PE Week Wire: Mon., Nov. 12, 2007

Some quick hits before boarding a plane for San Francisco, where Buyouts West begins tomorrow…

*** Is Kleiner Perkins becoming the Carlyle Group of venture capital? It added Colin Powell in 2005 to help advise on bio-defense and other homeland security issues.Today itbolstered its cleantech practice with the addition of Al Gore as a partner. Yup, that Al Gore – former Veep, early Google investor and, of course, Nobel Prize-winning green evangelist.

The move is part of a larger collaboration with Generation Investment Management, a London-based firm that Gore co-founded and serves as chairman of. According to a statement, the partnership will be to “find, fund and accelerate green business, technology and policy solutions with the greatest potential to help solve the current climate crisis.”

KP will co-locate its Europeanoperations at Generation’s headquarters, with partner John Doerr joining the Generation advisory board. Gore will donate 100% of his KP salary to the Alliance for Climate Protection – a “non-partisan foundation he chairs that focuses on accelerating policy solutions to the climate crisis.” No word yet on if that includes his carry…

*** Great lunchtime keynote by Madison Dearborn Partners’ Paul Finnegan during last Friday’s Yale SOM Private Equity Conference. Informative, combative and interactive. Really far too few of these at industry conferences (hopefully Buyouts West will be an exception). For example, he began by asking for a show of hands from those who believed PE pros pay too little in taxes. About four hands went up in a room of more than 200 (including yours truly), and he made two of them (not including yours truly) role-play various scenarios related to the credit crunch. A few notes from his talk:

Finnegan believes that GPs could be in trouble if they were particularly inflexible with I-banks on debt terms following the credit crunch. As he said, not every firm gets to see every deal. I happen to think that bankers are more craven than vindictive, but we’ll see…

Finnegan said that MDCP will soon send out PPMs for its sixth fund, with a $10 billion target. His attorney instinctively shouted out: “But we’re not soliciting.”

An audience member asked if MDCP does hostile takeovers. Finnegan responded negatively, saying: “We are totally incapable of running a business.”

He put odds of a recession at 50/50.

Carry at MDCP is broadly distributed, with no one individual receiving double-digit points, out of 100.

*** If public market values continue to drop, could that be the end of the 3-year-plus fundraising boom in private equity? After all, certain LPs could go from below-allocation to above-allocation without making new commitments…

*** Quiz Time: Can you name the MMO/virtual world app company that just raised a new round of venture funding? Hint: This is the deal lead’s first East Coast deal in quite some time, until…

*** Hope to see many of you in San Francisco…

Top Three

The U.S. House of Representatives passed a bill that would change the tax treatment of carried interest from capital gains to ordinary income, by a vote of 216-193. It is part of a larger tax bill to blunt the looming impact of AMT, but is not expected to pass the Senate in its current form. President Bush has also threatened a veto.

Oak Hill Capital Partners has agreed to acquire Firth Rixon Ltd. from The Carlyle Group and Lehman Brothers for approximately $1.97 billion. Leveraged financing is being led by Lehman Brothers, GE Commercial Finance and Lloyds TSB Corporate Markets. Firth Rixon is a supplier of highly-engineered rings, industrial forgings and specialized metal products primarily to aerospace engine manufacturers.It has offices in East Hartford, Conn. and Sheffield, England. Carlyle acquired Firth Rixon in 2003, and simultaneously merged in with existing portfolio company Forged Metals Inc. In September 2006, Lehman Brothers acquired a 36% ownership position, via a co-investment with Carlyle.

The Blackstone Group today reported a $113.2 million Q3 loss, on charges related to its IPO.

VC Deals

AmeriTV, a New York–based Internet television company founded in 2004, has raised $45 million in venture capital funding. First Mutual Credit and GTrade Securities co-led the deal, and were joined by four other undisclosed backers.

Anaptys Biosciences Inc., a La Jolla, Calif.-based therapeutic antibody discovery and optimization company, has raised $33.9 million in Series B funding. Novo AS led the deal, and was joined by Frazier Healthcare Ventures, Alloy Ventures, Numenor Ventures, WS Investment Co. and return backer Avalon Ventures.

CellFor Inc., a Vancouver-based producer of varietal tree seedlings for reforestation, has raised US$24.5 million in fourth-round funding. Backers include ATP Capital, CSFB Private Equity, GrowthWorks Capital, and BDC Venture Capital. The company has now raised over $63 million in total VC funding.

DisplayLink Corp., a Palo Alto, Calif.-based fabless semiconductor manufacturer that focuses on network displays, has raised $24 million in Series C funding. DAG Ventures led the deal, and was joined by return backers Atlas Venture, Balderton Capital and DFJ Esprit. The company has now raised around $51 million in total VC funding.

Ensemble Discovery Corp., a Cambridge, Mass.-based developer of a DNA-programmed chemistry platform for developing therapeutics and bioassays, has raised $15 million in Series B funding. The deal was tranched-out with the first $10 million coming in January, and the remainder being called down a few months later. Backers included CMEA Ventures, ARCH Venture Partners, Flagship Ventures, Oxford Bioscience Partners, Harris & Harris Group, Aeneas Venture Corp. (Harvard University) and Boston University Technology Development Fund.

Piedmont Pharmaceuticals LLC, a Greensboro, N.C.-based developer of drug delivery systems for human and companion animal use, has raised $8.5 million in Series B funding led by CM Capital Investments of Australia.

Fusion Media Group, a Wenham, Mass.-based out-of-home advertising company, has raised $7.5 million in Series A funding from Key Venture Partners. Part of the proceeds were used to acquire the assets of Tyler, Texas-based Genesis Media Advertising.

Arterial Remodeling Technologies, a Paris-based developer of bioresorbable peripheral and coronary polymer stents, has raised €5.5 million in new VC funding. Backers include Matignon Technologies and SGAM Alternative Investments.

Carnegie Speech Co., a Pittsburgh-based provider of software for assessing and teaching spoken language skills, has raised $6 million in Series A funding from Osage Ventures.

Allurent Inc., a Cambridge, Mass.-based provider of ecommerce software for retailers, has raised an undisclosed amount of second round funding. Return backer Polaris Venture Partners led the round, and was joined by GSI Commerce Inc.

Buyout Deals

Angelo Gordon & Co. has formed an amusement park acquisition platform called Adrenaline Family Entertainment Inc., in partnership with former Six Flags executives Hue Eichelberger and Russell Kuteman. The efforts initial deal was for Clementon Lake Park in Clementon, New Jersey. No financial terms were disclosed.

Arcapita has completed its $369 million acquisition of Varel Holdings Inc., a maker of drill bits for the oil & gas and mining industries, from KRG Capital Partners. KRG Capital bought Varel from 3i Group and UTIMCO in June 2005. It has since made several add-on acquisitions.

Catterton Partners has agreed to acquire Restoration Hardware Inc. (Nasdaq: RSTO) for $6.70 per share in cash, for a total equity value of approximately $267 million. UBS is advising Restoration Hardware on the deal.

TA Associates has agreed to sell SmartStream Technologies, a UK-based provider of software licensing and professional services, to DIFC Investments. The deal is valued at approximately £200 million in cash, and is expected to close next month.

Thomas H. Lee Partners and Fidelity National Financial have completed their $5.3 billion take-private buyout of HR services provider Ceridian Corp. Deutsche Bank Securities and Credit Suisse will provide leveraged financing, while Ceridian stockholders received $36 per share.

PE-Backed IPOs

American Public Education Inc., a Charles Town, West Va.-based provider of online postsecondary education for the military and public service communities, raised $93.75 million in its IPO. The company priced around 4.69 million common shares at $20 per share ($15-$17 original range), for an initial market cap of $340.97 million. It finished its first day of trading up at $34 per share. William Blair & Co. and Piper Jaffray served as co-lead underwriters. Shareholders include ABS Capital Partners (41.4% pre-IPO stake) and Camden Partners (10.3%).

Lumber Liquidators Inc., a Toano, Va.-based direct retailer of hardwood flooring, raised $110 million in its IPO. It had filed to price 11.5 million common shares at between $12 and $14 per share, but ended up pricing just 10 million shares at $11 per share – and ended its first day of trading down at $9.94 per share. Goldman Sachs and Merrill Lynch served as co-lead underwriters. TA Associates held a 34.6% pre-IPO position, based on a $35 million private equity infusion in December 2004.

ChemoCentryx Inc., a Mountain View, Calif.-based developer of oral drugs for autoimmune diseases, inflammatory diseases and oncology, has filed for a $57.5 million IPO. It plans to trade on the Nasdaq under ticker symbol CCXI, with Credit Suisse serving as lead underwriter. The company has raised around $105 million in VC funding, from firms like Glaxo Group (13.1% pre-IPO stake), OrbiMed Advisors (12.8%), HBM BioVentures (9.8%), Alta Partners (7.6%) HealthCap (7.4%) and GIMV.

Xanodyne Pharmaceuticals Inc., a Florence, Ky.-based drug company, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol XANO, with Morgan Stanley and Deutsche Bank Securities serving as co-lead underwriters. The company has raised around $232 million in total VC funding, including a $170 million Series A-1 round in 2005 that helped finance the $210 million acquisition of aaiPharma’s pharmaceutical division out of bankruptcy. Shareholders include Apax Partners (23.2% pre-IPO stake), MPM Capital (21.3%), AIG (10.9%), Essex Woodlands Health Ventures (10.7%), HealthCare Ventures (10.3%), Aisling Capital (9.5%) and Blue Chip Venture Co. (7.8%).

NanoDynamics Inc., a Buffalo, N.Y.-based developer of solid-oxide fuel cells, water filters and other advanced materials, has withdrawn its IPO registration. No reason was given, although the company had previously postponed the offering due to “current market conditions.” NanoDynamics had planned to offer 6.6 million common shares at between $12 and $14 per share, and to trade on the Nasadaq. Jefferies & Co. was serving as lead underwriter. NanoDynamics has raised around $15.25 million in total private funding, from groups like the Convergent Private Equity Fund.

Nimblegen Systems Inc., a Madison, Wis.-based maker of microarrays for the life sciences market, has withdrawn registration for a $75 million IPO. The move follows Nimblegen’s acquisition by Roche for $272.5 million. Nimblegen shareholders had included Skyline Ventures (14.04%), Cargill Ventures (13.37%), Schott AG (12.71%), Brookside Capital Partners (7.77%), Venture Investors LLC (6.55%), the State of Wisconsin Investment Board and Baird Venture Partners.

Symetra Financial Corp., a Bellevue, Wash.-based life insurance company, has postponed its IPO, due to “current market conditions.” The company had filed to sell 39.5 million common shares at between $19 and $20 per share. It plans to trade on the NYSE under ticker symbol SYA, with underwriters including Merrill Lynch, Goldman Sachs, JPMorgan and Lehman Brothers. Shareholders include Vestar Capital Partners, Och-Ziff Capital Management, Highfields Capital Management, Caxton Associates, White Mountains Insurance Group and Berkshire Hathaway.

CDM Resource Partners LP, a Houston, Texas-based provider of turnkey natural gas contract compression services, has set its IPO terms to seven million common units being offered at between $19 and $21 per unit. It plans to trade on the NYSE under ticker symbol CDP, with Lehman Brothers and Merrill Lynch serving as co-lead underwriters. CDM is owned by management and Carlyle/Riverstone Global Energy & Power Fund II.

PE Exits

Covidien Ltd. (NYSE: COV) has acquired Scandius Biomedical Inc., a Littleton, Mass.-based developer of devices for sports-related surgeries. No financial terms were disclosed. Scandius had raised over $13 million in VC funding since 2002, from firms like KBL Healthcare Ventures, NewSpring Capital, Stockton Ventures and Ivy Capital Partners.

PE-Backed M&A

Cap Rock Holding Corp., a Texan electricity distributor owned by Lindsay Goldberg & Bessemer, has completed its $867 million take-private buyout of Semco Energy Inc., a distributor of natural gas to more than 400,000 customers combined in Michigan.

Chorion Ltd., a UK-based owner and manager of classic and contemporary literary-based brands, has acquired Copyrights Group, a UK–based independent licensing business. No financial terms were disclosed. 3i Group acquired Chorion last year.

Firms & Funds

Accel Partners has closed its tenth fund with $520 million in capital commitments. The Palo Alto, Calif.-based firm had raised $400 million for its ninth fund back in 2004.

Cisco said that it has formed a venture capital initiative targeting the tech industry in Central and Eastern Europe. The program is being launched in partnership with 3TS Capital Partners, with Cisco making an anchor commitment to a €30 million fund called 3TS-Cisco Growth Fund III. Cisco also will make direct investments in the region.

Gresham, a UK-based mid-market private equity firm, has formed a dedicated energy and environmental team. It will be co-led by existing partners Andy Marsh and Christian Bruning.

Human Resources

Al Gore has joined Kleiner Perkins Caufield & Byers as a partner. The hire is part of a global collaboration between KP and London-based Generation Investment Management, to “find, fund and accelerate green business, technology and policy solutions with the greatest potential to help solve the current climate crisis.” KP will co-locate is European operations at Generation’s London offices, with KP partner John Doerr joining Generation’s advisory board. Gore is a Generation co-founder and chairman.

William Qu and Mike Ding have joined BlueRun Ventures as investment directors, focused on media, wireless and consumer services opportunities in China. Qu previously was director of investment with Capinfo, a Hong Kong-listed IT services company. Ding previously worked for Nokia’s emerging business unit as director for new business development and strategic investments.

Lisa Ricciardi has joined Essex Woodlands Health Ventures as an adjunct partner. She previously was with Pfizer as senior vice president of licensing and development.

Chris Perriello and Michael Hacker have joined the New York-based secondaries team of AlpInvest Partners as a principal and investment director, respectively. Perriello previously was with Paul Capital Partners, while Hacker worked in the secondaries group of UBS.

Jim Scheinman has joined Charles River Ventures as an entrepreneur-in-residence, focused on the consumer Internet, social networking and social media sectors. He previously was co-founder of Bebo, where he also served as vice president of business development and sales. Before that, he was vice president of business development and sales for Friendster.