SunTx Mulls Launch Of Fund III; More Exits Ahead

The firm’s 2010 vintage SunTx Capital Partners II, a $256 million vehicle with a $150 million of additional capital in a co-investment sidecar fund, is at least 80 percent committed, making it time for the firm to begin to think about its next fund, said the person, who asked not to be identified because talks are preliminary.

Founded in 2001 and led by founder and managing partner Ned N. Fleming III, who got his start with legendary Texas investor Richard Rainwater and a protégé of Rusty Rose, Dallas-based SunTx Capital is an operationally focused buyout shop that invests in lower mid-market companies, primarily in the Sun Belt. The firm invests mainly in manufacturing, distribution and service companies, typically with an enterprise value of $50 million to $150 million. The firm’s Web site lists 18 investing pros and operating partners

SunTx Capital scored an 8x return multiple and more than a 30 percent IRR in February when it sold auto-parts maker Huron Inc. to an unnamed financial sponsor, according to published reports. Huron, based in Lexington, Mich., makes components for drive trains and other car and truck parts. The firm invested in the company in 2005 using capital from its $230 million debut fund.

Of the additional portfolio companies that are poised for sale, the person said, at least one is likely to go to a financial sponsor, and another to a strategic buyer. The firm’s Web site lists 11 portfolio companies, including Huron. Other holdings include CBI Laboratories, a maker of skin care products in Fort Worth; Nouveau Eyewear Inc., a maker of eyeglass frames in Carrollton, Texas; and NationsBuilders Insurance Services Inc., a specialty insurer in Atlanta.

The firm’s inaugural SunTx Fulcrum Fund, a pool of $140 million (with an additional $90 million of SBA capital) that had its final close in 2004, had generated a 14.55 percent IRR as of year-end 2011, according to investor Colorado Public Employees’ Retirement Association.

UBS was the placement agent on Fund II, the person said, but SunTx Capital has made no commitments on the planned new fund, the person said.

CORRECTION: A version of this story posted on March 14 misidentified the SunTx Capital Partners II fund as the SunTx Fulcrum Fund II.