VSS Seeks Premier Mezz Fund

Consolidation has gripped the media industry ever since the U.S. government relaxed its rules of media ownership with the 1996 Telecommunications Act. And while the various mergers and acquisitions that have taken place since then have created some large media empires, investors still see plenty of assets available and ready for an infusion of capital.

In fact, Veronis Suhler Stevenson (VSS) is betting on a need for equity capital in the media industry. The New York-based media merchant bank is raising a mezzanine fund with a goal of $350 million, Private Equity Week has learned.

The fund, VSS Mezzanine Partners, is the firm’s first to focus on mezzanine. The firm had a first close in January for approximately $100 million.

Credit Suisse First Boston is acting as a strategic advisor for the fund.

VSS plans to invest in a wide variety of media companies such as those in advertising, cable television, consumer magazines, newspapers and radio. The firm has two deals in the pipeline – one in the newspaper industry and the other in radio. Sources familiar with the firm say that VSS will likely close on a deal by the end of the second quarter.

The fund will have a five-year investment cycle and invest primarily in U.S. companies. Like its buyout portfolio companies, mezzanine investments will go into middle market companies with less than $50 million in sales.

In the past, limited partners in VSS funds have included the Bank of New York, Gannett, H.J. Heinz Co., Mutual of Omaha and the University of Texas Investment Management Co., according to Thomson Venture Economics (publisher of PE Week).

The firm has raised three buyout funds since its founding in 1987 and is looking towards its fourth. Its most recent buyout fund, VS&A Communications Partners III, closed in 1998 with more than $1 billion.

VSS invests heavily in European media companies and recently merged its European yellow pages business with that of 3i to create Yellow Brick Road, a holding company controlling yellow pages throughout Europe. VSS also provides research and advisory services and publishes a widely distributed communications industry forecast and report.