multi Packaging Solutions Inc., one of its portfolio companies. There was no reservation or concern from members of the committee with the takeover, Ketterer says.

Officials at JPMorgan could not be reached for comment. But JPMorgan Chase’s proposed takeover of investment bank Bear Stearns has sparked a number of questions about whether the private equity operations would complement each other or clash. Bear Stearns essentially acts as a limited partner for its buyout division, which implies to many that the LBO shop won’t come under pressure as part of the sale to JPMorgan Chase.

It also appears to be business as usual for Churchill Financial, the mid-market lender that’s one of Bear Stearns Merchant Banking’s portfolio companies. The buyout shop owns more than 60% of the lending company after investing an undisclosed sum to launch Churchill Financial in February 2006.

The firm’s investment came from its second fund, and Bear Stearns Merchant Banking has set aside a small portion of uncommitted capital from the same fund to finance any follow-on acquisitions, says Churchill Financial CEO Ken Kencel.

“They’ve been good partners and supporters of our business,” says Kencel, who adds that the lender’s operational financing is on solid ground. “Obviously, we’d like to know ultimately what their home will be.”

It is unclear just how Bear Stearns Merchant Banking would interact, if at all, with JPMorgan Chase’s own buyout arm, One Equity Partners, which the bank inherited when it bought Chicago-based Bank One Corp. in 2004.

Bear Stearns Merchant Banking, with offices in New York, Chicago and San Francisco, targets retail, financial services, consumer products, transportation, logistics, health care, energy, packaging and industrial sectors. It makes equity investments between $100 million and $250 million in companies with enterprise values between $200 million and $1.5 billion, and with EBITDA in excess of $25 million.

It employs 47 professionals, including 27 investment professionals. A sister group, Bear Growth Capital Partners, which targets investments of $20 million to $100 million from a $250 million fund, employs seven investment professionals.

Similarly, One Equity targets mid-market companies in health care, and also has offices in New York and Chicago. The firm invests in defense, chemicals, technology and manufacturing, and has offices in Menlo Park, Calif., Miami and Frankfurt.

Established in 2001, One Equity manages $5 billion of investments and commitments for JPMorgan, and typically invests $50 million to $200 million at a time.

JPMorgan had a larger buyout presence in the early part of the decade with J.P. Morgan Partners, but in 2006 it spun that group out in what is now called CCMP Capital Advisors. There was also a venture group JPMorgan spun out, now called Panorama Capital.

Ketterer says that for Bear Stearns Merchant Banking the takeover proposal as a glass-half-full situation, and she is looking forward to having discussions with JPMorgan. “They have an extraordinary amount of resources and opportunities,” she says.