PE Week Wire: Friday, September 19, 2008

*** Here’s your daily carnage report: Citi considering a bid for WaMu, CIC dampens talk that it will increase its stake in Morgan Stanley, Italy’s Mediobanca may want certain AIG assets, Buffett’s “time bomb” goes boom, SEC enacts temporary ban on short-selling of financial firms and the Feds may just bail out everyone(the “Why be picky?” solution). Plus…

Bloomberg is reporting that Bain Capital and Hellman & Friedman are working together on a deal for Lehman Brothers’ investment management business, with an announcement to come as early as today. Each firm last week submitted separate bids of around $4 billion for the unit, which manages over $270 billion in assets. This includes Lehman’s $35 billion private equity program, which includes buyout funds, venture capital funds, funds-of-funds and fund placement.

*** Sign of the times: Last night I attended a fundraiser for The Greenlight Foundation, a philanthropic organization co-founded by John Simon of General Catalyst Partners. Each year, Greenlight identifies an unmet community need and then goes out in search of a nonprofit that is trying to launch a relevant program in Boston. This year, the beneficiary was Youth Villages, a group that helps provide transitional support and services for foster kids who are moving out of state care and into the adult world. It’s a Memphis-based group expanding into Massachusetts, and I happen to know the local director is a very smart and capable guy (he’s married! to one of J’s friends).

The event raised a ton of money, but the tally would have been much higher had it been held just one week earlier. During the opening cocktail hour, everyone I spoke with was lamenting the financial mess, and pessimism was the operative emotion. Then, when it came time for the charity auction, most folks sat on their hands. The quality of the items was top-notch, but a room full of (mostly) rich folks was feeling broke. Great event for a great cause, but I left anything but uplifted.

*** Totally unrelated, but the valet last night reported a “burning smell” in the hand-me-down VW when I went to pick it up. Seems to be getting worse this morning, but I need to do a bunch of driving. So if you’re on the Mass Pike and see a car in flames, please stop to give me a lift.

*** From the mouths of VCs: Yesterday talked to a venture capitalist whose firm just raised a new fund (sorry, under embargo on the details). While explaining why Firm X doesn’t do cleantech investing, he said: “We decided that we prefer capital efficiency over capital intensity.”

*** Quiz Time: Can you name the latest electric vehicle company to raise its first round of VC funding. Hint: Don’t think cars.

*** It’s far too early to know how Jane Mendillo will fare as chief investment officer for the Harvard Management Co., but it is now clear that she gets to begin with a head-start over rival Yale. America’s oldest university announced last week that its endowment stood at $36.9 billion for the fiscal year ending June 30, which represents an 8.6% increase over the prior year. Not too shabby, considering that the average university endowment actually lost value during that same period.

Yale also posted a gain, but at a slower rate, according to a document obtained by the Yale Daily News. The Connecticut school’s total endowment now stands at nearly $23 billion, which is second-best in the nation (and larger than the GDP of some actual nations). It would represent a 2.2% growth rate, were spending taken into account (Harvard’s is 5.7%, including spending).

The Yale paper says that both schools were able to buck the national trend by embracing alternative and real-asset investments, particularly since both schools saw drops in their domestic and foreign equities portfolios. But, again, Harvard wins this particular game. Maybe mixed emotions for Mendillo, though. She had worked at Harvard for years before briefly leaving to run Wellesley College’s endowment, but her undergrad and MBA diplomas still say Yale.

*** Have a great weekend… and I’ll see you next week in Denver, San Fran and Seattle.

Top Three

The Carlyle Group, The Blackstone Group and Providence Equity Partners have withdrawn their £1.87 billion buyout offer for Informa PLC, after it was rejected by the UK publishing and event house. There had been some speculation that the firms would raise their bid, which had been reduced from the initial offer.

Challenge Online Games of Austin, Texas has raised $10 million in Series B funding. Globespan Capital Partners led the round, and was joined by return backer Sequoia Capital. Challenge Games previously raised a $4.5 million Series A round, and makes the fantasy game Duels and the fantasy baseball game Baseball Boss.

Edward Liddy has been named chairman and CEO of AIG. He had joined buyout firm Clayton Dubilier & Rice as a partner earlier this year, after having retired as chairman of Allstate Corporation.

VC Deals

NanoH2O Inc., a Los Angeles-based developer of reverse osmosis membranes for water desalination and reuse, has raised $15.05 million in Series B funding from Oak Investment Partners and return backer Khosla Ventures.

Soteira Inc., a Natick, Mass.-based developer of a system for treatment of vertebral compression fractures, has raised $12 million in Series B funding, according to a regulatory filing. Backers include Delphi Ventures, Prism VentureWorks, Federated Kaufman Fund, HLM Venture Partners and Partech International.

Advanced Electron Beams, a Wilmington, Mass.-based developer of electron beam technology for advanced manufacturing processes and environmental control, has raised $4 million in new VC funding from GE Energy Financial Services. It had previously raised around $27.5 million from firms like Atlas Venture, General Catalyst Partners and Rockport Capital Partners.

Buyout Deals

Kohlberg & Co. has agreed to acquire Centerplate Inc. (AMEX/TSX: CVP), for approximately $83 million (33% premium to yesterday’s closing price). Centerplate is a Stamford, Conn.-based provider of food services, including concessions, catering and merchandise services in more than 130 sports facilities, convention centers and other entertainment venues throughout the United States and Canada.

Sun Capital Partners has acquired Gordmans Inc., an Omaha, Neb.-based apparel and home fashions retailer in the Midwestern U.S. No financial terms were disclosed. Gordmans was advised on the deal by Harris Williams & Co.

Tricap Partners, a private equity fund managed by Brookfield Asset Management, has acquired MAAX Corp., a Montreal-based maker of bathroom fixtures. No financial terms were disclosed. MAAX had been acquired four years ago for C$640 million by J.W. Childs & Co., Borealis Private Equity and Ontario Municipal Employees Retirement System. It subsequently completed a recap in which the buyers recouped most of their initial equity investment.

Versa Capital Management has agreed to acquire substantially all the assets of retailer Boscov’s Department Store LLC, which filed for Chapter 11 bankruptcy protection on August 4.

AIG Investments has invested new capital into Blue Intercontinental Micro Finance Bank, a JV between Nigeria’s Intercontinental Bank and Blue Financial Services, which provides micro-financing services and products into Nigeria’s retail market. AIG had previously invested in both Intercontinental Bank and Blue Financial Services. No financial terms were disclosed.

The European Commission has approved Lion Capital’s proposed £1.1 billion buyout of UK food products company The FoodVest Group.

PE-Backed M&A

Orchard Brands, a portfolio company of Golden Gate Capital, has completed its $35 million purchase of the misses apparel catalogs of Charming Shoppes Inc. (Nasdaq: CHRS).

Firms & Funds

Covington Capital has taken over management of two venture capital funds — New Generation Biotech Equity Fund and New General Biotech Balanced Fund – from Genesys Capital Partners. No financial terms were disclosed. In related news, NGBE has sold portions of its positions in Affinium Pharmaceuticals, Epocal and NeurAxon to “an institutional purchaser.”

Lumira Capital is planning to raise between $250 million and $300 million for its second fund, according to VentureWire. The Toronto-based VC firm was previously known as MDS Capital Corp., and focuses on the life sciences sector.

Human Resources

Brian Grey has agreed to join Polaris Venture Partners as an executive-in-residence, effective in October. He’ll work out of the firm’s Silicon Valley office, and previously was senior vice president and GM of Fox Sports Interactive.

Lars Ekman has joined Sofinnova Ventures as a San Diego-based executive-in-residence. He previously was with Elan Corp., where he served as executive VP and president of global R&D.

Citigroup has hired Mark Shafir as head of global M&A, filling a position that has been open since Frank Yeary retired in June. Shafir was previously chairman and co-head of M&A with Lehman Brothers.

John Koskinen has been appointed to serve as non-executive chairman of Freddie Mac. Koskinen is a current director of American Capital, and the former CEO of The Palmieri Co.

HarbourVest Partners has promoted Brett Gordon, Alex Rogers and John Toomey to managing director. Gordon and Toomey focus on the secondary market, while Rogers focuses on direct investments.