Castanea nears close of $575M

Mid-market specialist Castanea Partners is about to close on $475 million for its third fund. The firm also is raising a $100 million “overflow fund” earmarked only for larger investments, which would bring the total pool to $575 million.

A final close is expected by early August. All of the Newton, Mass.-based firm’s prior limited partners re-upped and increased the size of their commitments.

The firm buys companies in the publishing, information services, education, consumer brands, specialty retail and marketing services industries, with enterprise values of up to $150 million. Castanea looks to invest between $10 million and $75 million in each deal.

Its co-founders have operational experience in several of those areas. Brian Knez and Rob Smith, who are brothers-in-law, worked for Smith’s family business, a holding company with various consumer and media assets, for much of their careers. Knez and Smith were also co-CEOs of Harcourt General in 2001, when it was sold to Reed Elsevier. The same year, they stepped down as co-CEOs of clothing retailer Nieman Marcus.

Soon after, the pair committed $75 million of their own savings to launch a private equity firm. In 2004, they raised $207 million for their second fund, which also included much of their own capital. The firm also took money from seven LPs in that second fund, including Princeton University, Yale University and the Massachusetts Institute of Technology.

To date the firm has purchased six companies, and logged four exits, including three this spring. In March the firm sold vitamin-infused juice and tea maker Fuze Beverages, whichit bought in 2004, to the Coca-Cola Co. for an undisclosed amount. —Mark Cecil