Fox Paine slowly divests 2000 vintage fund

The mid-market firm has sold software company Paradigm for $1bn, completing its fourth exit from its 2000 vintage fund that has two remaining investments.

California-based mid-market firm Fox Paine & Company has sold geosciences software business Paradigm to Apax Partners and JMI Equity for $1 billion, generating a 7.8x return multiple.

Paradigm provides analytical and information management services to companies in the oil and gas and mining industries.

“[Paradigm] is well-placed to benefit from strong tailwinds in the coming years as energy companies look to drill in more challenging locations,” senior partner at Apax Ian Jones said in a statement.

UBS and Royal Bank of Canada provided debt financing in connection with the transaction.

Fox Paine acquired Paradigm in 2002, investing from its $1 billion second fund raised in 2000. Fox Paine Capital Fund II has been fully invested since 2004, having completed a total of six platform acquisitions. The fund has two remaining investments in European businesses: Ireland-based specialty insurance company Global Indemnity and London-based fragrance and luxury product retailer Cradle.

Fund II has generated a 40 percent compounded annual return from its four other investments, net of fees and expenses, according to the firm. Limited partners in the fund include pensions funds the Minnesota State Board of Investment and Oregon Investment Council and insurance company Aetna.

Fox Paine has been slowly exiting investments from the fund for nearly a decade, most recently selling plant and vegetable seed company Advanta for $339 million via five divestitures, beginning in 2005 and ending in 2010. The investment generated a 4.5x return multiple and 636 percent IRR, according to a spokesperson for the firm.

Fox Paine’s most recent investment from Fund II came in 2004 when it purchased automotive components company VCST for $58 million. Fox Paine sold the business in 2005 for $97 million, generating a 1.7x multiple and 57 percent IRR.

Fox Paine was founded in 1997 by Saul Fox, a former lawyer and Kohlberg Kravis Roberts partner, and Dexter Paine, a former investment professional at Kohlberg & Company. In 2005, after raising two funds worth a combined $1.5 billion, the founders decided to split and have Paine raise the third fund alone through the newly formed Fox Paine Management III.

In 2007, Fox charged Paine with breaches of fiduciary duty, breaches of contract, unjust enrichment and misappropriation of Fox Paine & Co.’s assets. The two men ultimately reached a settlement out of court later that year.