TH Lee.Putnam Internet Commits Aggregate $74M to Two Companies

Closing one deal and inking another, a group of investors led by TH Lee.Putnam Internet Partners agreed to commit a total of $74 million to two online furniture businesses.

HomePoint Corp., based in Greenville, S.C., will receive $55 million in a second round of equity financing, and publicly traded Krause’s Furniture, based in Brea, Calif., will receive $19 million, should the deal close. The investment in Krause’s is in the form of 380,000 shares of convertible preferred stock. Each share is convertible into 45.45 shares of common stock at a price of $1.10 per share.

HomePoint operates a computer network that links furniture retailers and manufacturers, allowing retailer members to search a virtual inventory of home furnishing items, place orders and track the progress of those orders through delivery.

Dan Christie, chief financial officer at HomePoint, said his company, with its extranet system, is the premier operator in the business-to-business online furniture space, even though furniture retail is a $65 billion business in the U.S.

The company also maintains an Internet site that markets its furniture to consumers. Christie said the Internet site is used to drive traffic to HomePoint’s member dealers, enhancing their prospects for sales.

Catterton Partners and GE Equity, which led HomePoint’s initial investment round of $16.5 million in August, also participated in this round, along with Granite Private Equity.

With the newly acquired capital, HomePoint plans to continue to reshape the home furnishings supply chain, Christie said, enhancing its efficiency, communication and productivity with its business-to-business network. The company also plans to increase its sales force and dealer membership.

Krause’s, which makes and sells custom-upholstered furniture, will use the capital to fund the initial launch of its business-to-business activities and e-commerce capabilities and, secondarily, to reduce debt and fund capital expenditures, according to a written statement.

As lead investor in the $19 million purchase of preferred stock, TH Lee.Putnam invested $13 million, making it Krause’s largest investor, owning approximately 25% of the company’s fully diluted shares. GE Equity is Krause’s second largest shareholder with 5 million common shares and 20,000 preferred shares.

At press time, Krause’s stock was trading at $2.75 per share, down from its 52-week high of $3.56 on Jan. 12.

The two online furniture investments mark TH Lee.Putnam Internet Partners’ second and third investments since the joint venture was founded last July between private equity firm Thomas H. Lee Co. and money management firm Putnam Investments. In November, the group put $50 million in venture funding into wine e-tailer

Partners managing the Internet fund could not be reached for comment for this article.