PE Week Wire, Jan. 11, 2007

Running late this morning, due to an 8am appearance on CNBC. We began with some of the Equity Office situation (see news below), but mostly focused on a recent Wall Street Journal article about the $10 billion auction for GE Plastics. Why? Because yesterday I wrote at that the WSJ story was largely inaccurate. Not just in regards to its underlying facts, but also in its subsequent analysis (although the basics of why GE is selling the unit, etc. were on the money).

The conversation got a bit lively thanks to the fact that the WSJ’s Alan Murray (who I have the utmost respect for) was guest-hosting the show, and can be viewed at the CNBC website. Since I don’t really have anything else to share this morning, what follows is that peHUB post, which includes an excerpt from the WSJ story:

GE Plastics: Let’s Go Clubbing

Goldman Sachs is not prohibiting club deals in the $10 billion auction for General Electric’s plastics unit. Moreover, it could care less about thesleepy Department of Justice “inquiry” into private equity collusion.

Forgive my declaratives, but something needed to be said after the Wall Street Journal incorrectly published the following in Tuesday’s edition:

General Electric Co. has asked for bids on its plastics business, valued at as much as $10 billion, in an auction that appears to reflect new concerns from the Justice Department about the lack of competition among possible private-equity buyers. GE has told a handful of private-equity buyout firms contacted about the possible plastics-unit sale that they face restrictions on their ability to team up with other private-equity bidders, according to people familiar with the sale effort. Although the exact nature of the restrictions aren’t known, one person familiar with the auction said firms contacted can’t call other buyout funds about teaming up.

Ok, back to reality: Goldman Sachs has told four firms – Apollo Management, Bain Capital, Blackstone Group and Kohlberg, Kravis Roberts & Co. – that they may not team up with one another. They are free to form bidding consortia with any other private equity firms (Carlyle, Madison Dearborn, TH Lee, etc.), so long as they first get approval to share confidential documents with potential partners. This is standard operating procedure for most high-profile Goldman Sachs auctions, and has absolutely nothing to do with the Department of Justice. I don’t know if the WSJ writers were fed some bad information, or simply succumb to standard journalistic bloodlust. Either way, they botched this one.

Goldman Sachs is simply trying to promote competition for its client, by precluding the most likely bidders from teaming up. This might sound a bit anti-free market, but it’s far less dramatic than prior Goldman-run auctions in which the bank has taken an active hand in actually forming the competing consortia. It did so long before those infamous DoJ letters were penned, and has done so since.

Any notion that this move reflects opposition to club deals is simply false. In fact, there is still a possibility that some of the aforementioned four firms could work together. KKR, for example, could ultimately tell Goldman that it wants in, but only feels comfortable doing the deal with Apollo (for reasons X, Y and Z). Goldman can always demure, but might approve if it already has alternate bids led by Bain and Blackstone.

In other words, business as usual. And I don’t mean collusion.

Top Three

The Blackstone Group may have competition for real estate giant Equity Office, despite already having agreed to what would be the largest leveraged buyout in history. Multiple news reports say that Cerberus, Starwood Capital and Walton Street Capital are seriously considering an offer in excess of $38 billion (including $16 billion in assumed debt), which would top Blackstone’s $36 billion bid. Blackstone has the right to match any superior offer, and also is entitled to a $200 million breakup fee were Equity Office to accept an alternate bid.

eBay Inc. (Nasdaq: EBAY has agreed to acquire StubHub Inc., a San Francisco-based online marketplace for the resale of event tickets. The deal is valued at $310 million in cash, and is expected to close later this quarter. StubHub had raised around $19 million in VC funding since its 2000 inception, including a $2.5 million infusion in 2002 at a post-money valuation of approximately $15 million. Backers include Allen & Co., Staenberg Venture Partners and Blue Water Capital.

General Atlantic, Goldman Sachs, the NYSE Group and the Softbank Asian Infrastructure Fund each have agreed to acquire a 5% stake in the National Stock Exchange of India. Sellers are IFCI, IL&FS, ICICI, PNB and GIC. No financial terms were disclosed.

VC Deals

WiLinx Corp., a Los Angeles-based fabless semiconductor company, has raised $15 million in venture funding from Third Wave Ventures. Two Third Wave partners, Babak Razi and Barak Bussel, who have been directors of WiLinx since its inception, will continue to serve on the company’s board.

Omeros Corp., a Seattle-based drug company, has raised $9 million in private equity and grant funding from the Stanley Medical Research Institute. The capital will be used to further developer Omeros’ drug candidate for the treatment of schizophrenia.

HeyLetsGo Inc., a Boston-based social networking startup, has raised $3.5 million in Series A funding from General Catalyst Partners and Highland Capital Partners, according to a regulatory filing.

Soasta Inc. of Mountain View, Calif. has raised $2 million in second-round funding led by Canaan Partners. The company develops software tools for the testing, certification and demonstration of SOA-based systems.

Lumora Ltd., a UK-based food safety diagnostics spinout from Cambridge University, has raised an undisclosed amount of funding from Tate & Lyle Ventures. It is Tate & Lyle’s first transaction.

Blurb, a Palo Alto, Calif.-based provider of book publishing services, has raised $2.5 million in debt financing from Hercules Technology Growth Capital. The company is backed by firms like anthem Venture Partners and Canaan Partners.

Buyout Deals

CanWest Global Communications Corp. and GS Capital Partners have agreed to acquire Alliance Atlantis Communications Inc. for Cdn$53 per share, for an aggregate purchase price of approximately Cdn$2.3 billion. Alliance Atlantis is a Toronto-based entertainment broadcaster.

Semiconductor Manufacturing International Corp. (NYSE: SMI), China’s largest chipmaker, said that it has been approached by private equity firms about a possible buyout. It declined to identify the interested suitors. SMIC went public in 2004, after having previously been backed by venture capital firms.

Kinderhook Industries, a New York-based private equity firm, has agreed to acquire restaurant chain Champps Entertainment Inc. (Nasdaq:CMPP) for $75 million, plus the assumption of all liabilities and debt. Champps chairman and CEO Michael O’Donnell and CFO David Womack also are participating on the buyout.

Milestone Capital Partners has acquired Houston Harvest Gift Products LLC from Trust Company of the West and Merit Capital Partners. No financial terms were disclosed for the deal, which also included participation by company management. Houston Harvest Gift Products is a Franklin Park, Ill.-based maker of food gifts and popcorn tins.

ABRY Partners and The Thurston Group have acquired healthcare technology company Companion Technologies Corp. from BlueCross BlueShield of South Carolina. No financial terms were disclosed.

Gordon Brothers Group has agreed to acquire Malden Mills Industries Inc., a Lawrence, Mass.-based maker of Polartec fleece apparel, for $44 million in cash. To help facilitate the sale, Malden Mills yesterday filed for Chapter 11 bankruptcy protection.

Compagnie de Saint-Gobain SA will receive four buyout bids next week for its perfume bottling subsidiary Desjonqueres, according to Dow Jones. The offers will be worth approximately Euro 600 million each, with likely bidders including The Carlyle Group, PAI Partners, LBO France and a partnership of Sagard and Electra Partners. Both 3i Group and Piramal Industries (India) had expressed initial interest, but have since dropped out of the running.

Apollo Management has acquired a minority position in Bradco Supply Corp., an Avenel, N.J.-based distributor of roofing materials and complementary building products. No financial terms were disclosed.

PE-Backed IPOs

Smurfit Kappa is considering an IPO later this year that could value the company at between Euro 4.5 billion and Euro 5 billion, according to The Financial Times. Shareholders include Cinven, CVC Capital and Madison Dearborn Partners.

U.S. Auto Parts Network Inc., a Carson, Calif.-based provider of aftermarket auto parts, has set its proposed IPO terms to 10 million common shares being offered between $10 and $12 per share. It plans to trade on the Nasdaq under ticker symbol PRTS, with RBC Capital Markets and Thomas Weisel Partners serving as co-lead underwriters. Oak Investment Partners holds a 30.4% pre-IPO stake.

PE-Backed M&A

Hispanic Yellow Pages of America, a platform acquisition portfolio company of Hispania Capital Partners, has completed its acquisitions of Travel Media Northwest Inc. and Hispanic Impact Media Inc., publishers of Spanish-language yellow pages in the Oregon-Washington-Idaho and Utah regions. No financial terms were disclosed.

RoadLink USA Inc., a North American provider of intermodal trucking and related logistics services has acquired Transus International LLC, a provider of intermodal trucking services in the southern United States. No financial terms were disclosed, except that Transus has $40 million in annual revenue. RoadLink is a portfolio company of Fenway Partners.

Wilks Broadcast Group LLC, a platform acquisition company of The Wicks Group of Cos., has completed its $138 million acquisition of radio stations in Kansas City and Columbus, Ohio from CBS Corp. (NYSE: CBS). The stations are: KFKF(FM), KBEQ(FM), KMXV(FM) and KCKC(FM) in Kansas City, and WLVQ(FM), WHOK(FM) and WAZU(FM) in Columbus.

PE Exits

Knology Inc. (Nasdaq: KNOL) has agreed to acquire PrairieWave Communications Inc., a Sioux Falls, S.D.-based provider of communications services in South Dakota, Minnesota and Iowa. The deal is valued at approximately $255 million, and is expected to close by June 30. PrairieWave is backed by Alta Communications and Banc of America Capital Investors.

Divergent Capital Partners of Australia has sold its “significant” stake in Visean Information Services, a Houston, Texas-based data management software vendor to the upstream oil & gas industry, to global oilfield services company Weatherford International (NYSE: WFT). No financial terms were disclosed.

Texas Pacific Group has offered to sell 7.5 million shares of retailer J. Crew (NYSE: JCG) in a secondary public offering. If successful, it would cut TPG’s ownership position from 36% to 24 percent.

Firms & Funds

Kohlberg Kravis Roberts & Co. has closed on $16.1 billion for its latest fund, according to LBO Wire. The final target remains $16.625 billion.

Great Pacific Capital has launched as a Santa Barbara, Calif.-based early-stage venture capital firm. The firm is managed by former Fastclick executives Dave Gross and Rusty Reed, and its initial fund is capped at under $50 million.

Human Resources

Anthony Leung has joined The Blackstone Group as a senior managing director and chairman of the firm’s China efforts. He is the former Financial Secretary of Hong Kong and, before that, held positions with both JP Morgan and Citigroup. Leung will co-head a new Hong Kong office, alongside Ben Jenkins, who will relocate from New York.

Duncan Hill has joined Ventures West as an entrepreneur-in-residence, with a focus on IT infrastructure and software. He currently is a tech consultant to entrepreneurs, and previously served as founder and CTO of Think Dynamics, a developer of data center provisioning and automation software, which was acquired by IBM in May

Energy Investors Funds has promoted Andrew Schroeder from partner to senior partner, and promoted Keith Derman from senior associate to vice president.

Lovell Minnick Partners has promoted Robert Belke from principal to managing director. He has worked on such deals as Duff & Phelps, PlanMember Financial Corp. and UNX Holdings.

Monte Haymon, an operating partner with Watermill Ventures, has resigned from the board of OfficeMax Inc. (NYSE: OMX), in order to focus on his other professional and personal obligations.