PE Week Wire, Feb. 2, 2007

The sky is gray, the groundhog didn’t see his shadow and the Equity Office board is recommending Blackstone’s $54 per share bid instead of Vornado’s $56 per share bid. In other words, it’s time for Friday FeedBack (a bit more interactive than usual):

First up are some comments on the Guidelines for VC-backed Directors, which has been downloaded over one thousand times from peHUB. As a recap, I said that the guidelines were well thought-out, but will only matter if they are actually adopted. Rich writes: “Your basic point is a good one, but why not take it one step further? Begin making a list of each portfolio company that adopts these guidelines – I guess you’d have to put out an open call, beginning with the firms that helped white the whitepaper. Then keep tabs on them and see if their exits are better than the industry average?” Good idea Rich. Very difficult from a practical standpoint – largely because M&A exit values often are kept confidential — but a very good idea…

Jen: “I wonder if someone could developer a similar paper for buyout-backed boards that have multiple equity sponsors? There are tons of issues that arise, depending on how evenly split the control is. I’d imagine, for example, that the SunGard board can be every bit as dysfunctional as a typical VC-backed board.”

SunGard CEO Cris Conde actually was asked that question at the Wharton conference last month, and he said that control wasn’t so much an issue – in part because each firm has been put in charge of various sub-committees. A bigger problem, he said, was communication. For example, imagine he has a conversation with a Silver Lake rep, and mentions something about production troubles. And the Silver Lake rep mentions it to the Bain rep before Conde has had the chance to do so. The Bain rep could be angry with Conde and feel out of the loop. He says the answer has been to eliminate selective communications – if he has something to tell someone, he tells everyone at once (! usually electronically).

*** Ron on yesterday’s Doppleganger news: “You mentioned that Dana Settle of Greycroft used to be a partner with VSP, but not that she actually worked at Doppleganger for a while between VC jobs… Maybe the best way to get funded is to hire an out-of-work VC for a while.” Yup, totally slipped my mind. Good catch.

*** Tons of email and blog comments about my request for improvements. A bunch centered around Vox Populi. Specifically, some readers wanted to know if they could participate. This is a tricky one, because the list is exclusive for a reason (i.e., they are people whose opinions/thoughts I particularly value). But, that said, if you feel you have a unique market perspective and a desire to blog to a large audience, let me know. No promises (perhaps trial posts), but I wouldn’t want to miss out on some interesting copy because I have a stunted Rolodex…

*** Finally, an email this morning about the aforementioned Equity Office endorsement of Blackstone’s buyout offer. James: “Equity Office is recommending to its shareholders that they take the lower of two offers, ostensibly because they fear Vornado will take too long to find the cash (if ever). What does this do to your ‘Goodbye to Boomtown’ argument? If boards – and then shareholders – accept LBO bids that are lower than are strategic offers, then LBO firms can maintain their anticipated return margins even if strategics flood the market.”

We obviously need to see what the shareholders do, since I’m not sure they’ll buy the cash-strapped Vornado argument. But let’s assume they do. Blackstone was forced by Vornado to significantly raise its bid, thus lowering its return expectations. So, if this keeps happening, then the argument stands. On the other hand, shareholder rejection of Vornado’s bid might lead some strategics to rethink getting into a bidding war with major LBO firms. Then the strategics leave, and the argument dissipates. Validation of the argument, however, also came this week when Carlyle bailed on the Elkcorp auction…

*** Reminder: I’ll be speaking tonight at the invite-only kickoff dinner to tomorrow’s Harvard Business School VC & PE Conference. I also hope to attend tomorrow, but have a lot of prep work to do for a Sunday Super Bowl party. And, n response to those of you who’ve asked: Nope, I really don’t care about the game anymore. Specifically, I can’t root for either Peyton or some of the thugs on the Chicago defense (particularly Ricky Manning Jr.). So I’m hoping for a 0-0 tie going into the final minute, when Vinatieri kicks a 70 yarder to win it.

New at

Five former members of Mellon Ventures — including CEO Larry Mock — have quietly formed a new middle-market buyout firm. Moreover, they were the mystery party that helped acquire the existing MV portfolio from the parent bank, alongside Goldman Sachs. Get all the scoop here.

As promised, a semi-comprehensive list of which puiblic pension funds report private equity fund performance data on their website. I provide links, and rank them in order of usefulness.

Denise Palmieri uses today to ask Is Groundhog is Guiding Your Career?

And, as always, news and analysis updated throughout the day…

Top Three

The Blackstone Group, CVC Capital Partners and KKR are considering a joint bid for British supermarket chain J. Sainsbury PLC. News of the potential offer sent the company’s stock up 15 percent, thus giving it a market value of around Gbp8.8 billion.

n2N Commerce Inc., a Cambridge, Mass.-based provider of cross-channel on-demand ecommerce platforms for retailers, has raised $30 million in first-round funding from General Catalyst Partners and Limited Brands Inc. (NYSE: LTD). In related news, n2N announced that its software will power Victoria’s Secret’s $1.3 billion direct-to-consumer business beginning in the second half of 2007.

Cinemark Holdings Inc., a Plano, Texas-based movie theater chain, has filed for a $400 million IPO. It plans to trade on the NYSE under ticker symbol CNK, with Lehman Brothers serving as lead underwriter. Madison Dearborn Partners holds a 66.3% pre-IPO take, while Quadrangle Group holds 7.1 percent.

VC Deals

XShares Group LLC, a New York-based developer and distributor of exchange-traded funds (ETFs), has raised $10 million in VC funding led by Grail Partners.

BioBehavioral Diagnostics Co., a Cambridge, Mass.-based developer of a diagnostic system for measuring the core components of Attention Deficit Hyperactivity Disorder (ADHD), has raised $8.5 million in Series A funding. Sevin Rosen Funds and Tullis-Dickerson co-led the deal.

Metafoam Technologies, a Boucherville, Quebec-based manufacturer of open-cell metal foam, has raised Cdn$3.4 million in Series A funding. Backers include BDC Venture Capital, FIER ID, MSBi Capital and M&M Investments.

Buyout Deals

One Equity Partners has agreed to acquire the Emissions Technologies group of ArvinMeritor Inc. (NYSE: ARM) for approximately $310 million. The group primarily serves manufacturers of light and commercial vehicles.

Exxon Mobil is considering the sale of at least some of its French oil business that could be worth up to $2.6 billion, according to The Business of London. Likely bidders include First Reserve, PAI Partners and Petroplus (of which Carlyle owns 20%).

Angelo, Gordon & Co. has acquired NOVA Gaming LLC from a group of individual owners. NOVA is a Greenville, S.C.–based maker of interactive, server-based gaming systems and titles for the Native American gaming market.

Carlyle/Riverstone has agreed to acquire a majority stake in Titan Specialties Ltd., a Pampa, Texas-based provider of perforating gun systems, shaped charges, well-logging instrumentation and other ancillary drilling and completion products for the oilfield services industry.No financial terms were disclosed for the deal, which includes leverage arranged by Credit Suisse. Merrill Lynch advised Titan on the sale.

H.I.G. Capital has sponsored a recapitalization of The Harvard Drug Group LLC, a Livonia, Mich.-based distributor of generic and branded pharmaceuticals in the United States. No financial terms were disclosed.

Aksia Capital of Italy has acquired a majority stake in Robuschi SpA, a maker of industrial blowers and pumps. The equity investment was Euro 30 million, with senior credit facilities provided by Interbanca and BNL.

Belvedere Capital has agreed to acquire a majority interest in Professional Business Bank (OTC BB: PBBK), a Pasadena, Calif.-based bank serving Southern California businesses. Under terms of the deal, PBB shareholders will receive $23 per share in cash or 0.87 shares of a newly formed holding company that will own 100% of PBB. Shareholders will elect their form of consideration, with 52.5% of the outstanding shares expected to receive cash and the remaining 47.5% to receive holding company shares, subject to the allocation provisions of the agreement.

MidOcean Partners has completed its acquisition of a 50% ownership position in Prism Business Media. The move comes after Prism completed its previously-announced acquisition of Penton Media. The stake was sold by Prism owners Wasserstein & Co., Highfields Capital Management and Lexington Partners. No financial terms are being disclosed.

Boston Ventures has acquired a majority interest in HomePages LLC, a DeKalb, Ill.-based publisher of 135 community yellow pages directories in Illinois, Wisconsin and Indiana. No financial terms were disclosed.

General Atlantic has agreed to acquire a majority stake in AKQA Inc., a San Francisco-based interactive marketing company, from Francisco Partners. No financial terms were disclosed, although The Wall Street Journal had reported that the asking price had been between $200 million and $250 million.

AIG Capital Partners has led a buyout of Companhia Providencia Industria e Comercio (Providencia), a Brazil-based manufacturer a fabric made of polypropylene used in disposable goods such as diapers and feminine care, and durable goods such as auto-parts and home furniture. The deal was valued at $432.6 million, with other members of the buyout consortium including GG Investimentos, Banco Espirito Santo and the Constantino Family. To provide leverage, Banco Santander led a local commercial paper issuance worth around $216 million.

Resilience Capital Partners has acquired Branstrator Corp., a Ft. Wayne, Ind.-based sunroom manufacturer. No financial terms were disclosed.

PE-Backed IPOs

Molecular Insight Pharmaceuticals Inc., a Cambridge, Mass.-based developer of molecular imaging pharmaceuticals and targeted radio-therapeutics, priced five million common shares at $14 per share ($14-$16 range), for an IPO take of approximately $70 million. It will trade on the Nasdaq under ticker symbol MIPI, while RBC Capital Markets and Jefferies & Co. served as co-lead underwriters. The company has raised over $35 million in VC funding from firms like Cerberus Capital Management and Siemens Venture Capital. The IPO gives it an initial market cap of around $345 million.

Algeta ASA, an Oslo, Norway-based developer of anticancer radiopharmaceuticals, has filed for an IPO on the Oslo Stock Exchange. ABG Sundal Collier and DnB NOR Markets have been named co-lead financial advisors and Terra Securities is co-lead manager. Algeta has raised around $34 million in VC funding from firms like Advent Venture Partners, NorgesInvestor, Odlander Fredrikson & Co., S.R. One Ltd. and Selvaag Invest.

Targa Resources Partners LP, a Houston, Texas–based provider of midstream natural gas and NGL services, has set its proposed IPO terms to 16.8 million common units being offered at between $19 and $21 per unit. It plans to trade on the Nasdaq under ticker symbol NGLS, with Citigroup, Goldman Sachs, Merrill Lynch and UBS serving as co-lead underwriters. Targa was formed by Warburg Pincus in 2003 as an acquisition platform.

Next week’s IPO calendar includes expected pricings from: Cellcom Israel, Synta Pharmaceuticals, Ja Solar, Mellanox Technologies, National Cinemedia and Accuray.

PE Exits

Oncap, a private equity vehicle of Onex Corp., has agreed to sell CMC Electronics Inc. to Esterline Corp. (Nasdaq: ESL) for $335 million. CMC is a Montreal, Canada-based provider of avionics, sensors and advanced materials to the aerospace and defense markets.

National Semiconductor Corp. (NYSE: NSM) has acquired Xignal Technologies AG, a Germany-based provider of high-speed data converters. No financial terms were disclosed. Xignal raised around $18 million over two rounds of VC funding in 2001 and 2003, from firms like Benchmark Capital Europe, Atila Ventures, BayTech Venture Capital and STAR Ventures.

Pfizer Inc. (NYSE: PFE) has agreed to acquire BioRexis Pharmaceutical Corp., a King of Prussia, Pa.–based drug company focused on diabetes. BioRexis also has a technology platform for developing new protein drug candidates. No financial terms were disclosed. BioRexis raised $38 million in VC funding over two rounds in 2002 and 2004, from firms like Quaker BioVentures, Prism VentureWorks, Tullis-Dickerson, Anthem Capital, Johnson & Johnson Development Corp., ProQuest Investments.

Coca-Cola Co. (NYSE: CCE) has agreed to acquire Fuze Beverage LLC, a San Ramon, Calif.–based maker of branded juices and teas. No financial terms were disclosed. Fuze has raised VC funding from Castanea Partners.

BT Group PLC has acquired International Network Services Inc., a Santa Clara, Calif.-based provider of IT consulting and software, from West Coast Venture Capital. No financial terms were disclosed. West Coast led a spinout of the company from Lucent in 2002.

PE-Backed M&A

The Riverside Company has acquired Publishing Business Systems Inc., a Minneapolis, Minn.-based provider of circulation software for the newspaper industry. No financial terms were disclosed. Riverside will add PBS onto existing portfolio company Digital Technology International, which provides newspaper publishing software.

Firms & Funds

The Blackstone Group is targeting $10 billion for its sixth global real estate fund, according to Reuters.

RRE Ventures of New York has closed its fourth fund with $300 million in capital commitments, as first reported here two weeks ago (sorry for the redundancy, but a competitor only “learned” of it this morning).

Human Resources

Paul Haggis is stepping down as CEO of the Ontario Municipal Employees Retirement System (OMERS). The Financial Post reports that he was “pushed out by the board of directors due to a disagreement over… their differing view of the CEO role.”

Giora Bitan is stepping down as CFO of Israeli networking company ECI Telecom Ltd., in order to join venture firm Poalim Capital Markets. Prior to joining ECI in 2002, Bitan was a general partner with Giza Venture Capital.

Jay Eum is leaving his post as head of Samsung’s U.S. corporate venturing group, according to VentureWire. The report says that Eum and two partners will form a new early-stage VC firm called TransLink Capital.

Ian Bagshaw has joined Linklaters as a London-based partner in the law firm’s private equity practice. He previously was with Clifford Chance.

Charlie Parker has joined London-based private equity firm Frontiers Capital as a director. He previously was with Boston Consulting Group, where he focused on the tech/telecom sector, and also worked with private equity clients.

AlixPartners, a Southfield, Mich.-based turnaround firm, has created the positions of co-president. It will be filled by managing directors Stefano Aversa and Peter Fitzsimmons, with Aversa responsible for the firm’s European and Asian offices and Fitzsimmons responsible for its North American offices. Michael Grindfors remains firm CEO.

Monument Group, a Boston-based private equity placement firm, has promoted six individuals to partner: Martin Anthonsen, Lori Campana, Teresa Kinsella, Bart Molloy, Ryan Mueller, and Laurence Zage.

The Halo Funds, a Palo Alto, Calif.-based venture firm, announced that partner Ed Esber has accepted co-managing member responsibilities for all the current and future Halo Funds (there currently are three). His fellow co-managing member Carol Sands will continue to interact with portfolio companies, but will focus more on fund administration and investor relations.