PE fund briefs, July 14, 2008

Relativity to hold final close

Relativity Capital, a new buyout shop with roots from The Carlyle Group and Cerberus Capital Management, expects to close on about $300 million for its first fund by the end of the year, says a source familiar with the effort.

Investors in the fund include Michigan 21st Century Investment Fund and the Philadelphia Pension Fund, according to Capital IQ.

The Arlington Va.-based firm has already made two investments this year. In March, it bought Berkshire Manufactured Products, a Newburyport, Mass.-based maker of components used in the aircraft, aerospace, automotive and medical industries. In April, it bought Nivisys Industries, a Tempe, Ariz.-based maker of night-vision equipment. The firm didn’t reveal terms for either deal.

Leslie Armitage, senior managing director and a former partner at Carlyle Group, and Joyce Johnson-Miller, senior managing director and former managing director at Cerberus Capital, founded the firm in 2006. They did not return a call requesting comment. —Bernard Vaughan

Darby eyes more funds around the world

Darby Overseas Investments expects to close a mezzanine fund dedicated to infrastructure in Brazil by the end of June at about $249 million, says a source familiar with the fund-raising effort. The vehicle is Darby Overseas Investment’s first vehicle dedicated to a specific country, although it won’t be the last.

Darby Overseas Investments, the private equity arm of mutual funds manager Franklin Templeton Investments, is still plotting its global strategy, so it remains unclear when the firm will start raising the new funds. —Bernard Vaughan

ACON runs through newly closed fund

ACON Investments, a firm supported by TPG founder David Bonderman, is quickly putting its newest fund to work, having deployed the vehicle’s capital on four closed deals as well as two more scheduled for completion by summer’s end.

The Washington, D.C.-based buyout shop closed Acon-Bastion Partners II earlier this year with $375 million in commitments, above its $300 million target. The firm also raised a side fund of $190 million to co-invest in deals, giving the firm $565 million in capital.

Investors in the fund include Bonderman, the California Public Employees’ Retirement System and the California State Teachers’ Retirement System. Jinich declined to say how much Bonderman contributed. “He’s a very large and special investor in the ACON funds,” he said.

ACON Investments expects to buy a financial services company and a company in retail-related manufacturing by the end of the summer, says Daniel Jinich, a managing partner.

The firm has also closed four deals since it started raising the fund in 2006. In January 2007, it bought Peter Piper Inc., a pizza restaurant chain. It followed that up with the acquisition of Spencer Gifts, a specialty retail store. In November 2007, it bought Milagro Exploration, an oil and gas exploration and production company. In April, it bought Chroma Oil & Gas, another oil and gas exploration and production company. —Bernard Vaughan

Constitution Capital answers lucrative phone call

Constitution Capital Partners didn’t set out to raise a $750 million captive fund. In fact, the Andover, Mass.-based funds-of-funds manager didn’t even make it to market with its fund-raising plans.

Constitution Capital, formed earlier this year by veterans of Standard Life Investments Private Equity USA, was just beginning to draw up its first prospectus when Britain’s second-largest pension fund called out of the blue. Universities Superannuation Scheme (USS) was actively scouring the market for international allocations and liked Constitution Capital’s strategy and seasoned team.

After months of negotiations and diligence, Constitution Capital last month announced USS’s $750 million commitment. As part of its investment, USS obtains a 10% stake in Constitution Capital’s management company.

As they did at Standard Life, Constitution Capital’s portfolio managers plan to focus on growth-oriented buyout funds.

The initial pool of capital will be deployed over a three-year time period. For now, the focus is on North American funds, but in two or three years, the firm expects to begin committing to European funds, says Daniel Cahill, a managing partner at Constitution Capital.

Cahill and his partners left Standard Life Investments in October following a dispute over profit-sharing. —Erin Griffith

Legend raises $400M

Legend Capital has raised $400 million for a private equity fund focused on technology, media and telecom in China.

Legend Capital is part of Legend Group, based in Hangzhou, China. The new fund’s parent company has invested $160 million in the fund. Consumer products will comprise 20% to 30% of the fund’s investments.

VSS targets $300M

Veronis Suhler Stevenson is raising upwards of $300 million for its second structured credit fund, which provides non-control capital to mid-market media companies to assist with acquisitions, product launches, buyouts and other corporate and owner initiatives.

The New York-based firm already has secured $132.5 million in commitments. The firm raised $123 million for its previous structured credit fund in 2005, alongside a $1.3 billion buyout fund the same year.

Diamond Castle seals first exit

More than a year after closing its debut fund, Diamond Castle Holdings notched its first exit, selling power company Catamount Energy Corp. to strategic acquirer Duke Energy Corp. for $240 million.

Having at least one exit in the bag is crucial if Diamond Castle decides to ask its investors to commit to another fund. That moment may come soon because the New York-based shop has deployed about 75% of its $1.8 billion fund. The remaining equity should fund the firm’s deals at least through this year, says Mike Ranger, senior managing director.

The firm tripled its investment on Catamount, having invested $62.5 million in the company in December 2005. It was the firm’s first acquisition.

Larry Schloss, the former head of DLJ Merchant Banking Partners, the buyout arm of investment bank Credit Suisse, and other DLJMB alumni, launched Diamond Castle in 2004. Its first fund, Diamond Castle Partners IV, was so named because it was the fourth fund that some members of the team invested together. —Bernard Vaughan