Castanea Gets Dolled Up In High-End Jewelry

BY PAUL ZIOBRO

11/20/2007 – Castanea Partners has acquired a majority stake in Ippolita, a maker of high-end, fashion jewelry, hoping that the private equity firm's experience in luxury brands can help build out the company's infrastructure to meet growing demand.

Terms of the growth equity investment were not disclosed, although Castanea typically invests between $10 million and $75 million per deal from its $575 million Castanea Partners Fund III LP.

Ippolita was founded in 1999 by the designer Ippolita, who goes by her first name, and has experienced dramatic growth in recent years. While neither Castanea nor Ippolita executives would discuss finances, Women's Wear Daily reported in April that the company had $40 million in sales in 2006, following growth of 77% and 75% in the previous two years.

The New York-based company specializes in bracelets, necklaces, earrings and rings, which are sold at high-end retailers like Neiman Marcus, Bergdorf Goodman and Saks Inc. The pieces, primarily priced between $500 and $6,000, are handmade, featuring a green-tinted gold that is a signature of Florentine jewelry. The company markets the jewelry as being versatile enough to wear from the pool to evenings out, said Chief Executive Lauren Sharfman.

With such rapid growth, Sharfman said the company needed to bring in a partner to be able to support ambitious plans that include increasing distribution and opening a couple of boutique stores.

"It's that inflection point where the company can drop the ball if we don't make plans to build out the infrastructure as our top line is growing," Sharfman said.

Ippolita was introduced to Castanea through a mutual acquaintance, and liked that the firm had experience investing in luxury brands like designer Betsey Johnson and children's clothing company Hanna Andersson Corp., Sharfman said.

Castanea had been looking at a couple of high-end jewelry companies itself, attracted to the demographics of the primary customers and the potential for growth, said Brian Knez, co-managing partner at Castanea. Ippolita fell right into the niche the firm was looking at, and also had the attractive sales growth.

Castanea understands the intricacies of growing a luxury brand, owing partly to the experience of two of its founders, Knez and Robert A. Smith, who served as co-CEOs of Neiman Marcus from 1999 until 2001. For one, the firm plans to expand Ippolita's distribution with discretion, so as not to dilute the power of the brand name.

"You have to make sure you don't expand simply to chase sales," Knez said. "A high-end luxury brand can become over-diminished."

Further plans for Ippolita include developing new lines of precious metals, like silver, and formalizing some operational aspects of the business.

Castanea's investment does not include a debt component, as the firm prefers to use Ippolita's free cash-flow to expand the business at this point.

"If run well, these businesses can be nicely profitable," Knez said.

Reach Castanea Partners at 617-630-2400.

http://www.castaneapartners.com

http://www.ippolita.com

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