The Buyout Brain Behind Annie's IPO ? ~ MAKE MONEY BLOG$

MAKE MONEY BLOG$ ~Food trade shows aren't a typical stomping ground for private-equity executives. But for Molly Ashby, founder and chief executive of Solera Capital LLC, pushing macaroni and cheese made by Annie's Inc. BNNY +5.59% is part of the job.Ms. Ashby's private-equity firm, which took control of Annie's in 2002
, helped the company rise from a niche brand sold in natural-food co-ops in New England to perhaps the year's hottest nontech initial public offering with a market capitalization of nearly $721 million and products on the shelves of mainstream retailers including Target Corp. TGT -0.86% andCostco Wholesale Corp. COST -0.99%

"We engage with all our companies pretty deeply like that," Ms. Ashby says, recalling how she spent a weekend in 2009 at a California natural-food fair lobbying grocers to stock Annie's products while her teenage daughter handed out samples of its organic snacks.

For Ms. Ashby's efforts, Solera has seen its $81 million investment in Annie's grow nearly sevenfold $538.4 million. Those gains are split between actual profits of about $112.8 million from $26.6 million in special dividends, about $3.1 million in management fees and $83.1 million of proceeds from the 4.4 million shares it sold in the IPO, and $425.6 million in paper gains on the 59% stake it retains.

A key, if unheralded, player at the dawn of the buyout era in the late 1980s, the 52-year-old mother of two has been thrust into the spotlight by Annie's successful IPO two weeks ago. Priced at $19, Annie's shares started trading at $31 and have continued to rise, closing at $43.29, up 5.6%, on Friday.

Ms. Ashby, tall and fashion-model thin as befits a former college tennis star, founded Solera in 1999 after 16 years at J.P. Morgan Chase JPM -3.64% & Co. Though its Madison Avenue offices look the part of a Manhattan buyout shop with dark wood trim and walls of windows, Solera has a different mien than most of its competitors. About two-thirds of Solera's 25 employees are women, a contrast to the male-dominated world of many other private-equity firms. "I want a really modern-looking team," Ms. Ashby says. "I want my team to look like the world around me."

Ms. Ashby also says she wants Solera's investments to focus on companies with a mission beyond their balance sheets, be it promoting organic food or providing environmentally friendly house paint. "We really care about the quality of the companies and what they stand for," she says.

Solera, a Spanish term that refers to the first stone laid in a home's foundation, raised its initial $250 million fund in 2000 from investors including J.P. Morgan, the New York City Public Employees Retirement System and pension funds at Verizon Communications Inc. VZ -0.77% and defense firm Raytheon Corp. RTN -0.32%

Through that fund, Solera acquired control of five companies: Annie's; magazine publisher Latina Media Ventures LLC; nontoxic-paint maker YOLO Colorhouse LLC; upscale women's clothing retailer Calypso St. Barth; and Little Clinic, a chain of small medical centers located within grocery stores it eventually sold to Kroger Co. KR -0.47%for $86 million. Until Annie's stock listing, Little Clinic was Solera's only exit from an investment. Solera now is in the midst of raising a new fund, according to a person familiar with the matter. Ms. Ashby declined to comment on future fundraising.

Ms. Ashby has a long history of making deals—and big profits.

Around the same time that Annie's founder Annie Withey was beginning to sell the macaroni and cheese that would become the company's signature product, Ms. Ashby was orchestrating a $5.1 billion leveraged buyout of hospital operatorHCA Holdings Inc. HCA -2.07% for J.P. Morgan.

That 1988 deal led to profits approaching $1 billion for J.P. Morgan, according to Brian Watson, who led the private-equity unit, Morgan Capital, at the time. As the banker who brought the deal to J.P. Morgan, Ms. Ashby was promoted to become chief investment strategist at Morgan Capital. Until Ms. Ashby's arrival much of the private-equity unit's investments came as part of broader deals at the bank, but under her direction the group began finding its own targets, he says.

Ms. Ashby was "clearly our most valuable and influential staff member in what was a very talented group," says Mr. Watson, who now runs Georgica Associates Pty. Ltd., an Asia-Pacific private-equity business spun off from J.P. Morgan.

Friends and colleagues say Ms. Ashby's success comes from combining highly analytical and patient deal making with a hands-on management style and a knack for building brands without betraying what attracted customers to them in the first place.

Fashion designer Tory Burch, who met Ms. Ashby at a conference for women business leaders three years ago, says she admires how Ms. Ashby has built Calypso, which targets some of the same customers as Ms. Burch's eponymous company. "She's not necessarily thinking about the finances, but the DNA and what makes that brand important," Ms. Burch says.

The daughter of a teacher and a U.S. Navy fighter pilot who was killed during the Vietnam War, Ms. Ashby was born in Pensacola, Fla., and raised in San Diego. She attended the University of California, Santa Barbara before transferring to the College of William and Mary in Virginia. She earned a master's degree in foreign service from Georgetown University in Washington, working one summer in Mali, before landing in a J.P. Morgan training program.

James B. Lee Jr., vice chairman of J.P. Morgan who advised Solera on the Annie's IPO, says that when he met Ms. Ashby he sensed that she had an ability to spot trends in small data sets and an "extremely strong moral fiber" that would mesh well with the mission-driven companies she wanted to invest in.

"I knew that if she could translate that into investing in the fields that she has chosen, she'd strike gold," Mr. Lee says. "Annie's wasn't an accident."

Soon after Solera acquired Annie's, the company began to expand beyond macaroni and cheese into snack crackers. Then, through an acquisition, came salad dressings.

In 1999, Annie's revenues were about $7 million. In the fiscal year ended March 31, sales topped $117.6 million. Profit climbed to $20.2 million in 2011, up from $6 million in 2010 and three years of losses before that. It plans to use proceeds from the IPO to reduce its debt to about $4.8 million, from $13.3 million, according to securities filings.

While the company will continue to add products, the fastest way it can grow will be to emerge from "those little, dust-covered aisles" where many stores stock organic items and onto shelves next to competing brands from the likes of Kraft Foods Inc.,KFT +0.57% said Annie's Chief Executive John Foraker, who bought a controlling stake in Annie's three years before Solera acquired the company.

The stock's climb "symbolizes the broader market's and institutional investors' appreciation" of organic food as more than a fad, Ms. Ashby said in her office last week after Solera and Annie's employees, along with their children, rang the opening bell at the New York Stock Exchange.

"One of our points of view was this is going to make it into the mainstream." Ms. Ashby says. "Every once in a while a company comes around that changes things."

Source:http://online.wsj.com

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