PE Week Wire: Fri., Dec. 7, 2007

Congressional Democrats are like Oakland Raiders-era Randy Moss: Unwilling to go over the middle, for fear of getting hit. I had hoped that they’d morph into Patriots-era Randy Moss on this carried interest issue, but it seems that they didn’t have the same flexibility of character.

The Senate yesterday approved a temporary fix to the alternative minimum tax (AMT) mess, but without language that would have changed the tax treatment of carried interest from capital gains to ordinary income. The vote wasn’t close (88-5), with the House expected to follow suit.

Apologists will cite pragmatism, as the tax change wasn’t worth enough real dollars to risk a GOP filibuster or presidential veto. But that’s like arguing that Moss might have gotten hurt going over the middle – no risk, no reward. There was a very real opportunity here to inject some basic fairness into the tax code (an oxymoron, I know), and the Democrats willingly kicked the can down the road until they (hope to) have both Congress and the White House. Just pathetic.

*** Every few months, someone tells me that Kodiak Venture Partners is on the ropes. The latest came last Thursday night before my MIT dinner speech, when someone said they’d heard layoff rumors. So I looked into it, and came up with the following:

No layoffs, although marketing director Liz Neal has left. The bigger issue is that fundraising remains on hold until the middle of next year, when Kodiak is hoping to have a handful of additional liquidity events. For example, two of its portfolio companies are planning to file for IPOs next week (hint: only one is based in Massachusetts).

Some of you might remember that Kodiak had originally planned to close its fourth fund by Q1 of this year, but things got derailed by the messy defection of partner Elliott Katzman to Commonwealth Capital Partners. After all, it’s problematic when a fund’s investors learn that a partner is leaving before the other partners know (which is at least one way the story has been told). There’s enough dry powder left in the current fund to last another eight months or so, which probably means PPMs will be distributed in Q2.

*** peHUB First Read

*** The 5th Annual Internship Drive is going gangbusters, with about 500 first-year MBA candidates logging into peHUB to take a look at more than 80 listings. I’m putting a few more up later today, after which firms will have to wait until May to submit new listings (for our 3rd Annual Desperate Interns Drive). Continued good luck to both the posters and the applicants.

*** Email of the day comes from Ed: “I enjoy your column, but why do you always ‘suck up’ so nauseatingly to the large buyout professionals. I understand that they provide the ecosystem for service providers to exist in, but come on. Please save us the pain with your feckless public attempts. They wouldn’t magically love you more if you are always on their side.”

I would reply, but need to head over to Bain Capital for a lunch they’re throwing in my honor… Have a great weekend!

Top Three

Conduit Capital Partners has sold its 70% stake in Inelec, a portfolio of three hydroelectric power plants in Western Mexico, to Enel SpA. The deal is valued at $156 million, which puts Inelec’s enterprise value at $193 million. BNP Paribas advised Conduit on the sale.

NanoCoolers Inc., an Austin, Texas-based developer of cooling technology for semiconductors, has shut down. The move came after the company’s investors voted to cancel a new fundraising drive. NanoCoolers had raised around $19 million in total VC funding since 2002, including a Series AA recap last year and a small bridge loan this past February. Backers included Austin Ventures and Draper Fisher Jurvetson.

Entropic Communications Inc., a San Diego-based provider of home networking for digital entertainment, raised $48 million in its IPO. The company priced eight million common shares being at $6 per share, which was the low end of an already-reduced offering range. Its initial market cap is approximately $405 million. Entropic will trade on the Nasdaq under ticker symbol ENTR, while Credit Suisse and Lehman Brothers served as co-lead underwriters. The company had raised over $75 million in total VC funding since 2001, from firms like Anthem, CMEA, Comcast, Revolution, Cisco Systems, Intel Capital, Liberty Associated Partners, Mission Ventures, Motorola Ventures, Panasonic Ventures, Redpoint Vent! ures, Time Warner and YAS Broadband Ventures.

VC Deals, a Chinese video sharing website, reportedly has raised $20 million in second-round funding. Hikari Private Equity led the round, and was joined by Susquehanna International Group China, Adobe Systems Incorporated, CID Capital, Sequoia Capital and Steamboat Ventures.

GroSolar, a White River Junction, Vermont-based solar energy startup, has raised $10 million in Series B funding. NGP Energy Technology Partners led the round, and was joined by return backers SJF Ventures, Calvert Social Funds, and Allco Financial Group. The company previously raised a $2.25 million Series A round in September 2006.

Pantech Biosolutions AG, a Liechtenstein-based developer of transdermal delivery solutions for large-molecular weight drugs, has raised CHF 6.3 million ($5.67m) in Series A funding. Gamma Capital Partners of Austria led the round, and was joined by other undisclosed European investors.

Buyout Deals

Advent International has completed its acquisition of UK appliances insurer Domestic & General PLC, for approximately £523.9 million. D&G stockholders received £14.25 per share, which was a 25.7% premium over the trading price on May 18, when D&G announced that it had received a takeover approach.

The Riverside Company has acquired Novamed Ltd., an Israeli microbiology and infectious disease testing company. It will be added onto existing Riverside portfolio company Diatron, a Hungarian manufacturer of hematology analyzers and reagents.. No financial terms were disclosed.

Highland Capital Management may once again propose a deal to bring Delphi Corp. out of bankruptcy, after objecting to a new plan that calls for an investment of up to $2.55 billion led by fellow hedge fund Appaloosa Management.

Highland Oil & Gas, a Ft. Smith, Ark.-based natural gas startup, has raised up to $100 million in private equity commitments led by Kayne Anderson Energy Funds.

Hotbed has acquired a £5.2 million industrial portfolio from UK sandwich maker Adelie Food Holdings, via a sale-leaseback transaction.

ProActive Recycling Inc., an Owen Sound, Ontario–based recycler of lithographic ink, has raised an undisclosed amount of private equity funding from KCA Partners. ProActive founder Albert Wakeford will continue to serve as CEO.

PE-Backed IPOs

Precision Therapeutics Inc., a Pittsburgh-based oncology services company, has withdrawn registration for its IPO. The move comes just days after the company agreed to go public via a reverse merger with special purpose acquisition company Oracle Healthcare Acquisition Corp. (OTC BB: OHAQ). PTI has raised around $84 million in VC funding since 1996, from firms like Adams Capital Management (39.1% stake), Quaker BioVentures (21.5%), TVM Capital (9.1%), Birchmere Ventures (8.8%), Stephens Group (6.5%) and Draper! Triangle Ventures.

PE Exits

Linsalata Capital Partners has sold portfolio company Overton’s Inc. to Gander Mountain Co. (Nasdaq: GMTN). The deal was valued at approximately $70 million, including the repayment of indebtedness. Overton’s is a Greenville, N.C.-based direct marketer of specialty water sports and related marine accessories.

Seagate Technology (NYSE: STX) has agreed to acquire MetaLINCS, a San Jose, Calif.–based provider of enterprise e-discovery solutions. No financial terms were disclosed. MetaLINCS has raised around $13 million in VC funding from ArrowPath Venture Capital, Newbury Ventures and Rembrandt Venture Partners.

Seaport Capital has agreed to sell Everest Broadband, a provider of high-speed communications services in the Kansas City market, to SureWest Communications (Nasdaq: SURW) for $173 million in cash. CoBank is providing acquisition financing.

Verigy (Nasdaq: VRGY) has agreed to acquire Inovys Corp., a Pleasanton, Calif.-based provider of semiconductor testing equipment. No financial terms were disclosed for the deal, which is expected to close within the next two months. Inovys has raised $38.8 million in VC funding, from firms like Storm Ventures, H.I.G. Ventures, Hotung Ventures, Revolution Ventures, CMEA Ventures, Palomar Ventures, TechFarm and Synopsys Inc.

Firms & Funds

EnCap Investments has closed its seventh fund with $2.5 billion in capital commitments. The Texas-based firm focuses on private equity opportunities in the upstream oil and gas industry.

HarbourVest Partners, a Boston-based fund-of-funds manager, has successfully floated a closed-end investment vehicle on the Euronext Amsterdam. The offering came up $100 million short of its $400 million target, but nonetheless managed to maintain the vehicle’s $830 million initial market cap. Shares were flat in their first day of trading.

Northern Light Venture Fund has raised $236 million for its second fund, according to a regulatory filing. Limited partners include Princeton University. The China-focused VC shop was founded in 2006 by U.S. firms Greylock Partners and New Enterprise Associates, and closed its debut fund with $120 million.

Human Resources

Marc van Gelder, CEO of OPG Group, and Marcel van Poecke, former CEO of Petroplus, have joined the advisory board of 3i Benelux.