September 13, 2004

Castanea Closes Buyout Fund
by Carolina Braunschweig

Castanea Partners of Newton, Mass., has closed its second fund, a $207 million vehicle that will provide growth capital to small and middle- market companies with an enterprise value of up to $100 million.

Castanea will use the fund to finance up to 10 leveraged buyouts, growth investments or special situations with equity investments between $10 million and $20 million, says Marion Schouten, the firm’s director of market development and investor relations.

Castanea will focus its efforts on publishing, business services, consumer products and specialty retail sectors. Those are the areas of expertise closest to the fund’s management team. Co-founders and managing partners Robert Smith and Brian Knez were previously vice chairmen of The Nieman Marcus Group Inc. and co-CEOsof Harcourt General Inc. from 1999 until its sale to Reed Elsevier in 2001.

Castanea COO Paul Gibbons was formerly vice president and treasurer of Harcourt General, while Operating Partner Peter Hoenigsberg was the formerly president and CEO. The Harcourt team has been working together for more than 15 years.
They’re focused on adding value to companies in the industries that they know are proven revenue-generators, Schouten says.

It’s an investment strategy that characterized the firm’s inaugural fund, a $75 million fund launched in late 2002 and capitalized exclusively by the firm’s partners.
Companies in its portfolio include Fuze Beverages of Englewood Cliffs, N.J.; Dallas-based EatZi’s Market and Bakery, a chain that prepares restaurant-quality meals for take-out; and Decision Resources Inc., a South Waltham, Mass.-based provider of biopharmaceutical research.

Limited partners in the new fund include Princeton University, Yale University and other endowments and foundations.

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