Rutledge to Launch Its Third Buyout Fund –

Rutledge Capital LLC is in the final stages of preparing to launch its third fund. After a February buyout, Rutledge has invested more than 60% of John Rutledge Partners II, L.P., for which the firm raised $113 million less than two years ago (BUYOUTS June 10, 1996, p. 6), said Steven Moseley, a principal. The group has yet to launch Fund III, the principal said, but that it will likely begin fund raising this summer.

“We will no doubt be raising a fund and it won’t be that far away,” said Mr. Moseley. The firm likely will set a target of less than $300 million, so it can remain focused on buying smaller manufacturing and distribution companies, he added.

The Greenwich, Conn.-based group last month took a majority position in Westchester, N.Y.-based Wise/Contact Us Optical Corp., a wholesale distributor of contact lenses, and will use the business as a platform. Mr. Moseley declined to reveal the purchase price; Bank of New York was the senior lender.

Since raising its last effort, the group has bolstered its team by increasing its staff to five principals from three. Rutledge last year added John Shaia, formerly a manager at McKinsey & Co., and Mr. Moseley, formerly a principal at Windward Capital Partners to its line-up of John Rutledge, Jerry St. Dennis and Rob Tucker. After adding the principals, the group changed its name from Rutledge & Co. to Rutledge Capital LLC.

The firm has not yet exited any investments from Fund II, so L.P.s will likely look closely at the returns the firm generated from its $50 million debut vehicle.

There is a sharp difference, however, between the two funds beyond the increased size of the follow-on effort. In Fund I, the firm largely co-invested with partners at Kelso & Co. and StoneCreek Capital (formerly the Gordon+Morris Group). Meanwhile, John Rutledge Partners II, L.P. has taken control positions in all its investments, and the firm plans to continue that strategy in most of its Fund III investments.

Rutledge’s investments from Fund II include a 1996 buyout of Adobe Air, a manufacturer of humidifiers and space heaters, and a 1997 investment in StairMaster, a manufacturer of excercize products that simulate walking up stairs.

In order to better show realized returns, Rutledge last month exited a 1995 investment in Fluidrive, a manufacturer of steerable hydraulic axles and air suspension systems (BUYOUTS April 17, 1995, p. 11). The exit brings Fund I to a 39% gross IRR, Mr. Moseley said, declining to give return figures for the Fluidrive investment.