Lion on the prowl for €2bn

Consumer investment specialist Lion Capital is on the hunt for €2bn as it kicks off its third fund.

Lion Capital III will follow in the footsteps of its predecessors, targeting medium-to-large buyout opportunities in Europe and the US.

The launch comes at a challenging time for private equity firms on the fund raising trail. Global private equity volume crashed to less than US$38bn in Q3 2009, representing a 45% fall from Q2 of this year, according to Private Equity Intelligence (Preqin). However, the same data provider also revealed a more positive outlook, with more than half of investors (54%) planning to make new fund commitments in the latter part of 2009, and a further quarter expecting to return to the market in 2010.

The latest offering from Lion is its third since the firm was launched in 2004 by Lyndon Lea, Neil Richardson and Robert Darwent following a spin-out from US buyout giant Hicks, Muse, Tate & Furst. It raised €820 for its first fund in 2005, following it up with a €2bn vehicle in 2007. Investors in Lion Capital II included the New York State Common Retirement Fund, Scottish Widows Investment Partnership, AIG Private Equity and the Indiana Public Employees’ Retirement Fund.

The fund launch comes as Lion, along with US LBO behemoth Blackstone, take part in one of the largest private equity exits of the year, that of selling Orangina Schweppes to Japanese brewer Suntory for a reported €2.6bn. The two firms acquired the UK soft drinks maker for US$2.6bn in 2006, investing roughly US$600m of their own money.

This follows the sale by Lion of the majority of its stake in Russian Alcohol to vodka maker Central European Distribution Corp (CEDC) for US$510m. Lion acquired the business, the largest producer of vodka and ready-to-drink alcoholic beverages in Russia, in June 2008 from Industrial Investors.

Lion has made one investment this year, buying US$80m of secured second lien notes in American Apparel, a US clothing manufacturer, distributor, and retailer.