Thomas Lee Was a Private Equity Pioneer Before KKR, Apollo (1)

The private equity world today is dominated by firms like Apollo Global Management, Blackstone Inc., Carlyle Group Inc. and KKR & Co., which trace their roots back decades.

Before any of them, there was Thomas H. Lee and the firm that bore his name.

Lee, a billionaire whose best-known transaction was notching a 334% return on equity from his 1992 purchase of Snapple Beverage Corp., died Thursday at his office in New York at age 78. His death was ruled a suicide by gunshot wound to the head, Julie Bolcer, a spokeswoman for the New York City Office of Chief Medical Examiner, said in an email.

The grief spread rapidly among those on Wall Street who knew him best. Todd Abbrecht and Scott Sperling, co-chief executive officers at Lee’s former firm, now known as THL, remembered him as a “generous and gracious individual.” At the New York office of Lee Equity Partners, a woman on the phone was crying as she said the firm declined to comment on his death.

Thomas Lee at his office in New York in 2019.

Photographer: Christopher Goodney/Bloomberg

Using $150,000 from an inheritance and a loan from his brother, he started Boston-based Thomas H. Lee Partners in 1974 and ran the firm until 2006.

Lee broke with his namesake firm that year and left to start a new one, Lee Equity. He didn’t take his name with him.

Through both firms, Lee invested more than $15 billion in hundreds of transactions as of 2020. That included his famous Snapple deal.

His firm bought Snapple in 1992 for $135 million, investing only $28 million of its own money. Lee then flipped it to Quaker Oats Co. for $1.7 billion two years later after boosting annual revenue from $95 million to $750 million.

His Snapple return on equity was 334% after his firm took out $927 million from the sale, according to a 1997 Forbes profile. With profits like that, by 2022, Lee was worth $2 billion, according to Forbes.

‘Iconic Figure’

Lee, who was often seen chewing a cigar around the office, had the private equity approach of targeting mid-cap companies with growth potential that had revenue of $300 million to $3 billion. One of his favorite aphorisms was: You’re better off paying a steep price for a great company than getting a so-so company at a bargain price.

Using that philosophy, one of his early successes was the 1985 acquisition of Akron, Ohio-based Sterling Jewelers. Other deals at his first firm included General Nutrition Cos. in 1989.

In 2005, he partnered with other private equity firms to buy Dunkin’ Brands, which franchised Dunkin’ Donuts and Baskin-Robbins ice cream shops, for $2.4 billion.

Investment Formula

Lee stayed with his basic investment formula when he started Lee Equity. It invested in Deb Shops, a junior fashion retailer, took Edelman Financial Group private in 2012 and made a big bet on Papa Murphy’s International, a take-and-bake pizza chain.

Lee often stayed out of the limelight when deals were reported, according to Edgar Bronfman Jr., who worked with Lee to buy Warner Music Group in 2004.

He said Lee’s philosophy was: You don’t have to win if you get everything you want. Let the other party have the social and press victories.

“Tom always focused on the business outcome for his investors, not his personal profile,” Bronfman told Bloomberg in 2014.

There were some flubs along the way, which Lee typically pointed out to potential investors when making a pitch on a new deal. A $500 million investment in 1999 in insurer Conseco Inc. soured when it sought bankruptcy protection three years later.

Lee’s firm was also rattled by its $507 million investment in Refco Inc., the US futures and commodities brokerage firm. Refco filed for bankruptcy protection after it disclosed in 2005 that its chief executive had hidden $430 million in debt for years.

Outside of work, Lee was an avid art collector, owning works by artists including Willem de Kooning and Jackson Pollock and was a trustee of Lincoln Center and the Museum of Modern Art, according to Forbes.

Lee was born in Washington, to Herbert and the former Mildred Schiff. His father worked for the Shoe Corporation of America, founded by his father-in-law, Robert Schiff. Lee graduated from Harvard College in 1965 with a bachelor’s degree in economics.

Before his private equity career, he spent eight years at the First National Bank of Boston, where he rose to vice president by 1973, specializing in lending to technology firms.

His first wife was Barbara Fish. They divorced in 1995 after having two children, Zach and Robbie, in 27 years of marriage. He later married Ann Tenenbaum. They had three children: Jesse, Nathan and Rosalie.

(If you or someone you know is struggling, contact the
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(Updates with cause of death from the New York City Office of Chief Medical Examiner in third paragraph.)

--With assistance from Patrick Oster, Alex Wittenberg and Bob Van Voris.

To contact the reporters on this story:
Patricia Hurtado in Federal Court in Manhattan at pathurtado@bloomberg.net;
Dawn Lim in New York at dlim308@bloomberg.net;
Amanda Gordon in New York at agordon01@bloomberg.net

To contact the editors responsible for this story:
Angela Moon at hmoon43@bloomberg.net

Brian Chappatta, Amanda Cantrell

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