Citigroup Plans To Shutter Citi Venture Capital Unit

After purchasing Metalmark Capital LLC, Citigroup Inc. plans to shutter an internal U.S. mid-market buyout group that it launched less than a year ago.

Citigroup has parted ways with all but one of the eight investment professionals of Citi Venture Capital, with only the team's original head, William Comfort, still in place. His current role is unclear.

The bank initially gave Citi Venture Capital $500 million to invest in U.S.- based mid-market deals of between $100 million and $500 million in enterprise value. It plans to sell the portfolio of roughly $150 million in investments that the team has made so far, in companies such as Big Red Ltd., a Waco, Texas- based beverage company, and Waddington North America Inc., a Covington, Ky.- based manufacturer of plastic cutlery and plates, these people said.

One person said that the bank's stake in a London-based mid-market fund managed by Stirling Square Capital Partners LLP is also up for grabs. Stirling Square was co-founded by Comfort's son, Stuyvesant Comfort, and manages a $280 million European mid-market buyout fund, according to the firm's Web site.

(This story will also appear in LBO Wire, a daily email newsletter published by Dow Jones & Co. that covers buyouts.)

Given that Stirling is currently prepping a new fund, it would likely seek a stapled secondary deal, in which the buyers would also provide fresh capital for the new fund, this person said. Stirling Square targets transactions of between EUR50 million ($78 million) and EUR500 million, according to the firm's Web site. Since 2002, it has backed 10 deals.

Citigroup launched Citi Venture Capital last summer, roughly a year after its prior buyout arm, CVC Equity Partners, spun out to become Court Square Capital Partners. The bank has since sold off the bulk of its $400 million in interests in legacy Court Square funds to secondary buyers AlpInvest and Goldman Sachs ( GS), according to Private Equity Insider, which first reported the news of the shutdown.

Citigroup decided to shut down the division to avoid any potential conflicts with Metalmark Capital, the mid-market buyout firm and former division of Morgan Stanley (MS) that it acquired in November, one person said. Metalmark is gearing up to raise $3 billion for its second mid-market buyout fund, Metalmark Capital Partners II LP.

Meanwhile, Citigroup is expected to retain its two other main private equity divisions. They include Citi Private Equity, a fund of funds, co-investment and mezzanine arm headed by John Barber, as well as Citi Venture Capital International, an emerging markets growth capital arm headed by Dipak Rastogi.

The members of the U.S. team that have left Citi Venture Capital include Managing Partners Alexander Coleman, Joseph Levy and Tony Bienstock and four junior professionals.

http://money.cnn.com/news/newsfeeds/articles/djf500/20080528

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Citigroup Plans To Shutter Citi Venture Capital Unit