Sycamore eyes J.C. Penney, MiddleGround adds-on two as it builds metal fabricator platform Banner Industries, How the covid-19 pandemic is impacting secondaries

MiddleGround closes inaugural fund and Sycamore is in talks to acquire bankrupt retailer J.C. Penney.

Morning!

MiddleGround Capital, which raised its debut fund on $459.5 million, is building up a metal fabrication platform through its portfolio company Banner Industries.

MiddleGround added-on Supra Alloys and EDGE International in a recent deal, writes Karishma Vanjani on PE Hub. The expansion is part of Banner’s efforts to build out its product line and geographical reach, Karishma writes.

The deal was negotiated before the pandemic locked down the U.S. economy. The challenge in the negotiations was that the parent company, Titan Metal Fabricators, was up for sale rather than the two divisions, she wrote.

The two divisions serve businesses like medical device manufacturers. The combined Banner Industries processes metals from mills and manufactures materials that can be used in ventilators and in the dental and aeorspace industries, MiddleGround Partner John Stewart told Karishma.

Read her full story here on PE Hub.

MiddleGround’s debut fund, meanwhile, is nearly half deployed, including through the most recent two add-ons.

BK: Sycamore Partners, which has been in the spotlight recently for being one of a handful of GPs to walk away from an agreed deal because of the pandemic downturn, is in talks to buy bankrupt retailer J.C. Penney, according to Reuters.

J.C. Penney filed for Chapter 11 protection from creditors in May after it said the pandemic lockdown forced it to temporarily close more than 800 stores in the U.S. Sycamore, which owns other retailers like Belk and Talbots, is in talks to works with the company should it fail in negotiations with creditors, Reuters wrote.

The retail sector, already challenged before the pandemic, has been heavily damaged by government-forced lockdowns and business closures that erased revenue almost overnight. Retailers that depend on foot traffic are struggling to survive until the health crisis eases enough to allow them to reopen. Even then, it’s not clear how comfortable consumers will be shopping in large crowds, which could mean revenue pressure for some time to come.

Sycamore is investing from its third fund, which it closed on $4.75 billion in 2018. It chose to walk away from its agreed deal to buy Victoria’s Secret from L Brands earlier this year, arguing the company experience a material adverse change from the pandemic.

Top Scoops
Check out our data presentation on how the covid-19 pandemic will impact the secondaries market. The feeling is the denominator effect, which causes LPs’ exposure to private equity to overweight as the value of their total funds drop, will force some LPs to sell on the secondaries market. That has happened to some extent, especially with smaller LPs like wealthy individuals, family offices and smaller endowments, sources have told Buyouts.

While traditional secondaries have been on pause and may take some time to recover, structured liquidity deals like preferred equity are a tool GPs can use to get capital to existing portfolio companies. Read more here on Buyouts.

TSG Consumer Products promoted Erik Johnson and Ed Wong to managing director positions. Johnson joined TSG in 2011 and is involved in new investment opportunities and the firm’s ESG strategy. Wong has been with TSG since 2011 and works with several TSG companies, including Pathway Vet Alliance, Power Stop, Revolution Beauty and CorePower Yoga. Read the news brief here on PE Hub.

That’s it! Have a great day. Hit me up as always with tips n’ gossip, feedback or just to chat at cwitkowsky@buyoutsinsider.com, on Twitter or find me on LinkedIn.

HOUSEKEEPING
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