Buyout beat, week of Oct. 22, 2007

Fifth Street to launch IPO on Wall Street

While other LBO firms are reportedly waiting out the credit storm before launching their IPOs, mid-market mezzanine lender Fifth Street Capital is plowing ahead.

The White Plains, N.Y.-based firm last week filed papers with the Securities and Exchange Commission to become a publicly traded business development company. Fifth Street is looking to raise $150 million in the offering. The firm expects to use the proceeds from the offering to invest in small and mid-sized companies, according to the SEC filing.

Fifth Street began to tell investors its plans to make a public-market play in the spring, at the same time that it was out to raise what will turn out to be its third and last institutional pool, a $400 million mezzanine fund. Fifth Street told LPs that their partnership interests would be converted to shares in the new public company.

At the time, in April, President Leonard Tannenbaum said that wasn’t always an easy sell. “Once it clicks they realize how great it is for them and for us,” Tennenbaum told Buyouts, a PE Week publication. “But it has to click.”

Fifth Street, founded in 1998, invests alongside sponsors in companies generating between $25 million and $250 million in revenue. The filing was made under the name Fifth Street Finance Corp. No date for the offering was listed in the regulatory filing, except that it will take place in 2008.

Harrah’s buyout OK’d by N.J. commission

New Jersey casino regulators last week approved the proposed $31 billion acquisition of Harrah’s Entertainment by Apollo Management Group and TPG. The deal would be the largest ever to take a publicly held casino company private.

The two private equity firms testified before a hearing of the state Casino Control Commission that they promised to be hands-off owners and have no plans of layoffs or selling off of assets as a result of the merger.

“We invested in Harrah’s because we have a tremendous amount of confidence in [Chairman and CEO] Gary Loveman,” Eric Press, an Apollo partner, told the Associated Press. “His plans for the business are our plans. We don’t intend to change a thing.”

The companies still need approval from regulators of 10 other states regulators before the deal can go through. The firms were scheduled to speak before casino regulators in Mississippi late last week. Approval for the deal has already been received from the Louisiana Racing Commission, and Iowa casino regulators considered the buyout earlier this month, but have not acted on it.

The deal is expected to close late this year or early next year.

3Com sale needs review, lawmakers say

Lawmakers urged the U.S. Treasury to conduct “the most rigorous review” of a plan by a Chinese company to buy a stake in U.S. technology company 3Com Corp.

In September, Bain Capital, the Boston-based buyout firm, proposed a $2.2 billion takeover of 3Com, with Huawei Technologies Co., a Chinese telecommunications equipment maker, taking a 16.5% stake.

Lawmakers say that they want to examine any links that Huawei has to the People’s Liberation Army.

A non-binding resolution introduced by Ileana Ros Lehtinen, the most senior Republican on the House foreign affairs committee, said the transaction in its current form threatens national security and should not be approved.

Spectrum Equity buys

Spectrum Equity Investors

has agreed to acquire a majority interest of Generations Network Inc., parent company of a portfolio of websites that include The deal is valued at $300 million, and is expected to close later this year.

Ancestry had raised more than $50 million in three rounds of funding in 1998 and 1999 from AOL, Hewlett-Packard Co., Intel Capital., CMGI @Ventures, Wasatch Venture Fund, Tango Partners, Pivotal Asset Management and other investors.