Pfingsten Closes Fund I With Shift to Fund II

Pfingsten Partners LLC has shuddered its first fund by recapitalizing portfolio company Barjan Growth Products through the $100 million Pfingsten Executive Fund II LP and a co-investment from Allstate Private Equity, a limited partner in the Pfingsten fund.

The two groups collaborated to take out the existing investors in East Moline, Ill.-based Barjan in a transaction that included the simultaneous acquisition of two add-ons – Kuranoff & Chary Inc. of Atlanta and Paperback Book Club of America Inc. of Jefferson City, Mo.

Thomas Bagley, senior managing director at Pfingsten, said the deal received the approval of limited partners from both funds, as well as the firm’s advisory board. The value of the deal was not disclosed, but Heller Financial and First Union were co-agents on the debt portion of the recapitalization and Allstate was the largest equity investor.

“Our options were to sell or recapitalize and retain ownership of the company,” Bagley said. “We decided it would be in the best interest of the company, and a good investment, to move the company [to Fund II from Fund I].”

He added that Allstate is the lead institutional investor in Fund II, so the company was given the opportunity to co-invest. Mark Bounds, director of Allstate private equity, said the group liked the investment because, with the simultaneous acquisitions, the company changed from a one-product consolidator into a more diversified acquirer of hard goods.

“In the past, Barjan bought same product competitors, but this was reaching out and starting a new product channel through the same customer channel,” Bounds said. “The customer overlap is 100%.”

After acquiring Barjan in June 1995, a Pfingsten and management of the distributor and marketer of travel products that are sold in travel centers, established an infrastructure that could support the intended consolidation of manufacturing companies. These steps included the establishment of reporting, warehousing and general operating processes. After implementing these processes over an 18 month span, Barjan began acquiring competing manufacturers in the U.S. and Canada.

Bounds said the company now plans to grow by acquiring companies that continue to diversify the products offered at the travel centers, as well as new areas where the same products are sold, such as carwashes. Bounds said Barjan will only focus on hard goods distributors, and he said the company definitely would not enter the apparel or food and beverage sectors of travel center retailing.

Separate from the Barjan acquisition, Bounds said Allstate has made two other consolidation investments this year. The group was the sole investor in the acquisition of USA Media Group, a West Coast-based cable provider to rural communities that will be used as a platform company for consolidation of non-urban cable providers. Allstate also partnered with the management of Imagine Technology Group to launch a consolidation of copier sales and service companies.