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Dot Family Holdings makes first e-commerce investment, has appetite for more

  • Why this is important: Family offices explore non-traditional investments to build their direct investment portfolios.

Dot Family Holdings recently moved into e-commerce by acquiring TAGG Logistics, an e-commerce-fulfillment platform.

In addition, the family office is exploring other e-commerce and traditional distribution investments to reach new geographies and industry verticals in North America, said Heath Hunter, vice president of corporate development.

It may also consider partnerships with like-minded family offices, Hunter said.

The $8 billion Dot Foods was started by Robert and Dorothy Tracy as a milk-powder distributor in the 1960s. In those days, Dot Foods served dairies across the Midwest with the family’s station wagon and a Cessna 140 airplane, its website said.

Dot Foods added products like sprinkles and hot fudge to serve ice-cream companies near their dairy clients in the 1970s, Hunter said.

To further consolidate its position in food-service redistribution, Dot Foods took on distribution of frozen foods and refrigerated foods in the 1990s. It also became a national redistributor, hitting $1 billion in the period, Hunter said.

Today Dot Foods carries more than 127,000 products from more than 900 manufacturers, its website said.

John Tracy, seventh of the 12 Tracy children, set up Dot Family Holdings in 2011.

He wanted to combine the family’s supply and distribution expertise with its long-term capital to invest in interesting non-food-related ventures, Hunter said.

Dot Holdings initially entered the direct-investing business through Chicago-based private equity firm Svoboda Partners, which has expertise in middle-market value-added distribution, Hunter said.

The partnership led to acquisitions of Triad Technologies, Reliable Parts Holdings and Grabber Construction Products. Reliable Parts Holdings LLC announced a strategic combination with Appliance Parts Depot in 2015.

Getting into non-food distribution was a learning experience, Hunter said. Initially it was hard to get the attention of investors and investment bankers, but the family office persevered, he said.

The investment in TAGG Logistics follows intense e-commerce-market research by Hunter, who joined the family office in 2015.

Hunter was previously at Prospect Partners in Chicago and was attracted to the family office by the family’s vision.

“TAGG outpaced the rapidly growing e-commerce-fulfillment market by over 10 percent a year, and that makes it an exciting and valuable addition to our portfolio,” Hunter said.

The fragmented e-commerce space is exciting for Dot Family Holdings, he said. “It offers tremendous opportunity to potentially add services for our wide customer base and will help open up other industry verticals for us,” Hunter said.

For now, it will be business as usual at TAGG, Hunter said.

“But there is the potential for collaboration between Dot Foods and TAGG down the road,” he said.

All Tracy children have served as employees in Dot Foods and many are active at Dot Holdings as well.

These include Tracy children Joe, Dick, Jim and Don Tracy. Sons-in-law Mike Buckley and Scott Stammerjohn are also part of the team, according to its website.

The family office has not made any co-investments to date, but is open to partnerships, Hunter said. It also follows a simple process to close deals in less than three months, he said.

The family office likes to make control investments between $25 million to $250 million in distribution companies, with Ebitda between $5 million and $30 million, according to its website.

“The Tracy family built Dot Foods with a clear and singular focus on growth. Dot Family Holdings, with its buy, hold and grow strategy, has the same vision for its portfolio companies,” Hunter said.

Action Item: For more details on Dot Family Holdings, see its profile in our Family Office Database.