Willis Stein Returns To Market

Willis Stein & Partners is pre-marketing its fourth fund, just weeks after its largest-ever investment wound up in bankruptcy court. That’s called moxie (actually, it could be called lots of other things too, but we’ll be generous and stick with moxie).

My colleague Erin Griffith reports that the Chicago-based firm will target $1 billion, which is well below the $1.8 billion that it raised for its third fund in 2000. It’s also lower than the $1.25 billion target Willis Stein first tagged to Fund IV back in early 2005, before abandoning the effort.

[Update: Willis Stein says that it is not actively “pre-marketing” the fund, but instead is providing information when specifically asked by limited partners]

The problem with Willis Stein’s 2005 fundraising attempt was that the firm’s second fund was a complete disaster, and its third fund had yet to prove itself. Moreover, both funds were saddled with a combined $420 million investment for Ziff Davis – an outsized deal that was looking more and more like a loser each day. The firm opted to postpone fundraising until late 2007, which it hoped would coincide with a $2 billion sale of Roundy’s Supermarket (original investment was $225 million).

Unfortunately for Willis Stein, the credit crunch cut so deep into the Roundy’s bid that the company was pulled off the auction block. Soon after, a number of Willis Stein professionals – including managing partner Dan Blumenthal – packed up to hang their own shingle elsewhere.

At the time, firm co-founder Avy Stein insisted that fundraising would resume in 2008. All that the firm needed was a few liquidity events, and to do something with Ziff Davis. I publicly expressed skepticism, but added that liquidity is to disgruntled LPs what aspirin is to headaches.

That brings us to today, and I’m kind of confused. Willis Stein has not announced a single liquidity event in the past six months. In fact, the firm’s only noise has involved Ziff Davis, which in early March filed for Chapter 11 bankruptcy protection (not the kind of liquidity LPs were hoping for). So what is it basing the new fundraising on? IRRs from Fund III? If so, there’s little chance that they are better today than they were last fall – particularly given that private equity firms must now mark portfolio companies to market (to the sagging market, that is). Maybe Roundy’s or something else is heading toward auction, with a sale expected before the official Fund IV PPM is printed in early summer. 

Or maybe, just maybe, this is just a fee-strapped private equity firm sending out feelers, in the hopes that someone of significance will bite.