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Yucaipa Nears Final Close On Latest Fund

Firm: Yucaipa Companies

Fund: Yucaipa American Alliance Fund II LP

Amount Raised: $1.5 billion

Target: $2.0 billion

Placement Agent: Atlantic-Pacific Capital Inc.

Yucaipa Companies, a firm lauded by one limited partner for its focus on “corporate preservation and growth, as opposed to downsizing,” is rounding the final bend on its latest fundraising drive.

The Los Angeles investment shop has pulled in 38 investors and garnered more than $1.5 billion in commitments for Yucaipa American Alliance Fund II LP, an investment vehicle with a $2.5 billion hard-cap, according to a regulatory filing. An investment abstract prepared by investment advisor Hamilton Lane, which is also the LP referenced earlier, places the fund’s target at $2 billion. Calls to Yucaipa were not returned.

The minimum commitment level for the fund is $5 million. Atlantic-Pacific Capital Inc., based in Greenwich, Conn., is listed as the firm’s placement agent and is slated to collect an estimated finder’s fee of $3.4 million for its efforts, according to the regulatory filing. Yucaipa received its first commitment for the fund in March 2008.

The fundraising effort was helped early on by the California Public Employees Retirement System, which committed $400 million to the pool in the first quarter of 2008, re-upping after making a $200 million pledge to the fund’s vintage-2002 predecessor. According to performance data from CalPERS, Yucaipa American Alliance Fund I LP had a net IRR of 13.9 percent and an investment multiple of 1.3x as of June 30, 2008.

Other investors in the fund include Los Angeles City Employees’ Retirement System, which pledged up to $20 million, and Pennsylvania State Employees’ Retirement System which committed up to $25 million.

Investment professionals at Yucaipa have provided 5 percent of the fund’s commitments with firm founder Ron Burkle’s own money making up a quarter of that sum.

The fund plans to be the lead investor in 10 to 15 “management intensive” transactions with equity investments falling between $50 million and $300 million, according to the document from Hamilton Lane. The fund’s specialty will be “control buyouts of operationally complex and/or underperforming core businesses in labor intensive industries.”

At least one transaction already closed by the fund, however, doesn’t fit with the vehicle’s described affinity for control. In January, the firm wrapped up a deal from the pool to acquire almost 10 percent of high-end grocer Whole Foods Market Inc. for about $99 million.

Founded in 1986, Yucaipa has invested a total of $3.3 billion in 40 deals and come away with $5.2 billion in proceeds, and a return multiple of 2x, according to Hamilton Lane.