Graham Launches Fund, Joins With Brera for Deal –

Graham Group, an extensive family business conglomerate with investments in scores of private equity funds, now is raising a buyout fund of its own with a target of $200 million.

In its first move as a private equity firm, Graham Partners already has agreed to acquire a manufacturing company in partnership with new LBO shop Brera Capital Partners. The deal, should it close, will be Brera Capital’s first, as well.

Graham Partners held a first close in January on $65 million, all of it coming from the Philadelphia-based Graham Group. According to Steven Graham, senior managing principal of the firm, Graham Group will commit a total of $68 million to the fund, representing 34% of the capital targeted. The firm now is marketing the fund to banks, funds-of-funds and family groups. Mr. Graham said he would also like to see some financial companies in the fund who will be able to co-invest in deals.

The Graham family has businesses in the packaging, architecture and engineering sectors and manages more than $1 billion in assets. In addition, it is a limited partner in approximately 20 private equity funds. The new fund will focus exclusively on manufacturing company buyouts. Mr. Graham said Graham Group wanted to start a private equity fund to further diversify the family’s investments and to develop an institutional profile in the private equity community, which will aid in sourcing deals.

Graham Partners will increase the number of its buyout professionals to 11 from eight, Mr. Graham said.

Graham Group is one of many family business groups that has started its own buyout program. For example, EXOR Group invests the wealth of Italy’s Agnelli family; Oak Hill Capital Partners is a private equity arm of Robert Bass of the Bass family of Texas; and Brookside International Inc. invests the capital of New York’s John Erwin family.

Late last month, Graham Partners announced its intention to acquire Western Industries in equal partnership with Brera Capital for an undisclosed amount.

High-yield financing for the deal will be provided by Chase Securities Inc., Merrill Lynch & Co. and Scotia Capital Markets. Chase Manhattan Bank and Bank of Nova Scotia also will provide bank debt.

Western Industries manufactures molded plastic parts and components, as well as metal components for the construction and home products industries. The company had 1998 sales of approximately $250 million.

Western Industries is a divestiture of EXOR Group, which is seeking to liquefy its portfolio and close its U.S. operations (BUYOUTS March 22, p. 1). Alberto Cribiore, Brera Capital’s founder, helped found EXOR America in 1974 and has maintained close ties with the firm. According to Mr. Graham, Brera Capital brought Graham Partners on board because of the experience the Graham Group has in plastic molding and metal fabrication.

Brera Capital last year closed on its $650 million debut buyout fund.

The alliance between Brera Capital and Graham Partners likely will be repeated in future deals, Mr. Graham said.

The two groups have joined forces before: Graham Group is a limited partner in Brera Capital’s debut fund, and Mr. Cribiore will commit personal capital to the Graham Partners effort.