On target

South Florida CEO, Sept, 2004 by Jaclyn Alcantara

Boca Raton-based Sun Capital Partners Inc., along with Cerberus Capital Management LP and Lubert-Adler & Klaff Partners LP, paid $1.2 billion to Target Corp. for its Mervyn's chain of department stores. The deal closed in late July, and is Sun Capital's largest acquisition to date. San Francisco-based Mervyn's has 257 stores and booked sales of approximately $3.3 billion in 2003.

The partners say they want to make the chain more profitable and are investing $400 million in the company. Why did Target sell? "Just because a company is making money doesn't mean that it is doing well," says Michael Kalb, a principle at Sun Capital. Target's eponymous stores drive its growth, he says, and Mervyn's, by comparison, "is not a growth vehicle. We're buying a well established regional chain that can benefit from our capital and operational expertise." Sun Capital was the most active private equity firm in the nation last year, with 18 deals, including the purchase of retailers such as Sam Goody and the Mattress Firm.