Mercantile Markets Consumer Products Effort –

Mercantile Capital Partners, LLC has joined a growing list of new firms launching private equity funds targeting the consumer industry.

The Mercantile Capital offering has an interesting hook as Antoine Treuille, the firm’s executive managing director, led the 1988 buyout of Loehmann’s Holdings, one of the biggest biggest retail industry buyouts of the 1980s.

The firm last month launched Mercantile Capital Partners Fund, L.P. setting a $125 million target for the effort. Mercantile Capital expects to tap corporations and other financial institutions in the fund raising, said Josh Goldberg, one of the firm’s two other directors. Edward Harrison, the chairman of investment bank Financo, is the group’s third director.

Financo and Mercantile Capital will work together in investing the fund; although Financo is not part of the general partnership, Mr. Goldberg said.

At the same time Mercantile Capital is starting to raise its fund, Dorset Capital Management, LLC also is marketing a $100 million fund that has a similar consumer products focus (see story, same page) and Brand Equity Ventures is attracting capital for a smaller partnership that targets the retail industry.

Mercantile Capital and Dorset will both have the support of established financial buyers. Thomas Lee, president of Thomas H. Lee Co., has expressed an interest in working with Mercantile Capital, and his firm’s portfolio company, Tucker Anthony, Ltd., is the placement agent for the vehicle.

Meanwhile, Chase Capital Partners, Investcorp International and Weston Presidio Capital will back Dorset’s effort.

Mercantile Capital and Dorset will be targeting control and non-control stakes in established companies. The two firms also will consider making investments in Internet companies that pertain to retail trade.

Mr. Goldberg said the financial buyer interest in retail comes from a marked change in the economy. He predicts that economic conditions in America will remain strong for the foreseeable future, even if the stock market tumbles, and that this will bring opportunities for companies with marketable brands.

“People are prepared to spend to live a certain lifestyle and that means they are more willing to buy brand products,” he said. “A service economy depends on people satisfying themselves.”

The firm was formed last year and has completed one investment. The group in November led the $75 million buyout of The Museum Co., a chain that sells museum-related products. The group committed $32 million in equity to the buyout, raising much of the capital from co-investors.

Mr. Treuille, unlike his partners, has also led several buyouts in a different era. From 1986 to 1993, he was executive vice president and chief operating officer for Entrecanales, a Spanish construction company. An affiliate of Entrecanales led the 1988 buyout of Loehmann’s along with Desai Capital Management, Merrill Lynch & Co. and The Sprout Group. Mr. Treuille left Entrecanales in 1993 and became a senior vice president at Desai and then left to form Mercantile Capital in 1996.