If one types “private equity” and “unions” into Google, the result is mostly a catalogue of recriminations. This hostile state of affairs works to the advantage of Ron Burkle, argues the billionaire head of The Yucaipa Companies. A new fundraising will test just how much limited partners buy into this advantage.
Los Angeles-based Yucaipa is preparing to approach limited partners with a follow-on fund that will seek out opportunities to invest in partnership with, or at least with the blessing of, labour unions. The fund has a target of approximately $3 billion, according to a source close to the firm.
It will be the second Yucaipa American Alliance fund, the first one having closed in 2002. As with other Yucaipa vehicles, the California Public Employees' Retirement System was a major backer of the debut American Alliance fund, committing $200 million. Public records show CalPERS with a 17.9 percent IRR on that fund.
Burkle built his fortune in supermarkets, a heavily unionised industry. In a previous interview with this magazine, Burkle argued that his generally strong relations with unions are not due to him making more generous concessions, but because he creates a corporate atmosphere in which unionised workers truly believe they are on the winning team, and benefiting by it.
Yucaipa tells its investors that it enjoys deal flow the vast network of union leaders, who alert the firm to companies in trouble or at inflexion points. The tips come in because the unions want Yucaipa as an owner.
Many large deals have union complexity, and Burkle has been present in some of these situations. He was reported to have recently worked with the Dow Jones employees union on a possible counter-bid to Rupert Murdoch's takeover proposal.
For years, various private equity firms have sought to seize the “worker friendly” mantel, in part to gain access to the vast and untapped pool of socalled Taft Hartley plans – union retirement systems. Private equity as an asset class is more in demand than ever, but unions and politicians have more concerns about it than ever. Burkle's worker-friendly formula may fill an important market need in a big way.
NEW ADVISOR IN NAMING-RIGHTS DISPUTE
After just one month as Leucadia Capital Partners, the newly formed La Jolla, California-based private equity advisory firm has changed its name to StepStone Group. The founders – Monte Brem, Thomas Keck, and Jose Fernandez – originally named the firm in honor of the Encinitas, California community in which they live and work. But soon after, a firm of the same name in a different line of business objected. To avoid a drawn-out dispute over naming rights, the firm changed its name. The new name is a reference to a beach in Leucadia.
HICKS TO LIST $400M ‘BLANK-CHEQUE’
Legendary Texas buyout pro Thomas Hicks has filed plans with the SEC to raise $400 million for a new special purpose acquisition vehicle (SPAC) for an as-yet unidentified acquisition. This is the latest in a string of moves Hicks has made since stepping down from the Dallas buyout firm he founded, Hicks, Muse, Tate & Furst, in 2005. According to the filings, the SPAC, Hicks Acquisition Company I, will seek to acquire a business with a “proven track record, strong free cash flow characteristics, a strong competitive industry position, an experienced management team, and a diversified customer and supply base.”
AVISTA CLOSES ON $2BN DEBUT FUND
New York-based middle marker firm Avista Capital has closed its debut fund on $2 billion (€1.5 billion), exceeding its initial target of $1.5 billion. Avista's seven general partners, led by Thomson Dean and Steven Weber, are the largest of the fund's 60-some investors, having committed $161 million, far more than the amount GPs would normally commit to a fund of this size. Avista Capital Partners I will focus on US-based companies in the energy, healthcare and media sectors. Avista is set to complete $200 million in recapitalizations by month's end, and an additional $300 million by the end of the year.
LEHMAN'S FOURTH FUND CLOSES ON $3.3BN
Lehman Brothers has closed its fourth private equity fund on $3.3 billion (€2.5 billion), exceeding its initial target of $3 billion. The new fund is nearly twice the size of the firm's previous fund, which closed on $1.2 billion in July 2005. $1.2 billion of Fund IV is earmarked for investments in Europe, a region which the firm's executives said shows increasing investment opportunities.
EX-CITI PRO RAISES $3BN FOR INFRASTRUCTURE
New York- and London-based Alinda Capital Partners has raised $3 billion (€2.25 billion) for a debut infrastructure fund. The fund will invest in public sector and energy infrastructure assets in Europe and North America. Christopher Beale, former head of infrastructure finance and project finance at Citigroup, leads the firm. Alinda has already committed one-third of the capital raised to investments. The firm owns the Detroit-Windsor Tunnel, toll bridges in Alabama, natural gas distribution utilities in several Western states, and an income fund in Canada that owns residential hot water tanks.
FORMER NBA PRO TO RAISE $250M FUND
David Robinson, an all-star centre for the San Antonio Spurs basketball team and longtime Texas philanthropist, has announced his intention to team with former Goldman Sachs investment banker Daniel Bassichis, to raise a $250 million (€186 million) in the next six months. The money will be invested in businesses that benefit the inner city. The fund is not the first of its kind: in 1998 Magic Johnson teamed with Canyon Capital Realty Advisors to form the Canyon Johnson Urban Fund, which now has nearly $1 billion in capital committed to revitalizing underserved urban markets around the country. CJUF closed its second fund on $600 million in 2005.
HARVEST CLOSES ON $815M, TRANSFERS OWNERSHIP
Harvest Partners has closed its latest, middle market-focused fund on $815 million (€612 million), bringing the US firm's total capital under management to roughly $1.7 billion. The fund, which began to be heavily marketed in mid-2006, had an initial target of $600 million. The formation of the firm's fifth fund coincided with the completion of an ownership transition from Harvest's founders to senior managing directors Thomas Arenz, Stephen Eisenstein and Ira Kleinman. The transfer was announced last year, when the fund held a first close.