PE Week Wire: Fri., Oct. 12, 2007

Dan Cahill has broken his silence, in response to recent comments made by Standard Life Investments about his team’s track record and the circumstances that led to their departure. He and I spoke via telephone yesterday, with Cahill saying he would be limited in his comments, per direction of his attorneys.

At particular issue was part of an LBO Wire story on the situation, in which SLI spokesman Richard England asserted that Cahill’s Boston-based team did not assume any deal-sourcing, marketing or fundraising functions.

“We made over 20 fund investments and 12 co-investments,” Cahill told me. “Every one was sourced through us, except for one deal that came through Europe… Some of the fund relationships I had from my previous job [with State Street]. We also brought in a substantial number of clients for our product, and even sourced the largest client for their European product.”

I emailed England for reaction, and was initially told: “Given that we are in legal discussions I don’t think it’s appropriate we conduct these discussions through the media.” When pressed on the deal-sourcing matter, England walked back a bit from his initial statement: “On that particular point you are correct. Although the great bulk of marketing and fund raising was and is done from Edinburgh, the Boston team had been involved in certain deal making/fund raising activity in the U.S.”

Cahill also confirmed prior reporting that the team left after a long dispute over economics: “They tried to transfer us to a new entity with onerous employment terms,” Cahill explains. “They would not give us partnership equity. We tried to negotiate for weeks without success, but ultimately declined to become part of the new entity.” SLI told a UK daily that only six of the seven team members had left, but Cahill says the only holdout was his secretary, rather than an investment professional.

Finally, he said that the North American team had over $700 million in assets under management at the time of its departure. This included four funds — two funds-of-funds and two co-investment funds.

It is unclear what happens next. Cahill and his team are said to have not yet plotted their next move, save for the expected legal entanglement with SLI. The North American portfolio will continue to be managed out of Edinburgh for the time being, although some LP types are already sniffing around the possibility of being hired as replacements. But there is one thing that’s a virtual certainty: Jonny Maxwell will be smiling for weeks to come.

*** WL Ross is raising up to $4 billion for its fourth turnaround fund, according to a regulatory filing. That’s a heady jump from the $1.15 billion he raised for Fund III back in 2000. In fact, it would basically double his firm’s assets under management (not included the assets of parent company Amvescap).

The filing indicates that WLR Recovery Fund IV already has secured around $2.24 billion in commitments from limited partners like CalPERS. Wilbur Ross did not respond to a request for comment.

*** My LinkedIn account now has over 1,000 contacts. Feel free to send an invite. Maybe someday we can get the entire Wire list in there…

*** I’m going to be working out of Las Vegas on the 29th and 30th of this month. If you’re interested in meeting up, please let me know.

*** Go Sox.

Top Three

Electronic Arts Inc. (Nasdaq: ERTS) has agreed to acquire gaming companies BioWare Corp. and Pandemic Studios from Elevation Partners, for up to $620 million in cash. EA also will issue up to $155 million in equity to certain BioWare and Pandemic employees. Elevation acquired BioWare and Pandemic in 2005 for “more than $300 million,” and put them under a holding company umbrella called VG Holding Corp. EA chief executive John Riccitiello recused himself from negotiating terms of the deal, and he is a former partner with Elevation.

InnovaLight Inc., a developer of silicon ink-based printed solar cells, has raised $28 million in Series C funding. Convexa Capital led the deal, and was joined by Scatec AS and return backersApax Partners, ARCH Venture Partners, Harris & Harris Group, Sevin Rosen Funds and Triton Ventures. The company now has raised around $42 million in total VC funding.

Virgin Group reportedly is in talks to buy Northern Rock, the troubled UK mortgage lender that previously had received interest from J.C. Flowers and Cerberus. Other possible suitors include Apollo Management, The Blac! kstone Group and Lone Star Funds.

VC Deals

Xcellerex Inc. has raised $31 million in Series C funding. VantagePoint Venture Partners led the deal, and was joined by return backers Kleiner Perkins Caufield and Byers and SCG Investments. The Marlborough, Mass.-based company has developed a manufacturing system and bioreactors for the production of biomolecules, including biotherapeutics and vaccines. It previously had raised around $14 million.

TPI Composites Inc., a Warren, R.I.–based manufacturer of large-scale composite structures for the wind energy, transportation, and military vehicle markets, has raised $22 million in Series A funding. NGP Energy Technology Partners led the round, and was joined by the Angeleno Group and return backer Landmark Growth Capital Partners.

Intrex India, an Mumbai-based provider of a prepaid payment solution called Itz Cash, has raised $10 million in VC funding. Matrix Partners led the deal, and was joined by Intel Capital.

Incisive Surgical Inc., a Plymouth, Minn.-based developer of a subcuticular skin stapler, has raised nearly $6 million in new VC funding, according to a regulatory filing. No investors information was disclosed, although VentureWire reports that it came from local angels with a 449 million pre-money valuation. Miller Johnson Steichen Kinnard Inc. served as placement agent.

Perpetuum, a UK-based maker of vibration energy harvesting devices, has raised £5 million in new VC funding from Environmental Technologies Fund, Quester and Top Technology.

Buyout Deals

Morgan Stanley Private Equity has agreed to buy the Tops Markets grocery chain from Ahold for $310 million. The 71 stores will continue to operate as Tops Markets and Martin’s Super Food Stores, with the same staff. Tops was founded as a neighborhood grocery chain in Buffalo in the 1960s. It was acquired by Ahold in 1991. In recent years, Ahold sold off some of its Tops stores in eastern New York, the Adirondacks and Ohio.

Investor AB and EQT Partners reportedly are considering a joint bid for Vin & Spirit AB, the Swedish maker of Absolut vodka. The deal could be worth up to $6 billion, with Vin & Spirit being advised by Morgan Stanley.

American Capital Strategies has bought Imperial Supplies LLC from Norwest Equity Partners. No financial terms were disclosed. Imperial Supplies is a Green Bay, Wis.–based distributor of aftermarket components for fleet and related industries.

Children’s Place Retail Stores (Nasdaq: PLCE) has retained Peter J. Solomon to explore a possible sale of the company, according to The Secaucus, N.J.-based retailer recently fired its CEO and saw its auditor resign.

Goldman Sachs has agreed to sell a 5% stake in Chinese meat processor Shineway Group to CDH Investments, for an undisclosed amount. Goldman currently holds a 51% position, with CDH holding the other 49 percent.

ICV Capital Partners has acquired Press-A-Print International LLC, an Idaho Falls, Idaho–based company that helps individuals launch promotional products businesses. No financial terms were disclosed.

Invest Equity and NORD Holding have sold LMF Leobersdorfer Maschinenfabrik AG (LMF) to Equita KGaA. No financial terms were disclosed. LMF is an Austrian maker of high-pressure reciprocating (piston) compressors for natural gases, process gases and air. The sellers were advised by Baird.

Strength Capital Partners has bought Virginia Candle Co. from Harren Equity Partners, according to LBO Wire. The deal was valued at less than $100 million.

Vista Equity Partners hascompleted its acquisition of theDiagnostic Systems business of Misys Healthcare Systems, a unit of Misys PLC. No financial terms were disclosed. The sale included all business assets, technology and products associated with the current hospital systems diagnostic portfolio, including the Misys Laboratory, Commercial Laboratory and Clinical Financial products — as well as stand-alone systems for radiology and pharmacy departments.

PE-Backed IPOs

Transoma Medical Inc., a St. Paul, Minn.-based maker of implantable wireless vital sign monitors, has filed for a $75 million IPO. It plans to trade on the Nasdaq under ticker symbol TSMA, with Piper Jaffray and Thomas Weisel Partners serving as co-lead underwriters. Transoma has raised just over $38 million in total VC funding, from firms like Polaris Venture Partners (24.53% pre-IPO stake), Canaan Partners (20.05%), Affinity Capital Management and Cross Creek Capital.

American Public Education Inc., a Charles Town, West Va.-based provider of online postsecondary education for the military and public service communities, has set its IPO terms to around 4.69 million common shares being offered at between $15 and $17 per share. It would have an initial market cap of approximately $288 million if it prices at the high end of its range. The company plans to trade on the Nasdaq under ticker symbol APEI, with William Blair & Co. and Piper Jaffray serving as co-lead underwriters. Shareholders include ABS Capital Partners (41.4% pre-IPO stake) and Camden Partners (10.3%).

BioHeart, a Sunrise, Florida-based developer of heart muscle regeneration therapies, has lowered its IPO price range from $14-$16 per share to $6-$8 per share. It has also increased the number of shares offered from 3.575 million to 4.167 million. If it prices at the top of its revised range, the company would have an initial market cap of around $140 million. BioHeart also has changed underwriters, dropping BMO Capital Markets and Janney Montgomery Scott in favor of Merriman Curhan Ford & Co. and Dawson James Securities. It plans to trade on the Nasdaq under ticker symbol BHRT. BioHeart has raised around $40 million in VC funding since 2000, from firms like Ascent Medical Ventures, Guidant, Tyco Capital and Advent-Moro Equity Partners.

PE-Backed M&A

Alliant Insurance Services Inc., an insurance firm bought by The Blackstone Group in August, has acquired Clarity Benefit Consulting, an Atlanta-based provider of specialty consulting services in the areas of absence management and disability and life insurance. No financial terms were disclosed.

Navarro Discount Pharmacies LLC, a portfolio company of MBF Healthcare Partners, has agreed to acquire Sedano’s Pharmacy & Discount Store Inc., a drug retail company with 11 pharmacies in the South Florida market. No financial terms were disclosed.

PQ Corp., a specialty chemical company acquired in July by The Carlyle Group, has agreed to acquire INEOS Silicas, a division of INEOS. No financial terms were disclosed, except that the combined company would have annual sale revenue in excess of $1 billion. Carlyle Group will hold around a 60% stake in the company, while INEOS will hold around 40 percent. The transaction is expected to close by year-end.

Specialty Coating Systems Inc., a portfolio company of Bunker Hill Capital, has acquired the remaining interests it did not already own in Parylene Japan KK. No financial terms were disclosed. PJKK was originally formed as a joint venture between SCS and Three Bond Co. of Japan, in order to provide parylene coating services within Japan.

Firms & Funds

Citigroup said that it is combining its investment banking and alternative investments units into one division, called the Institutional Clients Group. The group will be led by Vikram Pandit, who had run alternatives since joining Citigroup from Morgan Stanley earlier this year. The I-banking division will be jointly run by existing I-banking co-head Michael Klein and James Forese, former head of global equities. Tom Maheras, who had been co-CEO of the I-banking unit, is leaving the company. John Havens was named president and CEO of alternatives.

MHR Fund Management has closed its third fund with $3.5 billion, according to LBO Wire. The New York-based firm focuses on distressed opportunities in the middle-markets. Limited partners include Arcano Capital, CalPERS, the Montana Board of Investments and the New Jersey Division of Investment. Credit Suisse served as placement agent.

Human Resources

JPMorgan Chase said that it would make “modest staff reductions” in its structured credit and leveraged finance departments. No senior executives are expected to lose their jobs.

Jeff Porphy has joined Barclays Capital as a managing director of U.S. leveraged finance. He had spent the past 14 years with Credit Suisse, most recently as head of financial sponsors M&A and middle-market M&A.

Henderson Equity Partners has hired three principals for its London-based infrastructure team. They are Jasvinder Bal, formerly with Land Securities Trillium, Barclays Private Equity and Carillion Private Finance; Michael Jaffe, previously with the UBS securitization team; and Chris Tanner, who focused on project finance with PricewaterhouseCoopers.

Darry Oliver has joined Edison Venture Funds as chief financial officer. He previously was a partner and CFO of CEO Venture Fund.

Gretchen Lium has joined Headwaters MB has a managing director of strategic alliances. She previously was CEO and CFO of Westwork Partners.