Hedgie Consortium In Pegasus Take Private

Snapshot:Target: Pegasus Solutions

Sponsors: Prides Capital Partners, Tudor Investment

Corp., Belfer Management

Purchase Price: $275 million

Advisor: Seller: Bear Stearns

A consortium of hedge funds led by Boston- and San Francisco-based Prides Capital, and including Tudor Investment Corp. and Belfer Management, has completed the taking-private buyout of Pegasus Solutions. The buyers paid a total of $275 million to acquire the company, a technology and services provider to the hotel and travel industries.

The transaction was not unsolicited, as Pegasus had hired Bear Stearns in April 2005 to explore strategic alternatives. When the deal with the hedge funds was cinched in December, Prides Capital and Tudor had collectively accumulated over 15% of Pegasus’ outstanding shares.

The deal helps to affirm the increasing involvement of hedge funds in private equity transactions. Most of the hedge fund activity has taken place on the debt side of leveraged buyout deals, but there has been scattered interest on the equity side as well.

This past February, for example, Levine Leichtman Capital Partners had an agreed-to deal for Fox & Hound Restaurant Group toppled when hedge funds Newcastle Partners and Steel Partners trumped its bid for the pubs chain.

To acquire Pegasus, the hedge fund consortium agreed to pay $9.50 a share in cash. Prides reportedly contributed a $45 million equity slug in the transaction, while Tudor and Belfer invested $95 million of equity. JPMorgan, according to public filings, is leading the debt financing for the deal.

Prides Capital typically specializes in strategic block trades and activist investing in both small- and micro-cap public and private companies. Tudor focuses on global macro trading and equity investing, and also pursues commodity trading and event driven strategies. Belfer, meanwhile, describes itself as a diversified investment firm. —K.M.