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Castanea Closes Fund II at $207M, with Help from Foundations and Endowments

September 10, 2004 - Castanea Partners, a private equity firm formed by the former co-heads of retailer Nieman Marcus and publisher Harcourt General, has tapped a group of university endowments and foundations to raise its first fund from outside investors.

The Newton, Mass.-based firm has held a $207 million final closing for Castanea Partners II, L.P., which would invest in buyouts and growth financings of education, publishing, and specialty retail companies, among others. Yale University and Princeton University Investment Co. both signed on to the final closing, as did four other endowments and foundations.

As an enticement to investors, Castanea Partners transferred ownership of three companies from its debut fund--a $75 million partnership funded entirely by Castanea Partners's Co-Founders Brian Knez and Robert Smith--to the new fund. Moving the three deals to the new fund helped sell investors on the firm's approach and provided them with some deals that would be realized sooner. Because of the transfer of the three companies, Castanea's general partners have a stake in the new fund "that's a lot more than 2 percent," Mr. Knez said, although he declined to provide a specific number.

The three companies now in Fund II are Fuze Beverage LLC, an Englewood Cliffs, N.J.-based maker of vitamin-infused iced teas and juices, Decision Resources, a Waltham, Mass.-based publisher of competitive information for the biotech and pharmaceutical industries, and EatZi's Market & Bakery, an operator of stores that sell gourmet prepared meals.

A fourth investment in Boston-based asset manager Lee Munder Capital Group remains in Fund I's portfolio.

Castanea Partners plans to invest between $10 million and $20 million per deal, and would like to make between two and three investments annually.

Messrs. Knez and Smith formed Castanea Partners in 2001, after Reed Elsevier plc acquired Harcourt General. The two men head a 10-person investment team at Castanea Partners.

Reach Castanea Partners at 617-630-2400.

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