LPs

Leonard Green deploys one-third of Fund VI in 2014

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  • More than 50 pct invested
  • $1.8 bln put to work in 2014
  • Retail sector is challenging

Despite multiples surpassing pre-financial crisis levels, Leonard Green deployed $1.8 billion of Green Equity Investors VI and has now invested more than half the fund’s capital, roughly $3.3 billion, since inception. Fund VI closed on $6.25 billion in 2012. Now is a good time to be a buyer, Danhakl said.

“What we’ve found (is) price never makes a bad deal a good deal, and it actually rarely makes a good deal a bad deal,” Danhakl said. “Given our investment horizon, what you buy is a heckuva lot more important than what you pay.”

Danhakl called recently acquired businesses such as Mister Car Wash and food sanitation business Packers Sanitation Services “fantastic companies.” Leonard Green paid ”higher prices than we like, but given the prospects of the companies we’re buying, we’re very comfortable,” he said.

In November, Reuters reported that Leonard Green agreed to acquire Packers Sanitation for roughly $1 billion. Onex Corp’s middle market arm ONCAP sold Mister Car Wash for between $400 million and $500 million, according to peHUB.

One area that remains a challenge is retail. Traffic at retailers fell 5.2 percent year-over-year during the typically busy Thanksgiving holiday season, according to a recent National Retail Federation report.

“Our retail businesses are underperforming really for the first time, including (during) the recession,” Danhakl said. “So, retail, particularly our apparel businesses, are disappointing today.”

In an interview after his keynote, Danhakl noted that Leonard Green has structured each of its consumer retail holdings to withstand market downturns.

Leonard Green holds stakes in several retailers, including David’s Bridal, J. Crew Group, Sports Authority and Jo-Ann Stores. The value of the firm’s stake in The Container Store, a publicly traded retailer that sells crates and household organization products, declined rapidly in 2014 after shares hit a 52-week high of $47.07 in late 2013. Shares in The Container Store closed at $19.06 on Dec. 3, according to MarketWatch.

“The viability (of The Container Store) isn’t an issue, it’s just an issue of them meeting the objectives set by the public market,” Danhakl told Buyouts after the keynote.