Leonard Green Targets $5B for Newest Fund

Firm: Leonard Green & Partners

Fund: Green Equity Investors VI LP

Target: $5 billion

Leonard Green & Partners, a private equity firm specializing in well-known retail chains and other consumer companies, has begun marketing its sixth fund, Green Equity Investors VI LP, according to an investor briefed on the new offering.

The firm is looking to raise $5 billion and to close by the first quarter of 2012, said the investor, who said that the terms that he saw included standard carry and a 1.5 percent management fee. Executives at Leonard Green declined to comment.

The Los Angeles-based firm has about $9 billion in assets and recently has owned stakes in such high-profile retailers as Neiman Marcus, RiteAid, Whole Foods, the Sports Authority, J. Crew and Petco. In June, the firm bought out BJ’s Wholesale Club for $2.8 billion in partnership with another private equity firm, CVC Capital Partners.

Club deals like BJ’s have been a point of concern among some investors. While they see teaming up with other firms as a good way to lessen risks and do bigger deals, they also complain that such syndication dilutes a firm’s distinctiveness and competitive edge.

Over time, however, Leonard Green has proven itself to be a savvy investor in its core retail specialty. According to March 2011 return data from the Oregon Investment Council, Fund IV, which closed with $1.9 billion in 2003, produced decent but unspectacular returns, generating a 10.6 IRR and a 1.5 return multiple. Fund V, which closed in 2007 with $5.3 in commitments has done much better, especially given that it launched right before the financial crisis. Fund V has generated an IRR of 20.1 percent and has a 1.34 return multiple.

The firm’s investors include some of the nation’s largest pension funds, including the California Public Employees Retirement System, the Oregon Investment Council, the Washington State Investment Board and the New York State Teachers Retirement System.

Leonard Green was founded in 1989 by the firm’s namesake, who died in 2002.