An investment in silver screens has turned to gold for The Cypress Group. This is one star performance for which the New York buyout firm would like to be remembered.

Last month, Chicago buyout firm Madison Dearborn Partners agreed to buy Cinemark, a chain of movie theaters, for roughly $1 billion (€820 million), including the assumption of more than $500 million in debt. Cypress, a minority owner of Cinemark, stands to receive roughly $440 million from the transaction, or roughly three times the $139 million it spent to acquire its 44 percent stake in the Plano, Texas-based company in 1996. It is the biggest exit event in the firm's turbulent eight-year history.

Cypress was formed by four partners – James Stern, Jeffrey Hughes, James Singleton and David Spalding – who spun out of Lehman Brothers' private equity division. Cinemark, its first deal, was announced concomitant with the close of the firm's debut $1 billion fund.

Cypress quickly established itself as a major buyout player. Two years after raising its first mega-fund, the firm raised a $2.5 billion Fund II.

Subsequent Cypress deals did not fare as well as did Cinemark. Three portfolio companies – garden products retailer Frank's Nursery, healthcare group Genesis Health Ventures and grocery delivery startup HomeRuns.com – have gone bankrupt, costing the firm a total of $440 million.

But Cinemark has been an international blockbuster. During Cypress' involvement, the company opened screens across North America and throughout Central and South America. Its cash flow grew from $50 million to $200 million.

Cypress' win is even sweeter given the grim fates of other private equitybacked theater deals initiated in the 1990s. JP Morgan Partners, Brentwood Associates, Merrill Lynch and Goldman Sachs all got their fingers burned on theater chain investments as the industry suffered from over-expansion. Most notably, Kohlberg Kravis Roberts and Hicks Muse Tate & Furst each lost $500 million on investments in Regal Cinemas, now owned by distressed specialist Philip Anschutz. (Look for a sequel to Cypress' screen success in the impending sale of Loews Cineplex, owned by Toronto buyout firm Onex and Los Angeles-based Oaktree Capital.)

Cypress is also in the process of lightening its holdings in Montpelier. The private equity firm bought 9 million shares in the insurer in 2001 for $16.67 per share. The stock now trades for over $35 per share.

Clearly, 1996 was not the best year to start life as a buyout firm. Then again, when else would a first-time spin-out team have been able to raise $3.5 billion so quickly?

The New York buyout giant has agreed to buy Sealy, the world's largest manufacturer of mattresses, from a group including Bain Capital, Charlesbank Capital Partners, JP Morgan Partners, CIBC Argosy Merchant Fund and BancBoston Capital, for $1.5 billion (€1.23 billion). The Bain-led investor group bought Sealy in 1997 for a reported $800 million. In November, Boston-based Thomas H. Lee Partners bought Simmons, another mattress company, from private equity firm Fenway Partners for $1.1 billion.

The Chicago-based middle market buyout firm completed the goingprivate purchase of AMF Bowling Worldwide for $670 million (€537 million). AMF is the world's largest owner and operator of bowling centers and also manufactures bowling and billiards products. Founded in 1988, Code Hennessy & Simmons manages approximately $1.5 billion in capital in four funds. Last month, the firm also completed a majority equity investment in Baker Tanks, a supplier of containment rental equipment, for an undisclosed amount.

The New York private equity veteran announced it acquired cancer-care services company US Oncology in a privatisation worth $1.7 billion. Welsh Carson, which helped found the company in 1992, already owned roughly 14.5 percent of the US Oncology's shares. Welsh Carson was a founding investor of US Oncology in 1992. US Oncology provides cancer-care services to affiliated practices and more than 875 doctors.

The New York firm announced a $3.1 billion (€2.5 billion) agreement to acquire Extended Stay America, a publicly traded company that operates extended-stay lodging facilities in the US. Funds for the transaction will be drawn from both Blackstone Capital Partners IV and Blackstone Real Estate Partners IV. Extended Stay facilities offer core components to guests, including a combination living/sleeping area, a fully equipped kitchen or kitchenette and a bathroom.

Carlyle/Riverstone, the energy investment partnership between The Carlyle Group and Riverstone Holdings, announced two major investments in March. The firm teamed with a unit of publicly traded energy services holding company Sempra Energy in the acquisition of ten Texas power plants from American Electric Power for $430 million (€348 million). In addition, an affiliate of Fort Worth, Texas buyout house Texas Pacific Group joined Carlyle/Riverstone on the acquisition Mariner Energy from bankrupt Enron through one of their portfolio holdings in a $271.1 million deal.

Bain Capital, Warburg Pincus and Silver Lake Partners trumpeted a $2.05 billion (€1.67 billion) agreement to buy UGS PLM Solutions, a division of publicly traded EDS, the systems services giant. The three firms have contributed equal amounts of capital to the deal. UGS, based in Texas, is a ‘product lifecycle management’ software maker. The deal is being touted as the largestever private equity technology investment. Silver Lake, famous for its buyout of Seagate Technologies, is about to close its second fund on $3.5 billion (see story p. 22).

Two New York private equity firms, The Cypress Group and CSFB Private Equity, have agreed to buy Leawood, Kansas community bank Gold Banc in a $672 million (€532 million) public-to-private transaction. The privatised bank will be led by C. Stanley Bailey, the former chairman and chief executive officer of Superior Financial, an Arkansas bank that was purchased in December by Arvest Holding for $211 million. In 1998, Bailey led a group of investors in the buyout of Superior Financial from Bank of America. Arvest is controlled by Wal-Mart's Walton family. Cypress recently saw success in the exit of Cinemark (see story p. 18).

New York-based Bear Stearns Merchant Banking announced its purchase of Aearo, a maker of protective wear, from New York private equity firm Vestar Capital Partners for $385 million (€312 million). Vestar purchased Aearo in 1995 through a management buyout from publicly traded Cabot, a chemicals and metals manufacturer for $205 million. Aearo makes goggles, earmuffs, earplugs, respirators, hard hats, gloves, face shields, communication headsets, first aid kits, safety clothing and safety shoes, among other safety products.

The New York-based distressed giant announced an agreement to buy Guilford Mills off the public market for a cash total of $107 million (€86 million). The Greensboro, North Carolina maker of fabrics emerged from Chapter 11 bankruptcy less than 18 months ago. Cerberus, with roughly $12 billion in funds and accounts under management, last year acquired Fila Holding, an Italian manufacturer of footwear and apparel for sport and leisurewear, from Holding di Partecipazioni Industriali for $351 million.

Pacific Corporate Group, a La Jolla, California private equity consultant, announced a $100 million (€81 million) investment in publicly traded WebMD, an online information exchange facilitator for the healthcare industry, through a vehicle sponsored by the California Public Employees' Retirement System. The private investment in a public entity (PIPE) takes the form of convertible redeemable exchangeable preferred stock. Terms of the deal give PCG Corporate Partners the right to convert preferred stock to common shares at $9.40 per share. The preferred stock pays no dividends.

A consortium comprising Boston-based JW Childs Associates, Toronto-based Borealis Capital and Ontario Municipal Employees Retirement System (OMERS) have agreed to take bathroom fixtures maker Maax private in a deal worth C$640 million ($485 million; €392.6 million). Toronto-based Borealis Capital currently invests through its C$375 million Borealis Private Equity LP and Borealis (QLP) Private Equity LP fund. OMERS Merchant Banking Group is the private equity arm of the C$33 billion Ontario Municipal Employees Retirement System.