Mason Wells Gobbles Cereal Co., Wraps Fund –

Continuing its transformation from captive private equity arm to independent buyout firm, Mason Wells early this month agreed to acquire a manufacturer of private-label breakfast foods.

The deal marks Mason Well’s second control investment since spinning out from Marshall & Ilsley Corp. last year with Mason Wells Leveraged Buyout Fund I. The fund held a final close last month on $28 million, bringing the total capital raised to $175 million.

The Milwaukee firm put $19 million in equity into A. Sturm & Sons, also based in Wisconsin, which makes private-label products such as oatmeal, grits, and assorted powdered breakfast cereals. Sturm & Sons sells to most major grocery store chains, including Safeway and Wal-Mart Stores. The company should have 1999 revenue of $125 million, according to John Byrnes, a principal at Mason Wells. Mr. Byrnes declined to disclose the purchase price.

Financing for the deal was provided by Marshall & Ilsley Bank, Mercantile Business Credit and Fifth Third Bank.

Mr. Byrnes said the principals of Mason Wells have known the family owners of Sturm & Sons for a number of years and eventually agreed to acquire the company through a negotiated transaction. The family will retain a small equity stake in the company.

New Fund Begets Bigger Deals

As a captive arm of Marshall & Ilsley, Mason Wells was in most cases not allowed to take control positions in companies. The firm now will be looking to invest between $10 million and $20 million in equity in buyout transactions, whereas before its targeted investment size was never more than $8 million for a minority stake.

Marshall & Ilsley still is the largest investor in Mason Wells’ fund, with an approximately 25% interest. As an L.P., however, Marshall & Ilsley now may provide financing for Mason Wells deals.

Mason Wells made its first control investment last year with its acquisition of General American Corp., a provider of home-equity-closing services.

Mason Wells invests in paper packaging, industrial materials and business services sectors, including software. Most of its portfolio companies are located in the Northern Great Lakes region.