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NY Shop Eyes Second Close, Sets $825M Hard Cap

Firm: Arsenal Capital Partners

Fund: Arsenal Capital Partners III LP

Target: $750 million

Hard Cap: $825 million

Placement Agent: None

Legal Counsel: Kirkland & Ellis LP

Arsenal Capital Partners expects to hold a second close on its third buyout fund in June or July in the $400 million to $500 million range, a source close to the firm told Buyouts.

The  New York-based firm, which recently held a first close of about $300 million in commitments, has also negotiated with its investors to cap the fund at $825 million. That would comprise $800 million in commitments from investors and $25 million from Arsenal Capital professionals, the source said.

The target for the fund, Arsenal Capital Partners III LP, is $750 million. Investors will include sovereign wealth funds, the source said. Previous investors in Arsenal Capital’s funds have included international LPs such as Copenhagen-based ATP Private Equity Partners as well as U.S. investors including Adams Street Partners, RCP Advisors and the Oklahoma Police Pension and Retirement System.

Arsenal Capital typically invests $15 million to $75 million in deals with enterprise values of $30 million to $400 million; sectors of interest include specialty industrial, health care and financial services. In April, the firm generated more than 4x its invested capital in Novolyte Technologies when it sold the manufacturer of electrolytes used in lithium ion batteries to BASF, which should help the firm’s marketing effort.

Arsenal Capital was founded in 2000 by Terry Mullen and Jeffrey Kovach after they left Thomas H. Lee Partners. The firm has about 10 investment professionals, as well as 11 senior advisers and 12 operating professionals, according to its Web site.