Vestar Capital Nears Blockbuster Final Close –

Longevity and loyalty is paying off big for Vestar Capital Partners, which last week said that it had hard-circle commitments for its fourth fund totaling $2.52 billion. The New York buyout firm will hold a final close on that amount on Friday, according to Dan O’Connell, Vestar’s chief executive.

In a culture where general partners routinely jump ship to join rival firms or raise their own funds, Vestar’s seven founding partners, 11 years later, all are still with the firm. And so are most of the investors from Vestar’s $803 million third fund, who came stampeding back for the fourth effort with approximately $3.8 billion in commitments-commitments which had to be painstakingly pared back, O’Connell said.

“People take comfort in the continuity and longevity of the partnership,” O’Connell said.

Vestar Capital Partners IV, L.P. was launched last summer with a $2 billion target (BUYOUTS Sept. 13, p. 4). Monument Group was the fund’s placement agent.

Partners at Vestar declined to disclose the fund’s limited partners, but said that among them are 119 U.S. and European institutions and a large number of individuals. The individual with the largest commitment to the fund is Ray Chambers, a pioneer in the buyout community turned philanthropist and New Jersey Nets owner. Chambers invested in the first Vestar fund in 1988 through his firm Wesray Capital.

In addition, partners at Vestar are putting $100 million of their own money into the fund. No commitment exceeded $100 million, O’Connell said.

In its 11 years of investing, Vestar has realized a net internal rate of return of more than 50%, O’Connell said, and has suffered only two write-downs. The fourth fund will continue to target middle-market companies with annual revenues between $100 million and $1 billion. O’Connell described his firm as a generalist, and said Vestar will only look to complete four or five deals per year. “We do not aspire to be the volume leader,” he said.

No Interest in Internet

Vestar also will avoid the Internet sector, an area in which other buyout firms lately have been participating with venture capital-like deals. O’Connell said the Internet industry is not one of his firm’s competencies.

Nevertheless, Vestar has over the past year been involved in deals in wildly diverse sectors. It’s most recent transaction was to join with a number of other private equity groups in acquiring access lines to almost 400,000 telephone customers throughout the Southwest. The group bought the properties from GTE Corp. for approximately $1.7 billion (BUYOUTS Sept. 13, p. 10).

In July, Vestar acquired women’s clothing manufacturer St. John Knits in a going-private transaction worth approximately $520 million.

Also this year, Vestar has invested in a healthcare company-Sheridan Holdings- and a plastics packaging concern re-named Consolidated Container Co. LLC which it bought from Souza Foods Corp., a food conglomerate listed on the New York Stock Exchange.

O’Connell said his firm soon will announce another going-private transaction, but declined to give further details.

Vestar’s seven founding partners are O’Connell, Norman Alpert, James Kelley, Sander Levy, Prakash Melwani, Robert Roser and Arthur Nagle. Vestar has 26 investment professionals and an additional office in Denver.