J.W. Childs, back from the brink, buys two companies and seeks $450 mln Fund IV

The private equity firm is back to work, said Adam Suttin, a partner. “We are in business, we have a new fund…We are very much in the private equity business,” he said. “We are actively investing our fourth fund and managing the portfolio.”

This week, J.W. Childs announced two acquisitions: Kosta Browne Winery and Cycle Gear.

In the first, the Waltham, Mass.-based private equity firm bought a majority stake in Kosta Browne, which is known for its production of California Pinot Noir.

J.W. Childs had followed the wine maker for a number of years and had even looked to make an investment five years ago, in 2009, when the company was sold to the Vincraft Group, Suttin said. Vincraft, which is majority owned by TPG Growth, acquired a majority of Kosta Browne for about $40 million, the Vincraft website said. TPG Growth is currently fundraising for a $3 billion pool, Bloomberg News said in December.

The sale to J.W. Childs calls for company founders – Dan Kosta, Michael Browne (also the executive winemaker) and Chris Costello – to retain a 40 percent stake, The Press Democrat said. Kosta, Browne and Costello are staying on, Suttin said.

Kosta Browne, which is based in Sebastopol, Calif., sells wine directly to consumers and offers its products only twice a year: in the Spring and Fall. Customers have to wait an average of 18 to 24 months to get their wine, Suttin said.

“Making wine is both an art and science and we believe Michael Browne has perfected that to create a world class Pinot Noir,” Suttin said

A second deal

On Thursday, J.W. Childs said it also bought a majority of Cycle Gear, a provider of motorcycle apparel, parts and accessories. The seller was Harvest Partners.

Like Kosta, Cycle Gear touts a dedicated consumer following, said Jeff Teschke, a J.W. Childs partner. Cycle Gear has 120 stores that sell items such as motorcycle helmets, leather jackets and tires to consumers.

Teschke estimates there are three to four motorcycle riders per 100 people in the U.S., which roughly equals 10 million riders. The group is “very passionate” and has very specific needs to address, he said. Riders typically have to consider safety, weather protection and comfort, as well as performance when they choose what gear/clothing to use on rides, he said.

Cycle Gear “did very well in the recession,” said Teschke. “It’s a nice stable business.”

Financial terms for both Kosta and Cycle Gear weren’t disclosed. J.W. Childs typically invests from $20 million to $150 million equity per deal while its sweet spot is about $40 million to $50 million, Suttin said. Sectors include specialty retail, consumer and healthcare services.

Rebirth

Both Kosta and Cycle Gear represent investments from J.W. Childs forthcoming fourth fund. The PE firm is marketing for J.W. Childs Equity Partners IV LP, which has a $450 million target, according to SEC filings and sources. As of May, Fund IV had raised about $236 million, which is all from LPs, a person said.

The deals are also J.W. Childs first since the firm recapped its third fund last year. The PE firm collected $1.75 billion in 2002 with its third fund.

Last year, the Canada Pension Plan Investment Board and Goldman Sachs Group Inc bought the assets of Fund III, which then included five portfolio companies. The pool, now called Winterstreet Opportunities Fund, currently has four investments: Mattress Firm, Sunny Delight, WS Packaging Group and Esselte. Brookstone, which was part of the portfolio, won bankruptcy court approval in June to sell the chain to a group of Chinese investors for $174 million, Bloomberg News reported. The luxury gadget retailer had been owned by JW Childs Fund III, Temasek Holdings and OSIM International.

CPPIB committed $119 million to J.W. Childs fourth fund, sources said. The $119 million is part of Fund IV’s $236 million total, a person said. It’s unclear when the firm will finish fundraising for the fourth pool.

“We are actively looking for new opportunities,” Suttin said.