Citi Spin-Out To Raise First Indie Fund

Seven Mile Capital Partners, a new private equity firm that assumed a portfolio of investments from Citigroup Inc., is in the preliminary stages of raising its first fund under its new banner, Buyouts reported Friday.

The firm’s executives are talking to potential investors and have not yet decided on a target or issued a private placement memorandum. But they expect to raise a “lower mid-market” fund, according to a source; such a fund could vary in size but is typically in the range of $500 million or less.

The firm will be looking to buy or make significant minority investments in companies producing $5 million to $50 million in EBITDA in the industrials, business services, outsourcing, consumer products and financial services sectors.

Seven Mile Capital is led by Partners Vince Fandozzi, 46, who was previously global head of private equity and alternative investments at Citi Holdings, and Kevin Kruse, 42, who left his position as a managing director at Warburg Pincus LLC in early 2011. The firm also employs a vice-president and CFO, both of whom also come from Citi, as well as an associate.

Fandozzi and Kruse started talking about teaming up last summer, after AXA Private Equity bought about $1.7 billion in private equity assets from Citi. This deal, which closed in September, created Seven Mile Capital as a new private equity firm managing a fund of former Citi assets in which AXA is the majority investor.

“I thought it was an interesting platform with a fair amount of upside in terms of the value of the existing portfolio,” Kruse told Buyouts. “I thought it would be a good platform to build a new firm.”

Seven Mile Capital now wants to diversify its investor base. The firm is trying to get new investors to invest in the existing fund, Seven Mile Capital Partners Founders Fund LP, and commit to the new fund, Seven Mile Capital Partners II LP. Fandozzi and Kruse do not anticipate hiring a placement agent, instead relying on their own connections in the market.

The fact that Seven Mile Capital already has a large portfolio could help it raise new capital in what has been an exceptionally challenging fundraising market, Fandozzi said.

Seven Mile Capital’s existing portfolio consists of about 12 majority- and minority-owned companies, as well as a smattering of small venture capital investments. Most of the companies are based in the United States, though some are based in Britain. The portfolio includes Clarity Credit Management Solutions Ltd, a provider of credit management services to British lenders; MBA Polymers Inc., a Richmond, Calif.-based recycler of engineering plastics from waste streams and durable goods like appliances and computer equipment; and Nellson Nutraceutical LLC, an Irwindale, Calif.-based maker of food bars and powders.

Bernard Vaughan is a senior editor at Buyouts Magazine. Follow his tweets @BVaughanReuters. Follow Buyouts tweets @Buyouts.