J.W. Childs Said to Consider Liquidity Option for Clients

J.W. Childs Associates LP, the owner of consumer-focused businesses such as Brookstone and Sunny Delight Beverages Co., is considering giving investors who have been locked in a fund raised more than a decade ago an option to cash out, two people familiar with the matter said.

The firm, which is based in Boston, has selected Park Hill Group LLC, the placement-agent arm of Blackstone Group LP, to advise on a structured deal for J.W. Childs Equity Partners III LP, said the people, who asked not to be identified because the information is private. The structure and size of a possible arrangement hasn’t been decided yet.

J.W. Childs is joining a growing number of private-equity firms in giving investors in older funds the option of selling their stakes or rolling them into new vehicles with extended lives and new terms. New York-based Veronis Suhler Stevenson is shopping the remaining investments in a buyout fund from 1999, three people familiar with the matter said in October. Last year, Chicago-based Willis Stein & Partners gave clients the choice of selling their interests in its 2000 fund or shifting them into a new pool.

Limited partners have long griped about paying management fees to private-equity firms that sit on investments far past the typical 10-year life of their funds. The clients say the practice skews the alignment of interests between investors and the fund company, especially if there’s little or no chance of generating a profit on the investments.

Capital Raising

Philip Nunes, a spokesman for J.W. Childs at BackBay Communications Inc., said the firm didn’t respond to a request for comment.

J.W. Childs hasn’t raised a fund since gathering $1.75 billion for its third vehicle in 2002. It abandoned efforts to raise a successor fund in 2007, according to data compiled by Bloomberg.

The third fund, which holds stakes in five remaining companies, is valued at about $1 billion, the people said. Its investments include Sunny Delight, Mattress Firm Holding Corp., retailer Brookstone, office products maker Esselte and WS Packaging Group Inc. The fund was producing a multiple of about 1.4 times invested capital as of March 31, according to a quarterly report by Switzerland’s Castle Private Equity AG, an investor.

John W. Childs and Adam Suttin founded the firm in 1995. Childs came from Thomas H. Lee Partners, where he was a senior managing director. The firm primarily invests in consumer products and specialty retail businesses. It has invested more than $3 billion in 40 platform companies since its inception, according to an August press release.

(Corrects to remove reference to distributions related to Tile Shop Holdings Inc. offering in eighth paragraph of a story originally published Nov. 20.)
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