TSG Capital Closes On $500M Third Fund –

TSG Capital Group in January held a $515 million final close for its third buyout fund, which will continue its strategy of investing in companies that target ethnic markets.

The Stamford, Conn.-based private equity group launched TSG Capital Fund III, L.P. last February with a target of $500 million (BUYOUTS June 1, 1998, p. 10).

According to Darryl Thompson, a partner at the firm, TSG invests in underserved markets with African-American and Hispanic-American customers who have specialized tastes and product needs.

One of the firm’s more recent acquisitions was House of Bargains, a children’s apparel retailer with 54 stores in five states in the East and Midwest. House of Bargains, which was founded in 1954, targets consumers in low-income neighborhoods, and had 1998 revenue of $48.5 million.

TSG also invests in the automotive industry. The firm’s most recent deal was a majority investment in Orbseal L.L.C., a maker of automotive sealants, adhesives and sound abatement products. Terms of the transaction, which closed Feb. 17, were not disclosed.

In addition, the firm has targeted Spanish language markets as areas of opportunity. In January 1996, it formed Z-Spanish Media Corp. as a platform to acquire Spanish-language radio properties. The company, based in Sacramento, Calif., currently has 31 properties. TSG started Vista Media in August 1997, to acquire billboards in urban areas. The company now has more than 8000 billboards throughout minority neighborhoods in cities such as New York and Los Angeles.

TSG’s second fund was $200 million and is now fully invested. According to Mr. Thompson, the firm’s sweet spot for equity investments is roughly $40 million, but this may increase to $50 million with the closing of the new fund.

Limited partners in the fund are 80% from large public pensions, Mr. Thompson said, declining to disclose investors by name.