PE Week Wire: Fri., Feb. 15, 2008

*** It looks like the SEIU is doing more to Carlyle than just disrupting David Rubenstein’s speeches. The Washington Post reports on two pieces of SEIU-supported legislation that could cause headaches for the private equity giant. The first is a federal bill introduced by Chuck Grassley (R-IA) and Herb Cohl (D-WI), which would increase regulatory oversight of nursing home operators. Specifically, the bill would increase the maximum civil fines for operators found to have committed severe care abuses. It also would developer a federal monitoring program for corporate-level problems. The Carlyle relevance here is the recent purchase of nursing home operator Manor Care, which is what most of the SEIU protesters were chanting about at Rubenstein’s recent speech.

The second bill is also aimed at Carlyle, but would become far more wide-reaching: A California legislator has filed to ban state pension funds from investing in firms partially-owned by nations with poor human rights records. Carlyle recently sold an ownership stake to sovereign wealth funds of Dubai, which does indeed have some serious human rights issues to address. But this would also extend to Apollo, Blackstone (China) and that VC firm in negotiations to sell a piece of itself to Dubai (fyi: Tim Draper says it’s not DFJ).

I’m holding off commenting on either bill this morning, because I’ve not yet had a chance to read them. That’s what three-day weekends are for. But my gut reaction is that the former is needed (at least the fine increase). I’ve seen some nursing home horrors, including a blind resident whose kitchen cabinets were jammed full of cockroaches. Not saying Carlyle is a bad actor here, just that a $10,000 maximum penalty (the current system) is not enough for egregious neglect.

My opinion on the California bill will come down to its specificity. Human rights violations are difficult to qualify, as even the U.S. has been accused of such things by international watchdog groups. If some of those abuses occurred in California, would the bill prevent CalPERS from investing in a fund partially owned by CalSTRS? And is this just about “ownership interests,” or do limited partner positions also count? Again, more on this once I actually read the bills. But send in your thoughts in the meantime.

*** This time last year, we would have been deriding ArcSightand MAKO Surgical as lousy IPOs. They priced at the low end of their respective ranges, and saw their shares tumble on their first day of trading. But this is 2008, when VC-backed IPOs are nearly as rare as prize-winning beagles. So instead of ridicule, we give roses.

If you’d like to see what’s left, I posted a file of VC-backed IPOs in registration. It was done before MAKO priced, and before Concentric Medical withdrew its IPO registration (but both are mentioned in an update to the post). Overall, there have now been three VC-backed IPOs in 2008, two postponements, seven withdrawals and 41 companies remaining in active registration.

*** A point of clarification on Clear Channel, related to a comment made during Wednesday’s buyouts panel in Boston. In short: The comment wasn’t about Clear Channel.

*** Jeff Bussgang of IDG Ventures Boston, on how to raise follow-on financings.

* Dunkin’ Donuts shop ownersare displeased with company management (read: PE firms), over a deal to expand distribution of D&D products. I’m just displeased that I always need to repeat my order three times at the drive-through.

* Pete Peterson tries to reconcile with himself.

* Lawyers to banks: Just walk away from PE deals.

* Cerberus won’t panic (yet).

* Publishing Note: We’re off on Monday for the President’s Day holiday, although I still believe that a Super Bowl Monday holiday would be far more useful. I’ll be posting to peHUB in the meantime, and right back here Tuesday morning…

Top Three

BC Partners has agreed to acquire Migros Turk TAS, Turkey’s largest supermarket chain, for approximately $3.2 billion. It would be the largest leveraged-buyout ever of a Turkish company, and comes quick on the heels of KKR’s buyout of UnRoRo and TPG’s acquisition of Mey Icki Sanayi.

Teranetics Inc., a Santa Clara, Calif.-based provider of ICs for Ethernet transport, has raised $25 million in Series D funding, according to a regulatory filing. Return backers include Columbia Capital, Granite Global Ventures, Global Catalyst Partners, Venrock and U.S. Venture Partners. The company previously had raised $53 million since 2003, including a $20 million Series C round in October 2006 at a post-money valuation of approximately $85 million.

Morgan Stanley Private Equity was named as the preferred bidder to buy South Korea’s ailing Daewoo Electronics. The announcement came after creditors failed to reach an agreement with India’s Videocon Industries due to pricing differences. The consortium reportedly wanted a 13% discount to the initially agreed-upon $700 million price tag.

VC Deals

Aquantia Corp., a Milpitas, Calif.-based developer of physical-layer transceiver ICs, announced that it has raised $25 million in Series B funding. peHUB first reported on the round last August. Pinnacle Ventures led the deal, and was joined by return backers Lightspeed Venture Partners and Greylock Partners. Aquantia closed its first round in 2005 with over $12 million.

Apex Construction Systems Inc., a Portland, Ore.-based developer of environmentally-friendly building blocks for home construction, has called down around $16 million of a $22.29 million Series B round (including warrants), according to a regulatory filing. Backers include DFJ Element, Nth Power and Emerald Technology Ventures.

Triage Wireless Inc., a San Diego-based medical device maker focused on “cuff-less” blood pressure measurers, has called down around $6.73 million of a $20 million Series B round, according to a regulatory filing. Intel Capital and Qualcomm were joined by return backers 3i Group and Sanderling Ventures.

Q Therapeutics Inc., a Salt Lake City-based developer of cell-based therapies for CNS disorders, has raised the first tranche of a $15 million Series B round. vSpring Capital led the deal, and was joined by Invitrogen Corp., Epic Ventures (fka Wasatch Venture Fund), Toucan Capital, University of Utah Research Foundation, Salt Lake Life Science Angels and Q management.

Lion Cells Inc., a Woodside, Calif.-based developer of lithium ion battery technologies, has raised $12.05 million in Series B funding, according to a regulatory filing. Return backers include Battery Ventures and Nth Power. The company had raised a $3.6 million Series A round in July 2006.

Quintic Holdings, a Santa Clara, Calif.-based fabless maker of ICs for wireless consumer electronics, has raised $7.5 million in Series B funding, according to a regulatory filing. Return backers include Walden International, IDG VC, Tallwood Venture Capital and Harbinger Venture Management. The company had raised an $8.2 million Series A round in September 2006.

ActionBase, an Israel-based developer of an email-based system for tracking decision execution, has raised $6.5 million in new VC funding. Giza Venture Capital and Vertex Management co-led the round, and were joined by return backers Advantech Technologies and Sam Somech.

Nerites Corp., a Madison, Wis.-based developer of tissue repair products and coatings for medical devices, has raised $5.7 million in Series A funding. Venture Investors LLC led the round, and was joined by Black Mountain Ventures. The company had previously raised $3 million in angel funding.

Wigix Inc., an Oakland-based “community-inspired ecommerce platform,” has raised around $5.34 million in Series A funding. Draper Fisher Jurvetson led the round, with Tim Draper joining the board of directors.

Sparkplay Media Inc., a Mill Valley, Calif.-based developer of a MMO 3D games platform, has raised $4.25 million in Series A funding from Redpoint Ventures and Prism VentureWorks.

New Earth Solutions Ltd., a UK-based operator of waste facilities, has raised £4 million from Impax Asset Management.

Ideeli Inc., a members-only online shopping network for women’s accessories, has raised $3 million in Series A funding led by Kodiak Venture Partners. The company also has secured around $700,000 in venture debt.

Nuconomy, a Web analytics company, has raised around $3 million from UK advertising company WPP Group.

Buyout Deals

Boston Scientific Corp. (NYSE: BSX) has completed the sale of its Fluid Management and Venous Access business to Avista Capital Partners. The deall was valued at $425 million in cash.

Macrovision Corp. (Nasdaq: MVSN) has agreed to sell its software business unit to Thoma Cressey Bravo for approximately $200 million. The deal is expected to close by April 1, and is not subject to Macrovision shareholder approval. Current software business unit chief Mark Bishof will serve as CEO of the stand-alone company, post transaction. Get more info.

MTS Health Investors has acquired a majority stake in HealthHelp LLC, a Houston, Texas-based radiology benefit management company. No financial terms were disclosed. The seller was an undisclosed individual investor.

Stephen Norris Capital Partners is leading a $100 million financial restructuring of SCO Group, a Unix software company that currently is in Chapter 11 bankruptcy protection. No information had been disclosed on Stephen Norris’ partners in the deal.

PE-Backed IPOs

ArcSight Inc., a Cupertino, Calif.-based provider of security and compliance management solutions for enterprise and government clients, has raised $61.76 million in its IPO. The company priced around 6.86 million common shares at $9 per share ($9-$11 offering range), for an initial market cap of approximately $278.5 million. ArcSight will trade on the Nasdaq under ticker symbol ARST, while Morgan Stanley and Lehman Brothers served as co-led underwriters. ArcSighthad raised around $15 million in VC funding since 2002, from firms like Kleiner Perkins Caufield & Byers (23.5% pre-IPO stake), Institutional Venture Partners (11.8%), Integral Capital Partners (6.3%) and New Enterprise Associates (! 5.4%).

MAKO Surgical Corp., a Ft. Lauderdale, Fla.-based developer of robotic solutions and implants for minimally-invasive orthopedic knee procedures, raised $51 million in its IPO. The company priced 5.1 million common shares at $10 per share, for an initial market cap of approximately $184.38 million. It will trade on the Nasdaq under ticker symbol MAKO, while JPMorgan and Morgan Stanley served as co-lead underwriters. MAKOhad raised $50 million in total VC funding, including a $30 million round last year. Shareholders include MK Investment Co. (13.4% pre-IPO stake), MDS Health Ventures (12.68%), Tudor Ventures (11.12%), MDS Health Ventures (12.68%), Sycamore Ventures (10.54%) Appaloosa Ventures (6.84%), Highbridge Capital (6.02%) and Aperture Venture Partners (5.96%), Ziegler Meditech Equity Partners, Ivy Healthcare Capital and The Exxel Group.

IDS Group Inc., a Minneapolis-based provider of asset finance origination and portfolio management software for financial institutions and equipment manufacturers, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol IDSI, with Thomas Weisel Partners and Piper Jaffray serving as co-lead underwriters. IDS is a portfolio company of SV Investment Partners.

Concentric Medical Inc., a Mountain View Calif.-based developer of medical devices for restoring blood flow in people who have suffered ischemic strokes, has withdrawn registration for a $69 million IPO, due to “unfavorable market conditions.” It had filed last August, with plans to trade on the Nasdaq. Merrill Lynch and Lehman Brothers were serving as co-lead underwriters. The company has raised around $53 million in VC funding since 1999, from firms like New Enterprise Associates (20.3% pre-IPO stake) H&Q Capital Management (16.2%), SV Life Sciences (9.5%), Oxford Bioscience Partners (9.5%) and ProQuest Investments (13.9%).

Critical Homecare Solutions Inc., a Conshohocken, Penn.-based provider of home infusion therapy services to patients suffering from acute or chronic conditions, has withdrawn registration for a $125 million IPO. The move comes shortly after Critical Homecare owner Kohlberg & Co. agreed to sell the company to MBF Healthcare Acquisition Corp. (AMEX: MBH) for approximately $420 million. That sale has not yet closed.

PE Exits

American Public Education Inc. (Nasdaq: APEI), a Charles Town, West Va.-based provider of online postsecondary education for the military and public service communities, has raised $131.35 million through a secondary public offering. The company priced 3.7 million shares at $35.50 per share, including around 2.38 million shares from ABS Capital Partners and 750,000 shares from Camden Partners. The deal reduces ABS’ ownership position from 40% to 26%, and Camden’s from 9.9% to 4.7 percent.

Cerberus Capital Management is being accused of moving too fast on the bankruptcy auction for Global Motorsport Group, a maker of parts for Harley-Davidson motorcycles. Cerberus is the company’s primary owner and secured lender, and supports a swift $16 million sale to Dae-II Corp. of Korea. U.S. Trustee Kelly Beaudin Stapleton said: “The circumstances set forth are not all intended to promote a healthy auction process.”

LiveUniverse has bought Revver Inc., a Los Angeles-based online video distribution company. The news was first reported by NewTeeVee, which puts the sale price at just under $5 million. That’s far less than the $15 million Revver raised in VC funding, but more than the $300,000 to $500,000 that the company was being offered up for. VC backers include Draper Fisher Jurvetson, Bessemer Venture Partners, Draper Richards and William Randolph Hearst III.

Tenaska Power Fund has completed its sale of the Commonwealth Chesapeake Power Station in New Church, Va., to Tyr Energy Inc. of Overland Park, Kansas.No financial terms were disclosed. J.P. Morgan Securities advised Tenaska, while Fieldstone Private Capital Group advised Tyr energy.

PE-Backed M&A

WDF Services Corp. and Five Star Electric Corp. have merged to form GreenStar Services Corp., a national provider of mechanical, electrical and specialty contractors. WDF had been a portfolio company of Eos Partners, which will invest an undisclosed amount of new capital in the merged company.

Firms & Funds

Stone Arch Capital is targeting $200 million for its second fund, according to LBO Wire. The Minneapolis-based buyout firm is focused on lower-middle-market opportunities in the Midwest. Its debut fund closed in early 2006 on just under $100 million.

Human Resources

Benchmark Capital has added four entrepreneurs-in-residence: Rob Beardon, former CEOO of OpenSpan and JBoss; Lewis Cirne, founder of Wily Technology; Dan Finnegan; senior VP at Yahoo, in charge of HotJobs; and Keith Krach, a former Benchmark EIR who later co-founded Ariba. Benchmark recently closed its sixth fund with around $500 million.

Morgan Stanley said that private equity banker David Law is moving to Dubai, as chairman of I-banking for the Middle East and North Africa. He previously was in charge of non-U.S. financial sponsors.

Olivier Boyadjian has joined H.I.G. Europe as a Paris-based managing director. He previously was head of the investment team at CDC Capital Investissement, which manages a €700 million fund. H.I.G. Europe is the European affiliate of H.I.G. Capital, and closed its first fund last year with €600 million in capital commitments.