Thomas H. Lee Said to Weigh a $4 Billion Buyout Fund

Thomas H. Lee Partners LP, the private-equity firm whose investments include Dunkin’ Brands Group Inc. and Univision Communications Inc., is weighing a $4 billion buyout fund, half the size of its predecessor, according to two people with knowledge of the firm’s plans.

The Boston-based firm is considering a lower target after taking longer than average to deploy the $8 billion fund gathered in 2006, said one of the people, who asked not to be identified because the information is private. A smaller fund would be easier to invest within the five-year window that’s customary, the person said.

Buyout firms including KKR & Co. and Carlyle Group LP are raising less money for their latest pools compared with the mega-funds they raised during the 2005-2007 buyout boom because investors have grown more discriminating since the financial crisis four years ago. The market is also more crowded, with a record 1,858 private-equity funds seeking money, according to data compiled by Preqin Ltd., a London-based research firm.

Thomas H. Lee may seek to start raising money as soon as year-end as its 2006 fund is about 75 percent deployed, the people said. The firm has announced two deals in the last month, including a $400 million transaction in which it partnered with Latin America’s largest private-equity firm, GP Investments Ltd., to acquire Brazil’s barbecue-restaurant chain Fogo de Chao Churrascaria LLC. On June 5, Thomas H. Lee said it will buy a majority stake in wholesale party supplier Party City Corp. in a transaction valued at $2.69 billion including debt.

Matt Benson, a spokesman for Thomas H. Lee, declined to comment.

Clear Channel

Deals that Thomas H. Lee made at the peak of the buyout market, including Clear Channel Communications and Univision Communications, have weighed on performance. The firm has bought Clear Channel debt and sold some at a gain, helping offset paper losses tied to the equity.

Thomas H. Lee, which manages about $14 billion, was one of many buyout firms that took advantage of a more favorable market for initial public offerings last year, selling stakes in portfolio companies to public investors. The firm was part of investor groups that led offerings for Dunkin’ Brands, operator of the Dunkin’ Donuts coffee chain, and Nielsen Holdings NV, the television-audience ratings company.

Carlyle, based in Washington, is seeking about $10 billion for its latest flagship North American fund, less than the $13.7 billion it collected for its 2007 fund. KKR, based in New York, is also asking investors for about $10 billion; its 2006 fund closed at $17.6 billion.

Blackstone Group LP, the world’s largest private-equity company by total assets under management, raised about $16 billion for its latest buyout fund, down from its record-setting $21.7 billion 2007 pool.

The 2006 fund has produced an average net rate of return of 6 percent as of March 31, and the 2000 fund, a $6 billion pool, has returned 20 percent, according to one of the people familiar with the matter.

Thomas H. Lee has raised $20 billion in its 38-year history. The firm is named after its founder Thomas Lee who left to start his own firm in 2006, handing leadership to Scott Sperling, Scott Schoen and Anthony Dinovi. Schoen last month said he will step down from the firm, while remaining an adviser.

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