Behrman Capital, a private equity investment firm based in New York and San Francisco, has formed Behrman Capital PEP, a USD1bn, six-year investment partnership that was formed primarily to acquire the five remaining investments in Behrman Capital III.

The transaction provided immediate and full liquidity to all of the 2000-vintage fund's limited partners. 

At the same time, PEP will allow investors in Behrman Capital IV, a 2007 vintage fund that more recently invested in two of these companies, to see their investments fully mature. 

In addition, approximately 25 per cent of aggregate commitments to PEP will be devoted to add-on acquisitions in the existing portfolio and select new platform investments. 

PEP was significantly oversubscribed and closed at its hard cap.

The five companies now owned by PEP are Ark Holding Company, ILC Holdings/DDC, Pelican Products, Selig Sealing Products, and ILC Dover. The two companies in which Fund IV is also invested are Ark and Pelican Products.

The valuation of the five companies for the purpose of their acquisition by PEP was set through an independent auction process, resulting in the selection of the Canada Pension Plan Investment Board (CPPIB) as lead investor. The combined enterprise value of the five companies acquired from Fund III was approximately USD2.5bn.

As the lead investor, CPPIB committed USD654m to PEP and was joined by other investors such as Goldman Sachs Vintage Fund V, which invested USD100m.

The PEP transaction was approved by more than 75 per cent of Fund III limited partners and 95 per cent of Fund IV limited partners, as well as both funds' advisory boards.

Cogent Partners acted as exclusive financial adviser to Fund III and Behrman Capital in connection with this transaction.

Grant G. Behrman (pictured), managing partner of Behrman Capital, says: "Given the desire of Fund III limited partners for near-term liquidity and the interest of Fund IV limited partners in seeing their investments realize their full potential, we are proud to have devised an innovative solution that reflects our commitment to meeting the diverse objectives of all our investors. Our advisory boards were kept informed throughout the process, and they encouraged us to pursue this creative option. PEP delivered immediate liquidity to all of our Fund III limited partners, at an attractive valuation determined through a robust and independent auction process, and gave them the opportunity to remain investors in companies that are performing well, alongside our new investors and our Fund IV limited partners. We thank all of our investors and our advisory boards for their partnership and support in reaching this important milestone.

"We are also delighted to welcome the Canada Pension Plan Investment Board, one of the world's most respected institutional investors, as the lead investor in PEP.  CPPIB's investment, together with that of Goldman Sachs Asset Management and several new investors, gives us the ability to patiently support these companies as they execute their growth strategies over the coming years.”

Andre Bourbonnais, senior vice president, private investments, CPPIB, says: "We are pleased to partner with Behrman Capital and invest in five soundly managed companies that are well positioned to create significant value over the long term. As an active participant in the secondary private equity market, we were able to lead a transaction which provided a swift, innovative and constructive solution to a complex situation. The Behrman team has assembled an excellent portfolio with strong underlying management teams. We look forward to collaborating with Behrman in the coming years to maximize the value of these companies."