Done Deals: Shansby Group Gets Busy –

The Shansby Group rounded out the first quarter with its largest-ever equity investment and two exits.

Since January, the firm has invested in the Mayo Clinic’s new Internet company, MayoClinic.com, and sold its interests in two companies, MET-Rx Nutrition, a health foods manufacturer, and The Freestyle Group, a maker of sports watches.

Early this year, San Francisco-based Shansby Group tip-toed into a deal with the Mayo Clinic that some might call venture capital, but marked the firm’s largest equity commitment to date. The firm in January announced a partnership with the medical provider to assist in the launch of a Web site for businesses and consumers.

Gary Shansby, a general partner at the Shansby Group, declined to disclose the amount of his firm’s investment.

Evidently, Mayo Clinic had attempted to develop an Internet presence several years ago, but realized it did not have the talent or capital to carry out its plans and began looking for funding.

Shansby said Mayo saw an extensive amount of interest from investors, mainly venture capital firms, but chose his group because of its experience with brand names and its agreement to be a minority stake holder.

“This is not exactly a startup,” Shansby said. “The business has been around for a hundred years content and brand name are already there. Turning everything over to a VC group that has only done dotcoms was somewhat alarming to Mayo.”

MayoClinic.com will be a separate for-profit business, not a division of Mayo Clinic, though it is the majority stake owner. Additionally, the company will be based in a city other than Rochester, Minn. – where Mayo Clinic is based. It will make its headquarters wherever the as-yet-unnamed chief executive wants to set up shop.

Shansby said his group’s role in the company is as investors, board members and sisters in strategy, while Mayo Clinic will provide content and medical information.

The Shansby Group currently is leading the process of selecting a management team for the company and planning outside business development, such as lining up technicians.

Shansby said he expects an initial public offering for the company in the next 12 to 15 months.

Quick Turnaround

Also in the first quarter, The Shansby Group sold its 49% stake in MET-Rx one year and one day after buying it for $15 million, generating a 134% internal rate of return for investors.

MET-Rx makes nutritional food products and supplements under the MET-Rx and Source One Brand names.

The company was founded by a physician and originally developed around the athletic market. However, Shansby got into the investment just as the company became involved in clinical studies with Harvard University, proving that MET-Rx sped up the healing process for some individuals with certain ailments, including severe burns.

“This product was in the final stages of development so management was looking for additional capital to enter into a different market than where they had been before,” Shansby said.

During the year of its investment, the Shansby Group assisted MET-Rx in recruiting senior executives that accelerated product development. Additionally, the firm expanded the distribution base of the company – marketing it more to general consumers than athletes – while taking some of the pressure off the original owner so that he could focus on the products, Shansby said.

As pharmaceutical companies and other strategic investors became aware of MET-Rx’s new products, the Shansby Group was bombarded with offers to buy its stake. Due to the heavy interest in the company, Shansby said, his firm hired Lazard Freres to investigate the market and lead a sale.

As a result, Rexall Sundown bought 100% of the company.

When asked about the quick turnaround of the investment, Shansby said, “We’re a buyout firm – when the time comes, it just comes and you have to hope that it’s right.”

The firm also recently sold its 55% stake in The Freestyle Group, a manufacturer of sports watches and related accessories sold at sporting goods stores, netting an 18% IRR.

The Shansby group bought the stake four years ago. During that time, the firm concentrated on the company’s distribution and marketing.

Freestyle’s profit increased by 50% from 1998 to 1999.

In other news, the firm has added Michael Mauze as its third general partner. Previously, Mauze was a senior vice president at Lehman Brothers.