CCMP Gets Into The “Boutique” Business

In late 2008, CCMP Capital was hired by J.P. Morgan to manage the legacy portfolio of Bear Growth Capital Partners. Today, CCMP announced that it had acquired a majority stake in one of those portfolio companies: Francesca’s Collections Inc., a Houston-based women’s fashion retailer that had sold a minority piece to BGCP for around $57 million three years ago.

CCMP’s all-equity acquisition was valued at between $200 million and $400 million, with a percentage of the proceeds being used to buy out BGCP and certain Francesca’s founders.

“We could have put debt on this, but chose not to,” says CCMP chairman Greg Brenneman, who will join Francesca’s board of directors. “The most natural exit, eventually, would be an IPO, because Francesca’s numbers are better than anything comparable on the public markets.”

The closest market comp would probably be Rue21, an Apax Partners portfolio company that raised $128 million in an IPO last November. It reported $14.2 million in net income on $370 million in revenue for the first 39 weeks of 2009 (through the end of October), based on sales at over 500 stores in 41 states.

Francesca’s currently operates 168 stores in 33 states, with plans to add another 50 in 2010. Brenneman says that the market could support up to 1,000 stores overall, in part because Francesca’s model helps new shops pay back their opening costs within the first four months of operations.

“We do broad and thin,” explains Francesca’s CEO John De Meritt. “We put over 100 different styles in our boutiques each month, so our risk in any single style is very low… We buy a lot of our items immediately from the vendors we partner with, so we can take them directly from the manufacturers into our stores. It allows us to diversify our product selection, and keep our inventory light.”

Along with Brenneman, CCMP will be represented on the Francesca’s board by partner Rich Zannino (former Dow Jones CEO, who previously held exec positions with Liz Claiborne and Saks Fifth Avenue).