Leonard Green targets $5bn for sixth fund

The Los Angeles based firm has already received at least $350m in commitments for the fund, which will invest in control positions on the mid market.

Leonard Green & Partners has launched its sixth Green Equity Investors fund, targeting $5 billion for controlled buyouts of mid-market companies across a broad range of industries, according to the School Employees’ Retirement System of Ohio documents.

Green’s sixth fund will use a similar strategy as its previous Partners Funds, which typically invested between $100 million to $500 million of per transaction. Fund VI will focus on the US retail, consumer products, distribution, media, business services and healthcare sectors, avoiding cyclical and highly regulated industries, according to SERS documents.

Fund terms include a $200 million investment from the general partner over a six year commitment period. Green is charging management fees of 1.5 percent per year during the commitment period, 1 percent per year of aggregate fund commitments for the next two years and 0.75 percent thereafter, according to SERS documents. The 10 year fund will be subject to three one-year extensions, pending the approval of limited partners.

The firm also will share 80 percent of any transaction fees with LPs, and 100 percent of director fees, which members of the firm collect for sitting on the boards of portfolio companies, according to a limited partner who has seen the fund documents.

The firm did not return requests for comment.

Green has already received a $50 million commitment from SERS for the fund, in addition to a $300 million re-up from the Washington State Investment Board.

The firm’s previous fund, its largest, raised $5.3 billion in 2007. As of 31 March, the fifth fund has generated a 1.3x total value multiple and a net internal rate of return of 20.11 percent, according to documents obtained from Washington SIB. One LP not connected to the firm said a 1.3x for a 2007 vintage is “really good”.

Last year, the firm made a big push into the consumer sector when it announced a planned acquisition of NYSE-listed retailer Jo-Ann Stores in a $1.6 billion take-private. The firm’s offer, $61 per share, was a 34 percent premium over the arts and crafts store’s 22 December closing price.

Leonard Green & Partners, led by John Danhakl, Peter Nolan and Jonathan Sokloff, was founded in 1989 by the late Leonard Green. The Los Angeles-based firm has raised five funds to date and controls around $9 billion in equity capital under management.