PE Week Wire: Fri., May 23, 2008

The sun is shining, the BCE buyout is collapsing and the vast majority of Wire readers have already bolted for the holiday weekend (yeah, you’re the odd man out). In other words, it’s time for Friday Feedback.

Today’s edition concerns yesterday’s column, in which I advocated for the establishment of indirect limited partner meetings. I think Dexter summed up your sentiments with: “Dan, you often have great ideas. This was not one of them.” Here’s some more:

Jake: “These individuals are not qualified investors in the funds and therefore their rights only extend to the pension plan as their fiduciary. This would only be a PR move to make a fund look better, but by no stretch of the imagination do ‘indirect LPs’ have the right to demand anything directly from one of the funds their pension plan has invested in.”

— I never said anything about “rights” or “demands” Jake, just about allowing people to ask questions about how their money is being used.

Alison: I would strongly disagree with the idea of meeting with indirect LPs. For one, what is best for the beneficiaries and long-term goals of the Pension Fund is not necessarily what is best for the current workers. While many trustees are mindful of worker conflicts, their responsibility is to the pension fund. Secondly, I, as an institutional investor, would not want these indirect LPs to sway investment decisions. PE managers should have some degree of social responsibility, which I think they do, but their decision making process (both deal flow and value-add) should not be held down or influenced by individual LP politics.”

Joe: “This is nuts. What do you think the word ‘private’ means? Should a professor at MIT attend the session as well, since his department benefits by MIT’s investment in the fund? How about the patient who frequents from the Cleveland Clinic, since the Clinic may build a new ward if its investments do well? OK, how about a whole life policy holder for AIG, since better performance by the insurance co’s investments keeps its ratings high? I would be an indirect LP of just about every fund. Free lunches all year!”

Jack: “Given these are defined benefits plans, the pensioners are not indirect LPs. The employer holds the liability, regardless of Fund Performance, so there is no case to attend. They are not stakeholders.”

MT: [Thomson Reuters’ editorial] impact extends far beyond investment returns. For example, what happens if [Thomson Reuters writes a negative story about a company], which [is owned by one of its shareholders]? Just one of many questions that [Thomson Reuters shareholders] deserve to ask, since it’s their money floating the boat. So a preliminary proposal: [Thomson Reuters editorial staff] could begin holding indirect [shareholder] meetings.

— Silly analogy MT. Thomson Reuters is a public company, so its shareholders are indeed able to ask questions of company management. And if a major shareholder concern arose related to my writing (for example), you had better believe that I’d be held publicly accountable.

Anon: “I think this is a great idea. This might help dispel some of the private equity myths that prevail in the general public without compromising confidentiality.”

Top Three

Halliburton has offered to buy UK oilfield services company Expro International for around £1.7 billion. This tops an existing £1.6 billion offer from Candover, on which Expro shareholders are scheduled to vote June 2.

Lion Capital has agreed to acquire a majority stake in Russian Alcohol Group, the largest producer of vodka and ready-to-drink alcoholic beverages in Russia.No financial terms were disclosed. Goldman Sachs and Central European Distribution Corp. (Nasdaq: DEDC) will invest alongside Lion Capital.

Electronic Arts Inc. (ERTS) has agreed to acquire the assets of Hands-On Mobile Korea, the Korean division of San Francisco-based mobile gaming publisher Hands-On Mobile (f.k.a. Mforma). No financial terms were disclosed. Hands-On Mobile has raised around $104 million in VC funding from firms like Bessemer Venture Partners, General Catalyst Partners, eFund, Draper Fisher Jurvetson and Ins! titutional Venture Partners.

VC Deals

Altierre Corp., a San Jose, Calif.-based provider of wireless pricing solutions for retailers, has raised $8 million in additional Series C funding from existing shareholders D.E. Shaw Group and Labrador Ventures. The round total is now $30 million, including a recent $22 million close from D.E. Shaw, Labrador, The Galleon Group, ATA Ventures and Kinetic Ventures.

Arteris Inc., a London-based provider of networking-on-chip IPO, has raised $7.5 million in Series C funding. Docomo Capital was joined by return backers Synopsys, Crescendo Ventures, TVM Capital and Ventech. Arteris has now raised $25 million.

HyperMed Inc., a Burlington, Mass.-based provider of medical hyperspectral imaging, has raised $4 million in second-round funding from return backer GBP Capital.

Buyout Deals

J.C. Flowers & Co. has offered to pay €1.1 billion for a 24.9% stake in German bank Hypo Real Estate, which is around a 25% premium to its trading value prior to the offer. Hypo Real Estate has been hard hit by the subprime crisis.

AXA Private Equity has completed its acquisition of the Active Ingredients and Specialty Chemicals unit of Atrium Innovations (TSX: ATB), for US$155 million. Lazard advised Atrium on the sale.

Blackstreet Capital Partners has acquired Fleetwood Folding Trailers Inc., a Somerset, Penn.-based unit of manufactured home and recreational vehicle company Fleetwood Enterprises Inc. (NYSE: FLE). No financial terms were disclosed for the deal, which Fleetwood will use to help pay down a real estate term loan.

Canada Pension Plan Investment Board said yesterday that it does not plan to make a renewed bid to take over BCE Inc., although it does plan to pursue smaller opportunities in the global infrastructure and real estate sectors.

Peterson Partners has agreed to acquire the Consumer Solutions business unit of FranklinCovey (NYSE: FC), which makes personal planners and other organizational products. The deal is valued at $32 million in cash, while FranklinCovey will invest $1.7 million to retain a 19.5% voting interest in the new company.

Pomeroy IT Solutions (Nasdaq: PMRY) has received a non-binding $6 per share buyout offer from ComVest Investment Partners. The news comes just days after Charlesbank Capital Partners withdrew a $7.05 per share bid. Pomeroy provides IT infrastructure solutions, with a focus on enterprise, network and end-user technologies.

Tiger Capital Group and SB Capital Group have been named stalking-horse bidders for Linens ‘Things, the bankrupt retailer owned by Apollo Management. The firms offered around $120.3 million, with the official auction taking place next Thursday.

PE-Backed IPOs

IPC Systems Holdings Corp., a Jersey City, N.J.-based provider of integrated communications solutions to financial services companies, has withdrawn its registration for a $400 million IPO. No explanation was provided. Silver Lake Partners has owned the company since a late 2006 buyout.

PE-Backed M&A

N.E.W. Customer Service Companies Inc., a provider of extended service plans and buyer protection programs for consumer products, has merged with cell phone warranty company Asurion Corp., according to The Deal. No financial terms were disclosed. N.E.W. is a portfolio company of Berkshire Partners, while Asurion is owned by Madison Dearborn Partners, Providence Equity Partners LLC and Welsh, Carson, Anderson & Stowe. No word yet on who controls the newly-combined company.

Passport Health Communications Inc., a Franklin, Tenn.-based provider of payer and patient information technology services for healthcare providers, has acquired Nebo Systems Inc., an Oakbrook Terrace, Ill.-based provider of revenue cycle management and claims consulting services. No financial terms were disclosed. Passport has raised over $90 million in private funding, including a $70 million recap in April 2006 recap led by Primus Capital Funds.

Firms & Funds

Mayfield Fund, a Silicon Valley venture capital firm, is raising up to $150 million for its first dedicated India fund, according to a regulatory filing. It already has secured $75 million from limited partners like Skandia Life Insurance Co., Adveq and Industriens Pensionforsikring.

Michael Diekmann, CEO of Allianz, told shareholders yesterday that German banks are ready for consolidation.

Human Resources

RedShift Ventures has promoted Srini Mirmira from principal to partner. He currently represents RedShift on the boards of portfolio companies Imaginova, Novariant, SiOnyx and TerraGo Technologies.

Drew Hoffman has joined InterWest Partners as an executive-in-residence. He will focus on the medical device sector, and continue to serve as CEO of InterWest portfolio company Synvascular.