Big Month Helps Set Stage For Next JLL Fund

It’s been a busy last few weeks for JLL Partners, the New York-based LBO firm. Since the start of April, the firm has signed two deals, achieved its first realization from its fourth fund, and undertaken two dividend recapitalizations. With its fifth fund nearly 60 percent invested and solid returns in the bank, the flurry of activity suggests JLL Partners will be back in the market later this year to raise its sixth buyout fund.

The spurt of deals began on April 12, when JLL Partners, which invests in mid-sized companies in need of turnarounds, sold Mosaic Sales Solutions in a secondary deal to Court Square Capital Partners, formerly the buyout arm of Citigroup. The sale produced a 2.9x return on JLL Partners’s $57 million equity investment in Mosaic, which provides point-of-purchase marketing services. The deal was also the first complete realization from the firm’s fourth fund, a vintage 2002 vehicle.

The hot month continued with a $147 million equity investment in Patheon Inc., a publicly traded Canadian company that manufacturers drugs on a contract basis for big pharmaceutical companies. The PIPE deal gives JLL Partners a 25 percent stake in Patheon and three seats on the company’s nine-member board of directors. The infusion came from JLL Partners Fund V, a $1.5 billion pool closed in 2005 and now nearly 60 percent invested.

Last week, the firm was due to close its $870 million carve-out of McKechnie Aerospace from British holding company Melrose PLC. JLL Partners was to contribute $220 million in equity, coupled with $150 million more from unnamed co-investors. McKechnie makes new and replacement parts for aircraft, a business expected to be in greater demand as air fleets age, said Brian Wade, JLL Partners director of investor and public relations.

JLL Partners was also slated last week to complete a dividend recapitalization of Iasis Healthcare, a hospital network bought out in 2004 for $1.4 billion by a group of investors led by TPG. The recap would allow JLL Partners to recoup half of its $100 million equity investment in Iasis, a move made possible by the company’s 11 percent compound annual growth rate since the 2004 buyout, Wade said.

The LBO firm also completed another recap in April, its second in the last year since acquiring JG Wentworth, which brokers structured settlements. The recaps have provided JLL Partners with a return of 2.33x its $125 million investment in JG Wentworth, made in July 2005.—J.H.