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Genstar, Nearing Fund Close, Scores 5x On Insurance Broker

Target: Confie Seguros

Price: Undisclosed

Sponsor: ABRY Partners

Seller: Genstar Capital

Financial Adviser: Sponsor: Sica Consultants Inc.; Seller: J.P. Morgan Securities LLC, RBC Capital Markets

The healthy return should help the San Francisco-based buyout firm as it looks to wrap fundraising for its sixth buyout fund. The firm is “pretty much done” raising the fund, Managing Director Ryan Clark told Buyouts.

Confie Seguros is an auto insurance brokerage that primarily serves the Hispanic population. The company was the brainchild of Mordy Rothberg, a business development executive with experience raising capital from major companies, including AOL, Cisco and Yahoo, for various business ventures, according to Confie Seguros’s Web site. In 2008, Genstar agreed to invest as much as $75 million in Confie Seguros. The firm ultimately invested most of that, Clark said.

The company made its first acquisition in January 2008, buying Westline Corp., a Cypress. Calif.-based auto insurance brokerage business. From there it would go on to eventually buy 38 insurance auto brokerage businesses, all targeting the Hispanic community. It now has more than 300 retail locations nationwide and generates annual revenues exceeding $200 million.

In January, Genstar decided it would look to exit the company and in May it hired JPMorgan and RBC Capital Markets to shop the company, according to Clark. Genstar wanted to sell the company because the investment came out of Genstar Capital Partners V LP, a 2007-vintage pool of capital that gathered $1.55 billion in commitments. Genstar typically holds investments three to seven years, and it saw Confie Seguros as a five-year investment.

“We have to return capital to investors,” Clark said, adding that the company “has a lot of potential ahead of it.”

Indeed, ABRY Partners, an experienced investor in insurance-related companies, expects to double or triple the company’s size in the next few years, expanding both in states where it already has a presence and into those it does not, according to the trade publication Insurance Journal. ABRY did not immediately respond to a request for comment.

Confie Seguros wasn’t the only aging investment in Genstar’s portfolio. In May, Buyouts featured Oncure Medical Corp., an owner and operator of treatment centers for cancer patients it bought in 2006, as the subject for its “Need To Sell?” feature about older private equity investments. The company is still in the portfolio and the firm has no intention of selling it right now, Clark said.

Genstar doesn’t appear to be under significant pressure to generate returns in order appease investors, however. By May, the firm had raised about $900 million on its way to raising $1 billion for its sixth fund, which had originally targeted $1.5 billion, according to Bloomberg. Clark declined to say when or at how much the firm would ultimately close the fund.