PE Week Wire, Feb. 9, 2007

The sun is shining, the beloved Celtics keep losing and the (soon to be) new GNC owners better not be betting on too many Trimspa sales. In other words, it’s time for Friday Feedback…

Today’s edition comes to you from New York, where I’m sitting on the 30th Floor of the Millennium Hilton. Great hotel, save for the lack of in-room wireless service. We begin with reaction to Blackstone’s pending acquisition of Equity Office and, in particular, my semi-retracted suggestion that the firm would have been better off if it could have simply taken the breakup fee and moved on to other things.

LBO pro Alan writes: “I think your math is a bit off in the Blackstone Equity office example, if only thatit basically assumes that the return is based on a one-year hold at a 25% return. The 25% returnextrapolatestoa share price of $148 in five years, which would equate to a 22% return at the new bid price. That’s not to say that they aren’t overpaying, but the return is likely not quite so sensitive to the premium they are paying.” I see your point Alan, but Blackstone’s recent track record includes a tendency for quick flips. For evidence, it already seems to have reached agreements to sell off $13.5 billion of Equity Office assets.

Real estate financier Joseph: “This deal is the ‘top of the market’ as far as commercial real estate deals go. At the current price they are buying a portfolio of commercial real estate at about a 5% cap rate (inverse of PE ratio) and there is no way they can mathematically generate a 7 year or longer IRR greater than 8%. This is like buying Yahoo at $240 per share in 2000…. Most of the veteran RE moguls (i.e. Zell, Barrack, Hines, etc.) aresellers or only buying special situation deals because they know that the market is way over priced.”

Finally, I wrote yesterday that Blackstone plans to immediately pocket around $200 million in “acquisition fees” Two folks who attended last weekend’s Harvard Biz School VC/PE Conference wrote in to say that Blackstone’s Tony James put the fee figure closer to $400 million…

Two comments on A Tale of Two Firms. First is entrepreneur Roland on TianDi Growth Capital: “I don’t know what to think about this. On the one hand, I admire the fact that the partners are confidant enough in their own abilities and the market opportunity to fund the entire thing themselves. On the other, I wonder if LP disinterest should have served as a giant, flashing warning sign to go no further.” Next is Justin on Trimaran: “One of your competitors reported that Trimaran will be back in the fundraising market later this year. Who’s right? Them or you?” Great question Justin. I know exactly why that was written – because I know exactly who said it (I got the same call). Let me just say this for now: If there does happen to be a third Trimaran-branded fund, it will not feature the same partnership as the prior funds… And I’m not just referring to the folks who left last week.

Finally, I’ve gotten a bunch of emails like this one from Jon: “People always talk about how VC and PE investors are so good at improving businesses, but doesn’t the Boston Celtics example seem to contradict it? They were never this bad (ever) until the current owners took over.” Well that would be too broad a characterization, considering that someone like Tom Hicks has had mixed success at sports ownership (more in hockey than in baseball). But yes, the Celts are sadly a mess… and none of the owners are making the necessary moves of firing both Danny Ainge and Doc Rivers. But sports team ownership is more about fun and vanity than it is about business. Were this a more traditional investment, both would have been gone long ago…

Top Three

Eddie Bauer Holdings Inc. (Nasdaq: EBHI) shareholders have rejected a $9.25 per share buyout offer from Sun Capital Partners and Golden Gate Capital. The total deal would have been valued at approximately $614 million, including around $328 million of debt to be repaid. Only 44% of the company’s outstanding shares were voted in favor of the deal, falling short of the required threshold. Thirty-seven percent voted in opposition.

Ares Management and the Ontario Teachers’ Pension Plan have agreed to acquire Pittsburgh-based nutritional products retailer GNC from Apollo Management for a total enterprise value of $1.65 billion. Apollo acquired GNC in 2003 for approximately $750 million, and later filed for a $345 million IPO that it later withdrew due to adverse market conditions.

Fortress Investment Group, a New York-based alternative asset manager, priced 34.2 million shares at $18.50 per share ($16.50-$18.50 range), for an IPO take of approximately $632.7 million. The IPO gives Fortress a market cap of approximately $7.4 billion.

VC Deals

Targeted Growth Inc., a Seattle-based company focused on improving the efficacy of biofuel feed stock, has raised $22.3 million in Series D funding co-led by Capricorn Management and AllianceBernstein.

EoPlex Technologies, a Redwood City, Calif.-based advanced materials company that makes miniature devices to generate, harvest and manage energy, has raised $8 million in Series C funding. ATA Ventures led the deal, and was joined by return backers Draper Fisher Jurvetson, Labrador Ventures and Draper Richards.

Critical Biologics Corp., a Cambridge, Mass.-based developer of therapeutics for critical-care patients with low plasma gelsolin, has raised $7 million in Series A funding from Morningside Ventures.

Tacoda Inc., a New York-based provider of behavior-targeted advertising solutions, has raised $7 million in Series D funding, according to a regulatory filing. Return backers include Rho Ventures, Masthead Venture Partners, Hanseatic Americas and Union Square Ventures.

Promptu Inc., a Menlo Park, Calif.-based provider of voice-powered search and navigation services for mobile operators, has raised $5.6 million in new VC funding. Return backers include Steelpoint Capital and Lauder Partners. The company previously raised an $11.6 million round in September 2006.

Click Forensics Inc., an Austin, Texas-based provider of click-fraud reporting for online advertisers, has raised $5 million in first-round funding. Austin Ventures led the deal, and was joined by Shasta Ventures.

RiverGlass Inc., a Champaign, Ill.-based provider of data analytics, has raised $4 million in Series B funding. Country Investors & Financial Services was joined by return backers RPM Ventures, IllinoisVentures and the Illinois Finance Authority.

Sharewire, a Dutch mobile solutions provider, has raised €1.2 million in VC funding from Main Capital Partners., a referrals–based online recruitment site for the European market, has raised first-round venture funding from Benchmark Capital Europe. No financial terms were disclosed, except that the round was “multi-million pounds.”

Buyout Deals

TI Automotive has agreed to sell its Industrial Group businesses — Bundy Refrigeration, Walbro Engine Management and VARI-FORM – to Sun Capital Partners. No financial terms were disclosed.

Superior Vision Services Inc., a Rancho Cordova, Calif.-based provider of managed vision care plans, has completed a $54.25 million recapitalization. The deal included $19.25 million of equity led by ABS Capital Partners and sourced by DCA Capital Partners, while the $35 million debt tranche was provided by ORIX Venture Finance.

Advent International has acquired an 80% interest in Pronto, a consumer credit company in Uruguay, from a group of local individuals. No financial terms were disclosed. Advent was joined on the deal by Argentinean firm Grupo de Servicios y Transacciones SA.

3i Group has completed its acquisition of VNU Business Media Unit from The Nielsen Co. No financial terms were disclosed. The unit is a B2B publisher operating throughout Europe.

First Reserve Corp. has completed its acquisition of scaffolding services provider Brand Energy & Infrastructure Services from JPMorgan Partners. No financial terms were disclosed for the deal, which came four years after JPMorgan Partners beat out First Reserve to buy the company from DLJ Merchant Banking for around $500 million. Brand Energy is expected to withdraw its current registration for a $260 million IPO.

Weston Presidio has completed its acquisition of Evenflo Inc. from Harvest Partners. Evenflo is a Vandalia, Ohio-based maker of baby products like car-seats, strollers and highchairs. LBO Wire previously reported that Credit Suisse was syndicating a $205 million financing package for the deal.

American Securities Capital has acquired steel bridge fabricator PDM Bridge LLC from Kirtland Capital Partners, according to LBOWire. No financial terms were disclosed. Kirtland had acquired the Eau Claire, Wis.-based company in March 2002 from Pitt-Des Moines Inc.

RedZone Capital, a private equity firm run by Washington Redskins owner Daniel Snyder, has agreed to acquire the Johnny Rockets restaurant chain for an undisclosed amount. Snyder said that he hopes to help expand the 2000-restaurant chain to around 1,000 locations within the next five years (including smaller Johnny Rockets Express shops).

Fremont Partners has agreed to sell its controlling interest in Chicago-based IT consultant Software Architects Inc. to Capgemini for an undisclosed amount.

PE-Backed IPOs

Targa Resources Partners LP, a Houston, Texas–based provider of midstream natural gas and NGL services, priced 16.8 million common units at $21 per unit ($19-$21 range), for an IPO take of approximately $352.8 million. It will trade on the Nasdaq under ticker symbol NGLS, while Citigroup, Goldman Sachs, Merrill Lynch and UBS served as co-lead underwriters. Targa was formed by Warburg Pincus in 2003 as an acquisition platform.

PE-Backed M&A

LumaSense Technologies Inc., a Santa Clara, Calif.–based sensor maker controlled by Oak Investment Partners, has agreed to acquire Mikron Infrared (Nasdaq: MIKR) for $11.50 per share (18% premium to yesterday’s closing price). The entire transaction would be valued at approximately $65 million.

Wayport Inc., an Austin, Texas-based provider of Internet connectivity solutions to the hospitality market, has acquired ResortWiFi, a provider of wireless services to the timeshare industry and select hotel companies like Fairfield Resorts and Monarch Grand Vacations. No financial terms were disclosed. Wayport has raised around $155 million in VC funding since its 1998, from firms like Sevin Rosen Funds, Advanced Equities, GC Technology Fund, Invesco Private Capital, Lucent Venture Partners, New Enterprise Associates, New Venture Partners, Star Ventures, Sanders Morris Harris, BA Venture Partners and Trellis Partners.

The Riverside Company has acquired two companies as add-ons to portfolio platform Veritext Corp., a Florham Park, N.J.–based provider of court reporting services. The add-ons are: Doemer & Goldberg Inc., a provider of court reporting and deposition support services; and First Services Ltd., a provider of court reporting services and video conferencing solutions for clients in the Philadelphia market.

Merrill Corp. said that its wholly-owned subsidiary WordWave International Pty Ltd. has acquired ComputerReporters, a provider of reporting services to the legal, corporate and government markets in Australia. Merrill is a provider of document management services to the financial, legal and real estate markets, and is backed by DLJ Merchant Banking.

PE Exits

The Blackstone Group is nearing a deal to sell Equity Office properties in Seattle and Washington D.C. to Beacon Capital Partners of Boston, according to The Wall Street Journal. The deal would be worth roughly $6.5 billion, and would follow a reported agreement whereby Blackstone would sell Equity Office’s New York office buildings to Macklowe Properties for around $7 billion. Equity Office shareholders on Wednesday approved a $55.50 per share bid from Blackstone, in what will be the largest leveraged buyout in history.

The Carlyle Group plans to sell its remaining position in UK defense and security company Qinetiq. It originally acquired a 33% stake from the British Ministry of Defense in 2002 for Gbp42.5 million, and then sold around Gbp160 million worth of shares when the Qinetiq went public last February. Carlyle still holds 67.8 million shares, which could net another Gbp140 million.

Firms & Funds

Goldman Sachs Capital Partners is planning to raise upwards of $19 billion for its sixth buyout fund, according to The Wall Street Journal. It already has secured over $8.7 billion in capital commitments, according to a report in this week’s issue of Buyouts Magazine.

Tuareg Capital has held a $30 million first close on its inaugural Libya Fund, which has a total target of $100 million. The firm also announced a strategic partnership with Capital Management House of Bahrain, whereby the two firms will partner on certain opportunities in North Africa – particularly in regards to Islamic debt financing and other structured financing opportunities.

Human Resources

Gregg Fergus has joined Baird Venture Partners as an executive-in-residence in the firm’s life sciences group. He also will serve as senior vice president of corporate development with Baird portfolio company Caden Biosciences. He has spent the past nine years with Affymetrix, where he most recently served as senior vice president of sales and global operations. In other Baird news, the firm has promoted Devin Matthews to partner and James Pavlik and Michael Liang to vice president.

Emma Thorpe has joined The Carlyle Group as director of European communications. She previously was with PR firm Penrose Financial. Thorpe succeeds Katherine Elmore-Jones, who has moved over to Carlyle’s investor relations group.

William Candelaria has joined Gibson, Dunn & Crutcher LLP as a New York-based partner. He previously was with Mayer, Brown, Rowe & Maw, and focuses on M&A, capital markets and private equity – with a focus on emerging markets like Latin America.

Martin Lewis has joined Greenhill & Co. as a New York-based managing director focused on financial restructuring. He previously was with Rhone Group and, before that, was a co-founder of Miller Buckfire Lewis & Co. and a managing director with The Blackstone Group.

SAC Capital Advisors has hired Peter Berger to help launch a private equity group focused on Japan, according to Reuters. Berger previously was with Ripplewood, and will be joined by fellow Ripplewood pros Frank Barker and Jeffrey Hendren once their contracts expire this summer.

Patrick Harr has been named CEO of Streamload Inc., a San Diego-based provider of personal media delivery solutions. He previously was an entrepreneur-in-residence with Enterprise Partners Venture Capital and, before that, was president and CEO of Preventsys Inc. VentureWire reports that Streamload is nearing done raising a Series C round of between $8 million and $10 million.