Fox Paine Spin-Off Hits Ground Running

Following its first deal under its new moniker, Paine & Partners expects to close five to seven more transactions with the $1.25 billion third fund carried from the firm formerly known as Fox Paine & Co.

The newly christened firm, headed by former Fox Paine co-founder W. Dexter Paine, came into being late last month as part of his split with former partner Saul Fox. The new firm retained control of Fox Paine’s third fund, and also brought all of its investment professionals from the old shop.

Like its predecessor, the firm expects to make eight to 10 investments with each fund. Last week it completed its third investment with Fund III, raised in 2006. It was also Paine & Partners’s first deal since changing its name on Jan. 23. Mitchell Presser, partner, declined to comment on future fundraising plans.

In its first deal, the firm spent an undisclosed sum to back a management buyout of Capital Z Investment Partners LLC’s hedge fund sponsorship business. Capital Z, a former arm of Zurich Investments, provides investment cash for hedge fund managers in exchange for a minority position in their funds. An intermediary, whom Presser declined to name, introduced the firm to the Capital Z team about six months ago.

Paine & Partners is concentrating on helping Capital Z raise a new hedge fund sponsorship vehicle to seed new and emerging fund managers and to develop additional services. Presser declined to comment on the size of the vehicle, or on what additional services Capital Z could provide.

Paine & Partners plans to pursue the same strategy under its new name, exploring the market for deals in financial services, energy, health care, food and agriculture, among other areas, Presser told Buyouts. In August, under the Fox Paine banner, the firm acquired Icicle Seafoods, a Seattle-based company that supplies salmon, Alaska crab and other seafood. Presser expects volatility in the financial services sector to yield new opportunities in the coming months. “We think the dislocation will provide opportunities for people with capital willing to make investments in more difficult times,” he said.

The name change is the latest, and perhaps final, development in the ongoing rift between Paine and Fox. The relationship between the longtime friends and partners blew up last year and landed in the courtroom. The pair filed suits and countersuits alleging, among other things, breaches of fiduciary duty and misappropriation of the firm’s assets. The two eventually settled the feud out of court.

Paine & Partners has 18 investment professionals, all of whom come from Fox Paine. They include Fox Paine Managing Directors Presser, Kevin Schwartz and Troy Thacker. The firm also employs five operating directors.—B.V.