Macellum Forms Firm to Invest in Black and Minority Businesses

Macellum Capital Management has formed a firm to invest in Black- and minority-owned or -led businesses focused on the retail and consumer sectors.

The new firm, called Macellum Private Capital, is targeting $100 million to $150 million for its inaugural fund and will be hiring investors and operators.

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The firm is receiving initial backing via strategic partnerships with Bob Johnson, founder of BET (Black Entertainment Television) and The RLJ Cos.; G-III Apparel Group, and the retailer Citi Trends, which focuses on Black and Hispanic consumers. Some start-up money will also be coming from Macellum Capital.

MPC is being led by Daniel Balzora, an investor with 20 years of private equity/growth capital, investment banking/M&A, and operating experience at TZP Group, Pouschine Cook Capital, Jefferies & Co., and General Mills.

“Businesses and consumers are increasingly demanding products and services from these businesses, creating a $1 trillion-plus opportunity in an underserved and underrepresented market that has encountered systematic disadvantages to scaling and traditionally lacks access to significant capital, strategic and operational resources, and deep networks,” Macellum said in a statement.

“Macellum Private Capital’s mission is to address these gaps and generate positive financial outcomes for its portfolio companies that help improve the economic prospects and social mobility of diverse communities while delivering strong returns for its investors.”

MPC will consider taking stakes in multiunit retailers, e-commerce, health and beauty, apparel, food, home goods and experiential businesses. MPC will also consider business and industrial service companies that are vendors to large organizations.

The new firm is targeting U.S. companies offering “unique and differentiated products services that reach sizable markets, multichannel distribution opportunities, and have already established “proof of concept” and are generating more than $5 million in annual revenues. They should also have a flexible capital structure; Macellum could be the sole investor controlling the company or a co-investor.

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There are other criteria for investment. Targeted companies should have a culture that values diversity, “strong alignment” via significant financial/rollover commitment from the current shareholders, and should allow Macellum Private Capital to utilize its sector expertise, strategic and operational resources, to drive growth and operations enhancements.” Macellum officials said MCM provides MPC with “a comprehensive, well-established infrastructure, including finance, operations and compliance, legal and IT.”

MPC has assembled a high-profile investment committee including Jonathan Duskin, founder and chief executive officer of Macellum Capital Management; Morris Goldfarb, G-III chairman and CEO, and Johnson, of BET and The RLJ Cos.

Also on the committee: Jeanette Nostra-Katz, G-III senior adviser and board member and former G-III president; Citi Trends CEO David Makuen; Citi Trends executive chairman and former top Macy’s executive Peter Sachse, and Bret Cummings, Macellum’s chief financial officer and chief compliance officer.

Macellum has a reputation for shareholder activism and has run proxy contests forcing changes at several companies, including The Children’s Place Inc., Citi Trends, Bed Bath & Beyond Inc. and Big Lots Inc. The firm’s last six campaigns have resulted in 22 minority and/or female directors joining the boards of companies it has targeted.

Last week, Macellum nominated 10 candidates to the board of directors at Kohl’s Corp. Macellum owns nearly 5 percent of Kohl’s, and for months has been putting pressure on the Menomonee Falls, Wisc.-based value department store chain for strategic alternatives, including possibly selling the company and taking it private. The hedge fund has been highly critical of the Kohl’s management.

Macellum’s nomination of 10 candidates for the Kohl’s board is a reaction to Kohl’s recent rejection of at least two takeover offers — including from Acacia Research Corp. and reportedly from Sycamore Partners — and the retailer’s enactment of a poison pill.

Last year, Macellum was successful in getting two individuals of its choice placed on the board, and a third person was added to the board by mutual agreement between the activist and Kohl’s. Now, Macellum hopes to completely overhaul the Kohl’s board through a vote that will be tallied at the retailer’s next annual meeting of shareholders. The date has not been revealed yet.

In response to Macellum’s actions and criticisms, Kohl’s stated that its decision to reject the takeover bids and enact a poison pill are justified. Kohl’s also stated that it believes Macellum’s effort to take control of the board is “unjustified and counterproductive.”