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

Yesterday’s Congressional hearings on carried interest tax lasted way too long, and I admittedly stopped watching at 5:30pm (which means I missed the last panel, which included Leo HIndery, Jonathan Silver, Bruce Rosenblum, etc.). But seven hours was enough to make a few observations:

* The Senate is considered a more deliberate body than the House, but it’s also a better run body. Its hearing was focused on a single issue: How would carried interest tax change impact pension fund investors in private equity. It stayed on point, and finished up after about 90 minutes. The House hearing, on the other hand, touched on everything from carry to AMT to Iraq and universal healthcare (I only wish I were kidding). I lasted longer than some of the Congressmen did.

* Senator Gordon Smith (R-OR) had the day’s most explosive line, when he mused that this entire issue was sparked by the “extravagant lifestyle of one man.”

Russell Read of CalPERS kept getting asked if a change to carry would negatively impact his system’s private equity returns. He kept responding that there was no way to know.

* Senator John Ensign (R-NV) is either confused or intentionally deceptive. I’ll stick with confused, as it’s a kinder diagnosis.

Ensign cited a Blackstone Group estimate that passage ofa pending Senate billwould reduceBlackstone’s market cap by 40% (which I hadn’t heard, but no matter). This is the so-called “Blackstone Bill” — which specifically deals with publicly-traded limited partnerships. So far so good, and Ensign even acknowledged that the Blackstone estimate may be a bit dire.

But then Ensign mistakenly used the Blackstone estimate to challenge comments from Russell Read, chief investment officer of CalPERS. Read had earlier testified that he did not knowif the Levin Bill — a House bill that would change carried interest treatment for all private equity firms — would significantly impact fund returns, if at all. Specifically, Ensign stated that the impact would certainly be significant, were the”market caps”of all CalPERS private equity funds to be cut by 30% to 40%.

In other words, Ensign conflated the two bills. Passage of the Blackstone Bill would not impact the entire CalPERS private equity portfolio, and passage of the Levin Bill would not cut the CalPERS portfolio value by 30%-40%. Again, let’s just hope he’s confused… I asked his spokesman, but the promised reply never came.

* Bruce Rosenblum of Carlyle tried to outdo Magic Johnson et all, by arguing that a change to carry would “create an environment that would favor the affluent.” I’d expand on his argument, but it’s hard to type and laugh hysterically at the same time. As I wrote on Wednesday: Just be honest.

* You can read my thousands of live-blogging words here. Also included some links, like this one.

*** Unrelated: Writing this morning while simultaneously listening to a conference call being held by the SEIU, which recently surveyed 800 likely voters on their viewers toward private equity. I’ll post their results, my skepticism and some other issues at peHUB within the hour.

*** Northwest Venture Associates will not raise another fund, according to the Seattle PI. NVA founder Tom Simpson channels Steve Dow, by saying that “the fund model is broken.”

*** Denise Palmieri of Pinnacle Group on compensation.

Top Three

Advent International has agreed to buy UK appliances insurer Domestic & General PLC, for approximately £523.9 million. D&G stockholders would receive £14.25 per share, which is a 25.7% premium over the trading price on May 18, when D&G announced that it had received a takeover approach.

CBS Corp. has agreed to acquire SignStorey Inc., a Fairfield, Conn.-based provider of in-store media networks for the grocery industry, for $71.5 million in cash. The deal is expected to close later this quarter, with SignStorey to be renamed CBNS OuterNet. SignStorey shareholders include Golden Gate Capital, CIC Partners and Phoenix Investment Partners.

Mary Ma has joined TPG as a partner and managing director, with a focus on activities in China. She previously was chief financial officer of PC maker Lenovo, which counts TPG among its shareholders.

VC Deals

Virent Energy Systems Inc., a Madison, Wis.-based developer of a catalytic biomass processing system for making transportation fuels, has raised $21 million in second-round funding. Stark Investments and Venture Investors LLC co-led the deal, and was joined by return backer Cargill Ventures. Virent Energy has raised nearly $40 million since 2005.

Multiply Inc., a Boca Raton, Fla.-based social networking company focused on the 30something market, has raised $16.6 million in Series B funding. VantagePoint Venture Partners led the deal, and was joined by Point Judith Capital and return backer Transcosmos Investments.

Pearl Therapeutics Inc., a Redwood City, Calif.-based drug developer focused on respiratory disorders, has raised $15.5 million in first-round funding. New Leaf Partners and Clarus Ventures co-led the deal, with 5AM Ventures also participating. Pearl Therapeutics was co-founded by two former members of Nektar’s corporate and product development organizations.

TelASIC Communications, an El Segundo, Calif.-based maker of remote radio head products for base-station OEMs, has raised $12.5 million in fifth-round funding. ATA Ventures led the deal, and was joined by existing shareholders Mission Ventures and Redpoint Ventures. But not all past backers participated. The company previously raised around $84 million since 2002 – with some of that capital coming from ComVentures, IBM, Raytheon and Agilent Technologies.

Proteon Therapeutics, a Waltham, Mass.-based drug company focused on renal and vascular diseases, has raised $12 million in second-round funding. Return backers include Intersouth Partners, Prism VentureWorks, Skyline Ventures and TVM Capital. The company raised $19 million in March 2006.

NeoMatrix Inc., an Irvine, Calif.–based developer of a noninvasive test to identify breast cancer risk, has raised an undisclosed amount of Series C funding. No additional information was disclosed, although VentureWire pegs the round amount at $9.6 million.

Buyout Deals

Apax Partners France has acquired Telenor Satellite Solutions from Telenor ASA for $400 million. TSS will be merged with the former mobile satellite communications group of France Telecom – with the combined company to be renamed Vizada.

Audax Group has acquired Cinelease Inc., a Burbank, Calif.-based company that rents motion-picture lighting and grip equipment to the television, feature film, commercial, music video and event industries. No financial terms were disclosed. American Capital Strategies provided one-stop financing for the transaction, while Goldsmith Agio Helms advised Cinelease.

The Blackstone Group has agreed to acquire 18% of Chinese specialty chemical maker China National BlueStar Group Corp. for $500 million, according to Bloomberg.

FC Holdings Inc., a Houston -based network of community banks in Texas, has agreed to receive up to $150 million in private equity funding from JLL Partners. JLL will invest an initial $75 million in exchange for FC common stock, with FC having the right to call down additional $75 million over the next three years. Bear Stearns advised FC on the deal.

J.C. Flowers & Co. has invested $100 million for a minority stake in The Kessler Group, a Boston–based financial services firm focused on affinity marketing. Some of the capital will be used to develop a business focused on investment opportunities in the credit card industry.

Lindsay Goldberg has acquired around a 50% stake in Rosetta, a Hamilton, N.J.-based provider of personalized marketing services. The deal includes a $250 million capital line for acquisitions, and other company growth initiatives. Brown Brothers Harriman and the Winterberry Group advised Rosetta on the transaction.

TXU Corp. (NYSE: TXU) shareholders today will vote on a $45 billion buyout offer from KKR and TPG. If approved, the private equity firms hope to close the deal within several weeks.

PE-Backed IPOs

AthenaHealth Inc., a Watertown, Mass.-based provider of online business services for physician practices, has set its proposed IPO terms to around 6.29 million common shares being offered at between $14 and $16 per share. If it prices at the top of its range, the company would have an initial market cap of around $505.6 million. It plans to trade on the Nasdaq under ticker symbol ATHN, with Goldman Sachs and Merrill Lynch serving as co-lead underwriters. AthenaHealth has raised around $34 million in venture capital funding since its 1997 inception, from firms like Oak Investment Partners (17.3% pre-IPO stake), Venrock Associates (14.8%), Draper Fisher Jurvetson (14.8%) and Cardinal Partners (12.6%).

BioHeart, a Sunrise, Florida-based developer of heart muscle regeneration therapies, has set its proposed IPO terms to 3.575 million common shares being offered at between $14 and $16 per share. If it prices at the top of its range, the company would have an initial market cap of around $270.5 million. BioHeart plans to trade on the Nasdaq under ticker symbol BHRT, with BMO Capital Markets and Janney Montgomery Scott serving as co-lead underwriters. It 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 Exits

Mason Wells Private Equity has agreed to sell Creative Forming Inc. to Spartech Corp. (NYSE: SHE) for approximately $61 million. Creative Forming is a Ripon, Wis.-based custom manufacturer of plastic packaging.

Thermo Fisher Scientific Inc. (NYSE:TMO) has agreed to acquire the instrument sales business of Davis Inotek Instruments LLC, a portfolio company of private equity firm JPB Enterprises. No financial terms were disclosed. Davis Inotek is maker of calibration services for test, measurement and control instruments. Following the sale, it will be renamed Davis Calibration and will be singularly-focused on its core calibration service solutions.

PE-Backed M&A

Author Solutions (a.k.a. AuthorHouse), a Bloomington, Ind.-based self-publishing company, has acquired rival iUniverse for an undisclosed amount. Author Solutions is a portfolio company of Bertram Capital. iUniverse had raised over $39 million in VC funding from firms like Warburg Pincus, including a 2001 infusion at a post-money valuation of approximately $131 million (Warburg later sold its position back to company management).

Firms & Funds

Saw Mill Capital has closed its first traditional fund with $270 million in capital commitments. The Briarcliff Manor, N.Y.-based firm previously operated as a “fundless sponsor,” and acquires manufacturing and service companies with enterprise values of between $25 million and $150 million.

Human Resources

Jim Press has agreed to join Chrysler LLC as vice chairman and president, after previously serving as Toyota’s top North American executive. Chrysler was recently acquired by Cerberus. Read more here

Greg Taylor has joined drug company CytoGenix Inc. (OTC BB: CYGX) as chief financial officer and vice president for finance and administration. He previously was a managing director of Monterey Capital Partners.