PE Week Wire: Mon., Feb. 25, 2008

Greetings from absentia, as I’m currently on a flight from Boston to Colorado. So a few quick notes written on Sunday afternoon, in order to begin your Monday morning:

*** Ian Charles of Landmark Partners has posted a must-read piece over at peHUB. The subject is carried interest, and how a truly capitalistic private equity market would abandon the 20%-25% standard, in favor of a competitive auction. After all, general partners already ask limited partners to submit dollar allocation requests – so why not ask them to also submit carried interest requests. For context, Ian did a mock auction with a top-tier venture capital firm, and the results left 20%-25% well in the rearview.

There are plenty of reasons why general partners likely won’t adopt this model, but almost all of them are more pragmatic than philosophical. For example, there would be LP accusations of greed, upsetting the endowments-first apple cart and GPs running the risk of a 5%-10% carried interest. But, again, there is something odd about venture capitalists preaching supply/demand to their portfolio companies, but eschewing it in their own operations.

Be sure to let me know what you think, either via email or by commenting directly on Ian’s piece…

*** SEIU protesters were back in action last Friday, at the Chicago GSB Private Equity Conference. A reader in attendance says that the disruption occurred during the luncheon, which was being held at a Sheraton across the street from U Chicago’s Gleacher Center. The speaker was Carlyle Group co-founder Bill Conway, and a protester busted in through a side entrance as Conway began his talk. He began chanting about Manor Care, and was quickly joined by around another 20 peers.

There was no back and forth between any of the protesters and Conway – as there had been last month at Wharton, when David Rubenstein was speaking – although Conway did comment on the irony of their shared support of Barack Obama for president. Non-uniformed security (maybe cops?) ushered the protesters out after just a few minutes, which extinguished the possibility of Wharton-like confrontations at tables and in the halls.

*** We’ve gotten lots of good private equity t-shirt ideas, as you can see here. Keep ‘em coming, and next week I’ll ask you to vote on the ones most deserving of actual production.

*** Be back live tomorrow morning… Thanks to Eamon Beltran for taking care of the news.

Top Three

Hellman & Friedman has agreed to pay $2.4 billion for Getty Images Inc. (NYSE:GYI), a Seattle-based creator and distributor of visual content and other digital media; the price includes the assumption of existing debt. Barclays Capital, GE Commercial Finance and RBS Greenwich Capital are providing debt financing. Getty Images shareholders will receive $34 in cash for each common share outstanding. This price represents a premium of about 55 percent over the closing price on January 18, the last trading day before Getty Images announced it was exploring strategic alternatives. and

Providence Equity Partners has hit another snag in its attempt to buy a suite of 56 TV stations from Clear Channel Communications. After Providence Equity successfully negotiated the initial $1.2 billion price tag down by a reported $100 million last week, one of the deal’s debt providers, Wachovia, is still balking, according to The New York Times. Wachovia sued Providence Equity on Friday, arguing that the new agreement voids the bank’s responsibility to commit to the deal.

China Construction Bank Corp., one of the four big state banks in China, has plans to enter the private equity market, according to Global Banking News. The bank recently completed research reports about the investment and management of private equities. It is also trying to establish asset management companies and acquire trust companies in the country.

VC Deals

GeoLearning Inc., an Iowa-based provider of managed learning services, has secured $31 million from Fidelity Ventures. The funds represent the first institutional investment for GeoLearning. Fidelity Ventures Partner Roger Hurwitz has joined GeoLearning’s board.

Trupanion ,has received $22 million in financial backing led by Maveron LLC. Trupanion is a Seattle-based company that makes pet insurance easier for owners.

Nistica Inc, a Bridgewater, N.J.-based supplier of agile optical modules that simplify, automate and make affordable the delivery of high-bandwidth applications, has closes a series B financing round at $9 million. Battelle Ventures LP, and its affiliate fund, Innovation Valley Partners, led the financing.

Affomic Corp., a New Haven, Conn.-based biotechnology firm, has raised $7 million in a first round of financing. Connecticut Innovations, Elm Street Ventures, and Four Seasons Ventures participated in the round.

Nerites Corp., a Madison, Wis.-based developer of tissue repair products and coatings for medical devices, completed a $5.7 million series A round of funding. Venture Investors LLC, with participation by Black Mountain Ventures, led the investment. Previously, Nerites had raised $3 million from private investors.

Peak8 Solutions LLC, a Boulder, Colo.-based provider of technical support services, has secured $5 million in funding from Lacuna Venture Capital and other firms. Existing investors also participated in the round.

BioIQ, a health care information technology company based in Santa Barbara, Calif., completed a Series B financing round that raised $2.5 million. The round was led by venture firm Great Pacific Capital. Great Pacific’s Managing Partner Dave Gross will take a seat on BioIQ’s board.

Erasmic Venture Fund, a venture capital fund backed by Google Inc. (Nasdaq: GOOG), has invested in Bangalore-based fast food chain Kaati Zone. Kaati Zone is promoted by Kiran Nadkarni. Business Standard reported that Nadkarni is widely considered the father of the Indian venture capital industry. The terms of Erasmic’s investment into Kaati Zone weren’t disclosed.

Buyout Deals

First Reserve Corp., the energy focused PE firm, has agreed to delist CHC Helicopter Corp. (NYSE: FLI), a Canadian-based provider of helicopter services to the offshore oil and gas industry. The transaction is valued at about C$3.7 billion ($3.65 billion.). It comes with a C$61.4 million reverse breakup fee. and

U.K.-based buyout firm Lion Capital LLP has agreed to acquire 32 percent of Swiss baker Hiestand AG for an undisclosed price, according to The Deal. Hiestand supplies deep-frozen bakery products in Switzerland, Germany, Austria, Poland, Malaysia, Japan and Turkey. Lion was previously the European arm of Hicks, Muse, Tate & Furst Inc.

Kurt Geiger Ltd., a U.K.-based luxury shoe retailer, has been acquired in a £95 million ($186 million) buyout that was backed by Graphite Capital Management Ltd. Barclays Private Equity, as the seller, acquired a 72 percent stake in Kurt Geiger as part of a management buyout of the business from Harrods in 2005. Kurt Geiger is thought to have near doubled its money on the deal, according to The Independent.

PE-Backed IPOs

Future Ventures India Ltd., promoted by Pantaloon Retail (India) Ltd. and part of the Future Group, has sought regulator permission for an initial public offering. Future Ventures filed an application with the Securities and Exchange Board of India for an Initial public offering of about 3.74 billion shares, which would constitute 66.52 percent of its post-issue, paid up capital.

PE Exits

HgCapital, a London-based midmarket buyout shop, sold events and exhibitions organizer Clarion Events Ltd. to New York-based Veronis Suhler Stevenson LLC for £120.5 million ($234.5 million.) The transaction generated an initial rate of return of 34 percent for investors, according to The Deal. Veronis Suhler Stevenson beat Bridgepoint Capital Ltd. and Exponent Private Equity LLP to clinch the Clarion deal.

PE-Backed M&A

Mobile Mini Inc. (Nasdaq: MINI), a Tempe, Ariz.-based provider of portable storage solutions, has signed a definitive agreement to merge with Mobile Storage Group Inc., a Glendale, Calif.-based provider of portable storage. The transaction is valued at about $701.5 million. Mobile Storage Group, which will assume senior roles with the combined organization, is majority owned by Welsh, Carson, Anderson & Stowe.

Stream Communications Network & Media Inc., a broadband cable company in Warsaw, Poland, has sold 51.14 percent of its Polish unit, Stream Communications Sp. Zoo to Penta Investments Ltd. Penta purchased 15,640 shares from Stream Communications Network & Media for PLN 20.3 million ($8.3 million) and 16,900 newly issued shares for PLN 23.4 million.

Orascom Construction Industries has signed an agreement with United Arab Emirates-based private equity firm Abraaj Capital, which has agreed to merge its fertilizer production operations under Orascom Construction for a combined cash and shares equity consideration of about $1.59 billion. Orascom Construction of Cairo, Egypt, will also assume $1.1 billion in net debt.

Eldeco Group, a tier-II realty player in Delhi, India, is in talks with American International Group Inc. (NYSE: AIG) and Merrill Lynch & Co. (NYSE: MER) to raise $200 million to $250 million from a clutch of private equity investors. As part of this plan, Eldeco has already raised part of the funds from Xander PE. Eldeco Infrastructure & Properties Ltd. wants to raise funds at the entity and special purpose vehicle level for upcoming projects in Ludhiana and Jalandhar in Punjab, and in two cities in Maharashtra, according to Indian Business Insight.

Candover Investment PLC is in talks to buy a 25 percent stake in UK insurance firm Towergate Partnership Ltd., person familiar with the situation told Dow Jones Newswires. However, the timing of any deal for the insurance company, which is valued at about £3 billion ($5.9 billion), is uncertain. There are a number of outstanding issues, the person added. Based in Maidstone, England, Towergate has developed a range of specialist businesses, such as arranging insurance for Formula One motor-racing teams, rugby players and British Army equipment. The Sunday Times separately reported that entrepreneur Peter Cullum, who controls a 70 percent of the business, is in talks to sell a 25 percent stake in Towergate.

Firms & Funds

Warburg Pincus has effectively completed marketing efforts for its newest vehicle and anticipates having a final close on the fund soon, said a person familiar with the endeavor. The New York-based firm began marketing the fund, Warburg Pincus Private Equity Fund X LP, in May 2007, with a $12 billion target. After two interim closings, the partnership has reined in about $15 billion, LBO Wire reported.

UK-based British American Tobacco PLC (AMEX: BTI) had the winning bid in the auction for the cigarette business assets of Tekel SA, the Turkish state-owned tobacco company. British American Tobacco’s offer of $1.72 billion fended off rivals: Cinven Group Ltd. and others including a consortium that included Citi Venture Capital International Ltd.

Five Elms Capital, has completed a first close of $14 million in capital commitments. The investment team is led by Fred Coulson, former senior investment professional at TH Lee Putnam Ventures. Five Elms expects to finish fundraising in the second quarter and is targeting $20 million in capital commitments.

Asset manager Franklin Resources Inc. (NYSE: BEN) has acquired 49 percent of Vietcombank Fund Management, an investment management firm focused on private equity investment in Vietnam. The remaining 51 percent will continue to be owned by Vietcombank, the Bank for Foreign Trade of Vietnam. Franklin Resources, a San Mateo, Calif.-based firm, pursued the deal because of opportunity to extend its asset management network to Vietnam.

Allcargo Global Logistics Ltd.’s board approved a $60 million investment from The Blackstone Group (NYSE: BX) and its affiliates. The investment is subject to regulatory clearances. As part of this transaction, Blackstone will have representation on Allcargo’s board. Blackstone also intends to purchase more Allcargo shares from the open market from time to time, but intends to maintain its ownership below 15 percent. Allcargo is an Indian private sector logistics operator and a niche global logistics player.

The Pennsylvania Public School Employees’ Retirement System has pledged commitments of up to EUR300 million ($442.2 million) to CVC European Equity Partners V LP, up to $400 million to TPG Partners VI LP, up to $150 million to Versa Capital Fund II LP and up to $75 million to Catterton Growth Partners LP, according to LBO Wire citing a board agenda.

Human Resources

Providence Equity Partners Inc. named P. (Jim) Bankoff as a senior advisor. Bankoff is a former executive vice president of programming and products at AOL. He will advise Providence Equity on new investment opportunities and on certain of the firm’s existing investments in the online and digital media space.

Makan Capital Group Ltd., a real estate private equity group, has named Bracken White as chief investment officer and director at the corporate headquarters located in Abu Dhabi, United Arab Emirates.

Candover Investment PLC has appointed Jamie Paton to lead the firm’s expansion efforts in Asia. Initially, Paton will be based in Hong Kong while he is evaluating options in the region. Candover Investments plans to open its first Asian office, according to AltAssets.