PE Week Wire, Dec. 4, 2006

This is the final call for firms to participate in our 4th Annual Internship Rodeo. We have 21 firms participating so far, and will post the listings in the MBA Forum of later today. So if you need a first-year MBA to get you coffee this summer, please send me an email with three pieces of information: Firm type (VC, LBO, mezz, I-bank, etc.), internship location and whether or not you want your firm name disclosed.

For the prospective candidates, please do not send me your CVs. I will get out all access codes by 2pm ET this afternoon, and post the listings inside the MBA Forum by 6pm.

*** Scott Schoen of Thomas H. Lee Partners gave an interesting keynote speech at the Yale SOM Private Equity Conference last Friday. His general theme was that bigger buyouts are better buyouts, in part because larger deals finance better than do smaller ones. Some quick notes:

Schoen acknowledged that the biggest threat to mega-LBOs would be tightening in the lending markets, but also argued that there could be a beneficial flip-side. Specifically, less-available debt – or at least less available at sponsor-friendly terms – could result in lower purchase prices. Firms like TH Lee that have billions dollars in dry powder could once again begin buying low and selling high, as opposed to the current model of buying high and selling higher. Yeah, it’s an optimistic win-win scenario, but that’s the nature of today’s LBO beast…

TH Lee has invested in deals totaling $125 billion since Schoen joined 20 years ago. An astonishing $60 billion of that comes in just the past 12 months.

Schoen emphasized that LBO demand (deal-flow) continues to outpace LBO supply (funds). That said, he also pointed out how co-investment is playing a large role in the ever-growing deal sizes. In the case of Univision, for example, TH Lee sold down around $200 million to limited partners. They had asked for $2 billion.

Private equity-backed deals comprised 4% of all corporate M&A in 1998. This year it’s up to 21 percent. Schoen listed several factors in driving the growth, including activist hedge funds, CEO frustration with having to meet quarterly Wall Street projections and the fact that private equity has a lower cost of capital (and can act faster) than do strategic buyers.

*** The conference’s most intriguing idea came during the LP panel, when Jason Gull of Adams Street Partners mentioned that successful LBO or VC firms could conduct some sort of Dutch auction for fund terms. In other words, see if you can get that 25% carry up to 35% or even 40%. Or maybe cram those fee-sharing agreements back down to 80/20.

To be clear, Jason wasn’t promoting such an idea – but rather just wondering aloud why no one has tried it yet. One answer is certainly that GPs want to maintain LP fidelity in case the market goes sour (see: VC fund size cuts in 2001-2002). More likely, however, it’s simple fundraising pragmatism. In other words, a firm would rather guarantee that it can raise its $10 billion target at standard rates, rather than risk only being able to raise $7 billion at more attractive terms.

*** My keynote discussion with Bob Friedman of Blackstone Group and Mike Goss of Bain Capital was officially off-the-record, in large part so that we could discuss some sensitive matters. Apologies…

New at

Alex Haislip tells how you can buy Fred Wilson’s house, and also teases a VCJ story on whether or not business plan competitions are worth a VC’s time and effort.

Artheur Klausner of Pappas Ventures learns about Rule 415, which affects microcap companies seek to raise significant capital via PIPE offerings. He’s got some serious reservations.

New job postings on the Careers page

Regular news and blog updates throughout the day…

Top Three

Station Casinos Inc. (NYSE: STN) has received an $82 per share buyout offer led by Colony Capital and company management. The total deal would be valued at approximately $4.7 billion.

Qualcomm Inc. (Nasdaq: QCOM) has agreed to acquire Airgo Networks Inc., a Palo Alto, Calif.-based WLAN technology provider. No financial terms were disclosed. Airgo had raised around $144 million in total VC funding since its 2001 inception, including a tranched-out $55 million Series E deal at a post-money valuation of around $287 million. Backers include Accel Partners, BlueRun Ventures, OVP Venture Partners, Oak Investment Partners and Sevin Rosen Funds. In related Qualcomm news, the company also will acquire the majority of RF Micro Devices’ Bluetooth assets.

Energy Capital Partners has closed its inaugural fund with $2.25 billion in capital commitments. The Short Hills, N.J.-based private equity firm will focus on North American energy infrastructure opportunities, primarily in the power generation, renewable, electric transmission and midstream gas sectors.

VC Deals

Clarizen Inc., a Tel Aviv, Israel-based provider of enterprise-grade project management services, has raised $7 million in first-round funding from Benchmark Capital and Carmel Ventures.

NBI Development Inc., a San Francisco-based medical device company focused on neuro-modulation therapies, has raised $5.5 million in first-round funding. Three Arch Partners and Bay City Capital co-led the deal, and were joined by MPM Capital, Aberdare Ventures, Mayo Clinic and the Venturi Group.

QuickComm Software Solutions Inc., a New York-based provider of telecom expense management software and services to Global 2000 companies, has raised $4.1 million in Series A funding led by Starfish Ventures.

CadForce, a Los Angeles-based provider of outsourced architectural services, has raised $3.1 million in Series B funding. Louisiana Ventures led the deal with a $1.5 million disbursement, and was joined by return backers Rincon Venture Partners and Tech Coast Angels.

Geospiza Inc., a Seattle-based developer of enterprise software for automating genetic testing, has raised $3 million in Series A funding from undisclosed angels.

Embotics Corp., an Ottawa-based provider of autonomic IT service management and security, has raised an undisclosed amount of venture capital led by Tera Capital Corp.

NTerVu, a Web 2.0 company that builds interview systems, has raised an undisclosed amount of venture capital from VC South of Atlanta.

Buyout Deals

Freescale Semiconductor Inc. has completed its $17.6 billion public-to-private acquisition by The Blackstone Group, The Carlyle Group, Permira and Texas Pacific Group.

PAI Partners has agreed to buy the Roofing unit of Lafarge SA (NYSE: LR) for Euro 1.96 billion in cash and Euro 420 million in assumed debt and pension liabilities.

Airport Management & Investment Ltd. has completed its sale of the London City Airport to AIG Financial Products and Global Infrastructure Partners, an infrastructure-focused joint partnership between Credit Suisse and GE Infrastructure. No financial terms were disclosed for the deal, which included leveraged financing arranged by The Royal Bank of Scotland and Credit Suisse. London City Airport is located in East London (Royal Docks in Newham), offers flights to 27 destinations within Europe and is the UK’s third-largest corporate aviation facility.

Cerberus Capital Management is in talks to acquire 12 U.S. plants of bankrupt auto-parts maker Delphi Corp., according to Bloomberg.

EMI Group PLC (PSE: EMI) is expected to reject a Gbp 2.5 billion buyout offer from Permira, according to The Times of London. The music publisher apparently believes the 310 pence per share offer is too low, and will told out for at least 350 pence per share.

NGBI Private Equity has sponsored a Gbp14 million buyout of Change Recruitment Group, a Scotland-based recruitment consultancy focused on professionals in the financial services, investment, legal, distribution and logistics markets.

Industri Kapital has acquired Attendo, a Sweden-based provider of care services for older and disabled people in the Nordic region, from Bridgepoint Private Equity. No financial terms were disclosed. Bridgepoint acquired a majority stake in Attendo in February 2005, at an enterprise value of approximately Euro 225 million.

Blue Horizon Organic Seafood Co., an Aptos, Calif.-based supplier of branded and private-label seafood from environmentally-sustainable sources, has raised an undisclosed amount of private equity funding from Greenmont Capital Partners.

PE-Backed IPOs

This week’s IPO calendar includes expected pricings from Transforma Acquisition Group Inc., Allegiant Travel Co., Aegean Marine Petroleum Network Inc. and Heelys Inc. IPG Photonics Group is scheduled to price next week.

Dayton Superior Corp., a Dayton, Ohio-based concrete forming and shoring rental company, has set its proposed IPO terms to 7.85 million common shares being offered at between $13 and $15 per share. It plans to trade on the Nasdaq under ticker symbol DSUP, with Robert W. Baird & Co. serving as lead underwriter. Odyssey Investment Partners is the company’s majority shareholder.

PE Exits

Aspen Insurance Holdings Ltd. (NYSE:AHL) has agreed to repurchase approximately $156 million of its ordinary shares, representing approximately 5.9 million shares, from founding shareholders The Blackstone Group and CSFB Private Equity. The shares are to be repurchased at a price per share of $26.50, representing a 1.7% discount to the closing price on November 30, 2006. Following the share repurchase, Blackstone will hold approximately 11.4 million shares and CSFB Private Equity will hold approximately 4.4 million shares.

Terra Firma Capital Partners is considering a Gpb800 million IPO or sale of portfolio company Infinis, a UK-based renewable energy company, according to The Telegraph. Terra Firma has retained advisors Merrill Lynch, Climate Change Capital and Deutsche Bank.

DDJ Capital is in talks to sell its majority stake in Austin, Texas-based fine jewelry retailer Samuels Jewelers Inc. to an undisclosed suitor in India.

PE-Backed M&A

Independent Insurance Investments Inc., an auto insurance portfolio company of Inverness Management, has completed its acquisition of the Omni Insurance Group from The Hartford Financial Services Group Inc. (NYSE: HIG). No financial terms were disclosed for the deal, for which almost all of the equity was provided by Inverness and its limited partners.

International Automotive Components Group North America has agreed to acquire Lear Corp.’s North American Interior Systems Division. IAC is a joint venture between WL Ross & Co., Franklin Mutual Advisers and Lear.Upon closing, Lear will transfer all of the assets of its North American interiors business and $25 million of cash to IAC, while WL Ross and Franklin Mutural will collectively contribute $75 million of cash and extend a $50 million term loan to IAC NA. Lear will hold 25% of the stock in IAC NA and warrants for an additional 7% equity interest. The operations being acquired by IAC include 26 plants located in the United States, Canada and Mexico with revenue of approximately $2.5 billion.

Other Deals

Alexza Pharmaceuticals Inc. (Nasdaq: ALXA) has raised $50 million in PIPE funding to develop two drug candidates: One for the treatment of panic attacks associated with panic disorder, and one to treat acute agitation in patients with schizophrenia. Both candidates currently are in Phase 2a clinical trials. Symphony Capital Partners led the deal.

Firms & Funds

Kayne Anderson Capital Advisors has closed its fourth fund with $950 million in capital commitments. The Houston, Texas-based private equity firm targets oil and gas companies that need strategic equity capital to finance acquisition and development opportunities.

Alliance Semiconductor Corp. has agreed to sell its portfolio of venture capital LP and GP interests to QTV Capital Ltd. for $123.6 million in cash. The transaction is expected to close by the end of Q1 2007, and does not include the sale of Alliance’s interests held by Solar Venture Partners. QTV’s financial partner on the deal is Pantheon Ventures.

Human Resources

Herald Chen has left Fox Paine & Co., where he had served as a managing director, according to Buyouts Magazine. Chen had joined Fox Paine in late 2002, after having co-founded Jamcracker Inc. with Exodus Communications founder K.B. “Chandra“ Chandrasekhar.

Joshua Green, a partner with law firm Heller Ehrman, has agreed to join Mohr Davidow Ventures as a partner focused on cleantech opportunities.

Mike Partsch has left Accuitive Medical Ventures, where he had been a managing director. In other Accuitive news, the firm has added Rudy Mazzocchi as a venture partner. Mazzocchi is the former founder and CEO of Image-Guided Neurologics (acquired by Medtronic in August 2005), and also will serve as vice president of business development with Accuitive affiliate The Innovation Factory.

John Manzetti has been named president and CEO of the Pittsburgh Life Sciences Greenhouse. He had joined the group in July as an executive-in-residence, and was named chief operating officer in September. Manzetti previously had served as president and CEO of NOMOS Corp., a provider of radiation therapy for cancer patients.

Paul Capital of San Francisco has added a corporate development team to focus on capital formation and investor relations. The three-person team includes: Jay Backstrand, vice president and former CEO of VolunteerMatch; Clare Canale, marketing manager who previously was with Charles Schwab & Co.’s strategic trading group and; Brian DeFee, and associate who recently completed his MBA at Thunderbird.

Peter Combe, former chairman of financial sponsors and co-head of leveraged finance with Lehman Brothers, has joined Permira to run a new debt practice, according to Private Equity Online.

Brian Sherer has joined SVB Silicon Valley Bank as a managing director of corporate finance. He previously was a senior vice president at Wells Fargo Foothill, where he focused on private equity-backed acquisition financing.

Alvaro de Molina has resigned as chief financial officer of Bank of America, after just 18 months on the job. He says that he hopes to either become a CEO or run a private equity or hedge fund. Joe Price, head of risk management for global corporate and I-banking, will take on the CFO role.

Paul Walborsky has joined Hercules Technology Growth Capital as a managing director in the firm’s technology group. He previously founded and served as CEO of Grupo Arca, a membership club for Hispanics in the United States.

Ripplewood Holdings said that it will name Mary Berner as president and CEO of The Reader’s Digest Association, following the completion of Ripplewood’s public-to-private buyout of the company. Ripplewood executive chairman Harvey Golub will become Reader’s Digest chairman, while current Reader’s Digest president and CEO Eric Schrier is in talks to assume a “strategic role to help build a stronger portfolio of media assets upon completion of the transaction.”