Fenway Accessorizes Fund II With Final Platform –

In the business world, it has often been said that “the clothes make the man” (though the MBA from Harvard probably helps). And as technology evolves, many white-collar workers eventually find themselves shopping for things like carrying cases for their laptops or Blackberry’s as a way to accessorize and accentuate their two-button Armani suits with peak lapels.

Private equity firm Fenway Partners is hip to the scene, and as such has agreed to acquire Targus Group International Inc.-which hails itself the creator of the notebook computer carrying case-in a $382.5 million sponsor-to-sponsor transaction. The selling party is Apax Partners, whose recently acquired U.S. entity, Saunders Karp & Megrue, has owned Targus since 1996.

Debt financing for the transaction will be provided by Goldman Sachs & Co., UBS and Wachovia Securities. Equity for the transaction will come from Fenway Partners Capital Fund II LP, while Targus Chairman J. Howard Johnson will roll over a portion of his investment in the company, as well.

Anaheim, Calif.-based Targus designs, markets and distributes carrying cases and accessories for mobile computing on a global scale, generating revenues of approximately $450 million. Accessories the company sells include any thing from WiFi scanners to Kevlar coated cable locks for notebook computers.

“Often, when people first purchase a laptop, they purchase a carrying case separately,” said Timothy Mayhew, a managing director at Fenway Partners. “Many people want to fit their case with their lifestyle, whether its and athletic one, a student who wants a backpack, or a professional looking for more of a business style. It’s an accessory that connotes a lifestyle.”

Indeed, the most popular product sold by Targus is the computer case, but Mayhew said the company has a good customer retention rate when it comes to purchasing other accessories down the road. “The computer case has been the Trojan Horse for the company to sell the rest of its products through,” he said.

Over the past four years, the U.S. notebook computing industry has been one of the fastest growing sectors of the computer market with a compound annual growth rate of more than 20%, said Mayhew, adding that Targus has had 10 consecutive quarters of year-over-year growth.

To keep that pace going, Fenway will invest in product expansion and product innovation. But the real value add, Mayhew said, is likely to come simply from keeping up with the Targus’ growing end-markets, which include corporate distributors, original equipment manufacturers and retail. “Add-ons are not a requirement in order to make a good return on this investment,” he said.

Targus will be the last platform acquisition for Fenway’s second private equity fund, which raised more than $900 million before holding a final close in 1998. The remainder of the fund’s dry powder, which Mayhew said is a significant amount, will be put to use making add-ons acquisitions and growth capital investments in existing portfolio companies. Mayhew declined comment when asked about the prospect of a Fund III.

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