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Building a New Era at St. John Knits

NEW YORK — When Michelle Obama wore a chic, black St. John jumpsuit on “The Tonight Show Starring Jimmy Fallon” late last month, she garnered positive reviews for the look. To executives at the Irvine, Calif.-based firm, that moment also signaled a message loud and clear: St. John Knits’ future under new management is off to a good start.

Since Bernd Beetz invested in St. John last year, became its chairman and poached Geoffroy van Raemdonck from Louis Vuitton to be chief executive officer, the American fashion house has been going through change in order to reach its global potential, not least of which was an investment by Chinese conglomerate Fosun International. Since taking up their posts, the two executives have closely studied the house’s history and business structure to understand the foundation and develop a blueprint for its future. They have now come up with a multifaceted vision that includes the hiring of a creative director; increased innovation in knitwear, which is the brand’s core category; a larger assortment of special occasion and casual luxelifestyle clothes, and international expansion, particularly throughout Asia. 

“Geoffroy and myself have a very similar philosophy on how to approach a brand, so we looked at the organization and the heritage,” said Beetz, who was one of the beauty industry’s top executives and played an instrumental role in transforming Coty Inc. during his tenure as ceo. “That has been the platform for all the things we have been doing up until now.”

The vision is strongly rooted in founder Marie Gray’s story, though that is being updated to suit more modern sensibilities. The aim — as in any brand reinvention — is to cultivate new customers without alienating the loyal existing base.

“We want to be the accomplice to accomplishment for women around the world,” van Raemdonck said during an exclusiveinterview with the duo at St. John’s showrooms on Fifth Avenue here. “This really goes back to how Marie Gray started, knitting a shift dress for herself in 1962. Her desire was to outfit women of success. She believed strongly, and we believe strongly, that living well is wearing well, and that women have a desire to wear clothes to accompany them in life.

“Our approach is one that doesn’t look at the age of the customer,” he added. “It’s an attitude and outlook on life.”

To realize this, St. John has started the search for a creative director, who is expected to oversee all design elements and work with senior vice president of design Greg Myler. The new hire will “translate our vision on every touch point, from the product to the imagery to the windows and the store concepts,” van Raemdonck said. “The notion of ‘of-the-moment’ is really important. This woman lives in this world, and in a sense, we rise above fashion. Fashion is a key element and we want to be of the right moment and speak to the trends of the moment, but most importantly, we want to deliver clothes that work for the woman.”

The modern sensibility will extend to all brand areas. “We are developing a new approach to our look book and our photo shoots that is much more inviting,” van Raemdonck said. “They will tell a story that helps the customer project themselves into our lifestyle. We are investing in windows. There are a lot of things we are doing right now to signify change, but the big change will come when we present a collection that we are responsible for. That starts a year from now as we design a year out.”

Knits will play a key role, but innovation will become an important factor. St. John has its own domestic workshops and manufacturingfacilities, which it can use to develop new knits. “That’s something that has not been reached in the past, and we want to put much more focus on it,” Beetz noted.

While the brand’s core continues to be daywear, about one-third of the business is in evening, or, as van Raemdonck noted, “going from a restaurant to a formal gala or mother-of-bride.” The company is looking to build on this category, as well as more casual work and weekend clothes.

The duo see potential both in North America and worldwide. Fosun is expected to hasten further expansion in China and beyond (in fact, Beetz’s opportunity to invest and take a leadership role in St. John came to him via Fosun and his friendship with Patrick Zhong, its senior managing director). Vestar Capital Partners continues to be the majority investor. 

Beetz and van Raemdonck declined to disclose St John’s volume — estimated to be about $400 million a few years ago — but said that 80 percent of the company’s business is still in the U.S., though that ratio is likely to shift in the future. 

“Greater China will be a prime focus internationally,” van Raemdonck said. “We have been there since 1992. We have 21 locations; 18 are individual boutiques, and we want to grow in that market. We are reopening a store in Hong Kong next month and are signing a couple of leases there in the most attractive malls.”

He called the region’s potential “really critical” to St. John’s future growth, with further opportunity to amplify the brand presence in Japan and Korea. 

Equally key are the Middle East, where St. John already has two units in Dubai, and Europe, where it has had a strong presence and sell-throughs at Harrods since 2008, as well as KaDeWe in Berlin and Tsum in Moscow, for example.

“It’s a great U.S. brand that we can really internationalize,” Beetz said. “We have a vision and a target. We have a clear understanding of what the basis has been. I think we have the way to contemporize that, and capture the zeitgeist of where we are today.”

Van Raemdonck added, “Once you establish that, then accessories, sunglasses, handbags andfragrance become also very relevant. We want the woman to enter our lifestyle and we are there to outfit her for success, and that’s encompassing of everything.”

On the more immediate horizon is the reopening of the Vancouver boutique at the Hotel Vancouver on Wednesday, followed by another reopening at the Landmark mall in Honk Kong on March 31. In November, the company plans to unveil a new store concept in its location at the Americana Manhasset on New York’s Long Island. The look is still in development.

Since the two executives joined, Gray, who is on the company board, has been a key source of information. “She is a great inspiration,” van Raemdonck said. “She is a great voice of the spirit of the brand, and makes herself available at any time. We have both spent a lot of time with her to get the gist of what she has created, and understand the love and the passion that she has had for her customer.”

That essence won’t be changing. “The spirit is the same,” Beetz said. “She is very helpful, but also very supportive of what we’re doing. To succeed in life and to succeed in your career — that’s something she wanted to address, and that’s something we really want to reactivate.”


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Canada Pension Plan Investment Board Enters Into Agreement To Acquire Vestar IV Portfolio Company Wilton Re

Toronto, ON, Canada (March 21, 2014): Canada Pension Plan Investment Board (CPPIB) announced today that a wholly-owned subsidiary of CPPIB, together with the management of Wilton Re, have entered into a definitive agreement to acquire 100% of the common stock of Wilton Re Holdings Limited for US$1.8 billion from a group of investors led by Stone Point Capital, Kelso & Company, Vestar Capital Partners and FFL. The transaction is subject to regulatory approvals and other customary closing conditions.

Wilton Re is a provider of life insurance and reinsurance solutions to the U.S. life insurance market and a leading acquirer of closed blocks of life insurance policies. Since its inception in 2005, Wilton Re has successfully invested over US$1.7 billion in a variety of strategic in force reinsurance and M&A transactions.

“In making a long-term investment in Wilton Re, CPPIB views the company as an ideal platform through which CPPIB can deploy significant follow-on capital at scale in the U.S. life insurance sector,” said André Bourbonnais, Senior Vice-President, Private Investments, CPPIB. “Closed-block life insurance is an asset class with attractive risk-adjusted returns, well-suited to our long-term horizon.”

“CPPIB ownership positions the company for growth and enhances our service offerings to clients and policyholders,” said Wilton Re Chairman and CEO, Chris Stroup. “CPPIB represents the next phase for Wilton Re – a strategic owner, committed to our business model, with a very long term investment horizon and unparalleled capital resources. Under CPPIB ownership, we anticipate the capital resources necessary to accelerate growth and expand our core In Force Solutions and middle market insurance, and enhance our competitiveness overall.”

“We are investing alongside and share a common vision with Wilton Re’s management team, led by Chris Stroup, and together we plan to invest further capital into the business to support its continued growth for many years to come. As a AAA rated long-term investor, we believe CPPIB is an ideal shareholder for Wilton Re’s employees, policyholders and client partners,” said Mr. Bourbonnais.

About Canada Pension Plan Investment Board
Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 18 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London, Hong Kong, New York City and São Paulo, CPPIB is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At December 31, 2013, the CPP Fund totalled C$201.5 billion. For more information about CPPIB, please visit www.cppib.com.

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Vestar Capital Partners and Goldman Sachs in Partnership to Acquire Hearthside Food Solutions

NEW YORK, NEW YORK – March 19, 2014 – Goldman Sachs and Vestar Capital Partners announced today that they have signed a definitive agreement to acquire Hearthside Food Solutions, the largest independent bakery and contract food manufacturer in North America, from Wind Point Partners. Terms were not disclosed.  The transaction is expected to close in the second quarter of 2014. Goldman Sachs and Vestar will own equal stakes in the company going forward.

Hearthside Food Solutions is the nation’s largest and fastest-growing independent bakery and a full-service contract manufacturer of high quality, grain-based food and snack products for many of the world’s leading premier brands. Hearthside offers a diverse product portfolio focused on four main platform categories – bars, cookies/crackers, granola/cereals, and snacks. The company manufactures more than 150 brands and 1,400 SKUs for its top customers.

“When we launched Hearthside in 2009, we envisioned a company that could transform the contract manufacturing industry,” said Rich Scalise, chairman and chief executive officer of Hearthside. “We have achieved that goal, building an industry leader and a highly successful business in the last five years based on the principles of being fast, flexible and adding more value. Going forward, by leveraging the experience and relationships of both Goldman and Vestar, we are confident we can take the company to the next level of growth in the contract manufacturing industry. We look forward to working with our new partners.”

"Hearthside is a leader in the co-manufacturing industry and management has done an excellent job accelerating its growth trajectory,” said Nicole Agnew, a managing director in the Merchant Banking Division at Goldman Sachs.  “We are extremely pleased to have the opportunity to invest in Hearthside and partner with its first class management team and employees.”

“Hearthside is not only one of the largest co-manufacturers in the food industry, but also the leader in quality, safety, and innovation. They respond rapidly to industry trends and shifting consumer preferences,” said Dan O’Connell, CEO of Vestar. “Now more than ever, food companies turn to co-manufacturers like Hearthside to help them initiate and accelerate the commercialization process and for timely response to changing consumer preferences. We are excited to work with Rich and his talented team to take advantage of these positive long-term trends and grow the business.”

Affiliates of Barclays Capital and Goldman Sachs provided commitments for the debt financing for the transaction. Davis Polk & Wardwell LLP acted as the legal advisor to Goldman Sachs and Vestar in this transaction.

About Hearthside Food Solutions

Hearthside Food Solutions, headquartered in Downers Grove, Illinois, is the nation’s largest independent bakery and a full-service contract manufacturer of high quality, grain-based food and snack products for some of the world’s leading premier brands. Hearthside operates 20 food-manufacturing facilities in eight states. For more information on Hearthside Food Solutions, visit www.hearthsidefoods.com.

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Vestar Capital Partners to Acquire Institutional Shareholder Services from MSCI

Rockville, MD and New York, NY – Institutional Shareholder Services Inc. (“ISS”), a leading provider of corporate governance solutions to the global financial community, today announced its parent company, MSCI Inc. (NYSE: MSCI), had entered into a definitive agreement with Vestar Capital Partners  (“Vestar“), pursuant to which Vestar has agreed to acquire ISS for $364 million. The transaction is expected to close in the second quarter, subject to customary closing conditions.

ISS will operate independently once the transaction is completed. The current ISS executive team will remain in place.

"With Vestar’s support, the management team looks forward to advancing ISS‘ long-standing mission of providing world-class corporate governance solutions in an independent and transparent manner," said Gary Retelny, President of ISS. "Clients will continue to see expanded product offerings, innovative solutions, and the same high level of service that ISS has delivered to institutional investors, corporations, and governance practitioners globally for nearly three decades."

Also commenting on the transaction, Vestar Capital Partners‘ Robert L. Rosner, Founding Partner and Co-President, said ISS‘ position in the industry, future prospects, and strong management team appealed significantly to the New York-based private equity firm.

"This transaction underscores our belief in the importance of corporate governance and ISS‘ leadership position within the industry. ISS is a market leader in providing corporate governance solutions, with strong client retention rates and a powerful commitment to operating impartially. We fully support the ISS management team and its focus on innovation and providing unrivaled client service," said Rosner.

MSCI acquired ISS in 2010 as part of its acquisition of RiskMetrics Group. ISS currently has close to 700 employees operating across 15 global offices in 10 countries.  Its 1,700 clients include institutional investors, who rely on ISS‘ objective and impartial proxy research and data to vote portfolio holdings, as well as corporations focused on governance risk mitigation as a shareholder-value enhancing measure.

Morgan Stanley acted as financial advisor and Davis Polk & Wardwell LLP acted as legal advisor to MSCI on the transaction. Simpson Thacher & Bartlett LLP served as legal advisor to Vestar Capital Partners.



About ISS
ISS, founded in 1985 as Institutional Shareholder Services Inc., is the world's leading provider of proxy advisory and corporate governance solutions to financial market participants. ISS' services include objective proxy research and analysis, end-to-end proxy voting and distribution solutions, turnkey securities class-action claims management, and reliable governance data and modeling tools. Clients rely on ISS' expertise to help them make informed corporate governance decisions.  For more information, please visit www.issgovernance.com.