Castle Harlan still seeks deals and possibly a new fund

Castle Harlan Inc may have called off plans last year to raise its sixth fund, but the 29-year-old private equity firm is still open to raising a new pool.

The New York firm said it is exploring and pursuing several investments while devoting its energy to maximizing returns for investors in its fourth and fifth funds.

“While the firm is not presently seeking to raise a new fund, it is open to this possibility if and when … a proper opportunity presents itself,” Castle Harlan said in a statement.

In 2015, Castle Harlan pulled plans to raise its sixth fund. The firm had been seeking $800 million, Buyouts reported.

Mulling a revamp

Castle Harlan is currently considering whether to restructure its fourth and fifth funds, Buyouts reported this week. The PE firm hired Evercore for the possible funds revamp. The fifth pool closed at $800 million in 2010 while Fund IV collected $1.16 billion in 2003, a statement from that time says.

Founded in 1987, Castle Harlan has four investments left: Shelf Drilling, Caribbean Restaurants LLC, Gold Star Foods Inc and Tensar Corp, the firm’s website said. The PE firm does have money, $97 million from its fifth fund, that can be used for deals, Chairman and CEO John Castle said. “Fund V still has the ability to call capital for add-on acquisitions,” he said.

Last week, Castle Harlan said KB Holding, an affiliate of GSSG Capital, had acquired Kings Super Markets and Balducci’s Food Lover’s Markets from Angelo, Gordon & Co and MTN Capital Partners LLC.

Kings, Parsippany, New Jersey, is an upscale grocery with 25 stores. Balducci’s, of Germantown, Maryland, is a specialty gourmet food retailer with six stores.

Castle Harlan spent months working on the deal, handling all negotiations with the sellers and even signing an “exclusivity” agreement at the end of 2015, Castle said. The firm ended up not investing, he said.

KB Holding was originally invited into the deal as a co-investor, Castle said. The PE firm backed off the transaction when KB indicated it wanted a longer hold, Castle said. PE firms typically own companies for three to five years before they try to sell.

KB “concluded they would really like to own [King and Balducci’s] outright and on a long-term basis,” Castle said.

Investment manager

Castle Harlan ended up listed as an investment manager for the transaction. The Kings-Balducci’s sale was a “one-off exception,” Castle said. In future deals, Castle Harlan expects to be a lead investor, a spokesman said.

Funding for the Kings-Balducci’s transaction was expected to come from firm executives and co-investors, he said. In the future, Castle Harlan may use co-investors. “We have found that there are a large number of family offices [interested in] making co-investments. … There are large pools of capital out there as well,” Castle said.

Angelo Gordon declined comment. MTN and KB Holding could not be reached.

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Photo of cantaloupes courtesy of Kings Super Markets