PE Week Wire: Mon., Oct. 8, 2007

Buyout pros will look back on Q3 with the type of animus usually reserved for an infectious disease or termite infestation. But they’ll have to write down their qualatative anecdotes, as the historical data won’t look too bad.

Buyouts Magazine today released deal closure and fund-raising data for Q3, which shows that the past three months weren’t all that different from the April-May stretch. U.S.-based LBO firms and their portfolio companies (which can be headquartered anywhere) closed 252 control-stake transactions in Q3, with disclosed values of more than $106 billion (82 deals had disclosed values). That represents a 12% increase in disclosed deal volume over Q2, although the number of closed deals dropped buy approximately 16.56 percent. That brings the 2007 total to 837 consummated deals with a disclosed value of $304 billion. For contrast, the first three quarters of 2006 had 770 deals with $181 billion in disclosed value.

Buyout fund-raising also remained fairly steady in Q3, with $74 billion raised by U.S.-based firms. That’s basically even with the $74.3 billion raised in Q2, and brings the 2007 tally to $214.8 billion. There have been 275 domestic buyout funds in market this year, with 123 of them having targets of less than $500 million. Another 76 have targeted between $501 million and $3 billion, with the other 36 going for mega status.

Buyouts Magazine subscribers can get much more in-depth info, charts, etc. at Non-subscribers… Well, non-subscribers can become subscribers.

* Ascension Health Ventures announced that it has raised $200 million for its second fund. I’ll have 5 Questions with Ascension managing director Matt Hermann at peHUB later today, but here’s an interesting nugget in the meantime: Ascension’s $125 million debut fund was raised in 2001, and has 20 portfolio companies. Of those, only one has gone under (SERVicys). That’s pretty remarkable for a 2001-vintage VC fund – and made even better by a trio of IPOs and pair of M&A exits.

* Did you notice Friday’s note that Guggenheim Aviation Partners had closed its second fund with $737 million. Any chance that the aircraft acquirer/leaser got to “737” by coincidence? No, I don’t think so either.

* Self-Promotion Alert: I’ll be on CNBC’s Closing Bell today at 3:15, to discuss the financing environment for leveraged buyouts. Expect my surprising optimism to persist.

* peHUB First Read

* Buyout firms endanger children.

* I’ve gotten lots of emails about Q3 presidential fundraising — and how much each candidate got from private equity professionals. Soon, dear readers, soon.

Candidates are not required to submit formal fundraising documents to the Federal Elections Commission until October 14, at which point they’ll be available to my perusal. Some candidates have publicized their own Q3 tallies, but the more detailed analysis will have to wait another six days.

As an FEC spokeswomen told me: “As soon as the campaign presses ‘send,’ it will be available.”

Top Three

Citi reportedly is in talks to lend beleaguered Northern Rock between £5 billion and £10 billion, to enable the beleaguered UK bank to stop borrowing at the Bank of England’s emergency rate. Such a deal could help Northern Rock remain independent, rather than selling itself off. J.C. Flowers is known to have made a £15 billion buyout offer, while the Wall Street Journal reports that The Blackstone Group and Apollo Management also have made initial takeover approaches. Cerberus also is reported to be interested.

Ascension Health Ventures of St. Louis has closed its second fund with $200 million in capital commitments. The St. Louis-based firm launched in 2001 with a $125 million fund solely backed by Catholic health system Ascension Health, to invest in medical device, healthcare technology and healthcare services companies. Its second fund expanded the LP base to include Catholic Health Initiatives and Catholic Health East.

MAP Pharmaceuticals Inc., a Mountain View, Calif.-based developer of inhaled drug products for respiratory and CNS diseases, raised $60 million in its IPO. The company priced 5 million shares at $12 per share (below $14-$16 range), for an initial market cap of approximately $231 million. It began trading Friday on the Nasdaq under ticker symbol MAPP, and finished up at $13.35 per share. Merrill Lynch and Morgan Stanley served as co-lead underwriters on the IPO. MAP Pharma had raised around $107 million in total VC funding since its 2003 formation, including a $50 million Series D round earlier this year. Shareholders include Bay City Capital, Perseus-Soros Biopharmaceutical Fund, Pequot Ventures, Brookside Capital, Skyline Ventures and D.W. Shaw Group.

VC Deals

CeraPedics Inc., a Lakewood, Colo.-based developer of products for the orthopedic bone substitutes market, has secured $14.45 million of a $16.45 million Series A round, according to a regulatory filing. OrbiMed Advisors led the deal, with Medical Capital Advisors serving as a placement agent.

Apollo Endosurgery Inc., an Austin, Texas-based developer of medical devices for minimally-invasive surgical procedures conducted through natural orifices, has raised $11.5 million in Series A funding. Backers include PTV Sciences, H.I.G. Ventures and individual angels.

MyBuys Inc., a Redwood City, Calif.-based provider of behavioral recommendation software for online retailers, announced that it has raised $10 million in Series B funding. Palomar Ventures led the round, which closed back in March. Return backer Lightspeed Venture Partners also participated. Inc. of San Francisco has raised $500,000 in seed funding from True Ventures and The Hit Forge. Not much information is available on the stealth company, except that it plans to provide a new product for online gamers. Jared Kim last year while still a freshman at UC Berkeley. He previously founded Xinjun Software, an online platform that connected gamers across mainland China.

Consistel, a Singapore–based provider of wireless network solutions in Asia and the Middle East, has raised an undisclosed amount of VC funding co-led by Jafco Asia and Intel Capital. East Peak Advisors advised Consistel on the transaction.

Simplex Diabetic Supply Inc., a Brentwood, Tenn.-based supplier of Medicare diabetes products, has raised an undisclosed amount of VC funding from New Enterprise Associates. Chip Linehan and Ryan Drant of NEA will join the Simplex board of directors.

Helixis Inc., a Carlsbad, Calif.-based developer of molecular diagnostics products, said that Advanced Technology Ventures participated in a $10 million Series A round announced back in August. Previously-disclosed participants included Domain Associates and Okapi Venture Capital.

Buyout Deals

The Ontario Teachers’ Pension Plan has agreed to acquire San Francisco-based proxy advisory firm Glass, Lewis & Co. LLC from Xinhua Finance for $46 million.

Appaloosa Management said on Friday that it would increase its restructuring offer for bankrupt auto supplier Dana Corp., in order to prevent a $750 million investment from Centerbridge Capital Partners.

ClearLight Partners has acquired Port Washington, N.Y.-based natural juice company Apple & Eve LLC from shareholders that included Weston Presidio. No financial terms were disclosed. Centerview Partners advised Apple & Eve on the transaction.

Goldman Sachs reportedly is the leading bidder to acquire UK water utility Southern Water, which is being sold for around £4 billion by the private equity arm of Royal Bank of Scotland. RBS owns only 49% of Southern Water’s shares, but controls nearly 94% of its economic interest under an unusual ownership structure. Other shareholders include Perry Capital and D.E. Shaw.

Riverside Partners has acquired GemCity Engineering & Manufacturing, a Dayton, Ohio-based manufacturer of electro-mechanical engineered products serving the defense, healthcare, semiconductor, and industrial machinery markets. No financial terms were disclosed for the deal, which was done in partnership with GemCity management.

United Rentals Inc. (NYSE: URI) said in an SEC filing that its directors have been sued for allegedly failing to disclose all material facts related to a proposed $7 billion acquisition by Cerberus. The plaintiffs are requesting that the deal be enjoined. Under current terms of the offer, United Rentals stockholders would receive $34.50 per share.

PE-Backed IPOs

ZARS Inc., a Salt Lake City-based developer of non-invasive drug delivery technologies, has withdrawn its IPO filing, citing market conditions. The company had planned to sell five million common shares at between $14 and $16 per share, and trade on the Nasdaq under ticker symbol ZARS. It was scheduled to price late last month, but then formally delayed. Cowan & Co. and CIBC World Markets were serving as co-led underwriters. Zars has raised around $33 million in total VC funding since 2000, from firms like Draper Fisher Jurvetson (23.1% pre-IPO stake), Wasatch Ventures (7.6%), vSpring (5.4%), ePlanet Ventures, CDIB BioScience Venture Management and Tenex.

BG Medicine Inc., a Waltham, Mass.-based developer of molecular diagnostics based on biomarkers, has set its IPO terms to six million shares being offered at between €5.75 and €7.25 per share. It plans to trade on Eurolist by Euronext Amsterdam under the symbol BGMDX, with Cowen International and Fortis serving as co-lead underwriters. BG Medicine has raised around $37 million in VC funding since 2000, from firms like Flagship Ventures (48.8% pre-IPO stake), Gilde Investment Management (14.6%) and Koniklijke Philips Electronics (6.5%).

Noah Education Holdings Ltd., a Shenzhen, China-based provider of interactive education content in China, has set its IPO terms to around 9.85 million American depository shares being offered at between $9.80 and $11.80 per share. It plans to trade on the NYSE under ticker symbol NED, with Deutsche Bank Securities serving as lead underwriter. Shareholders include Baring Private Equity Partners, Lehman Brothers Commercial Corp. Asia Ltd. and Dynamic View Investments.

PE Exits

Blackstreet Capital Partners has sold PJCOMN Acquisition Corp., owner and operator of 82 Papa John’s pizza restaurants in Colorado and Minnesota, to Essential Pizza Inc. No financial terms were disclosed.

FreeLinc, an Orem, Utah-based provider of wireless communication accessories for two-way radios, has acquired Aura Communications Technology, a Wilmington, Mass.-based company specializing in near-field magnetic induction communications. No financial terms were disclosed. Aura has raised over $31 million in VC funding, from firms like Creative Technologies, Motorola Ventures, Duchossois Technology Partners, Entrepia Ventures and iSherpa Capital.

MSNBC has acquired Newsvine Inc., a Seattle-based provider of online news content solutions. Newsvine raised around $5 million in startup funding in late 2005 from Second Avenue Partners.

Firms & Funds

American Capital Strategies has closed its second private equity fund with $585 million in capital commitments. AIG served as cornerstone limited partner, and was joined by Landmark Partners, Paul Capital Partners, Lehman Brothers Secondary Opportunities Fund and SVG Advisers Limited. The fund will use $488 million to purchase American Capital’s equity investments in 80 portfolio companies, while the remaining $97 million will be used for follow-on investments in those portfolio companies.

Egis Capital Partners has launched as a private equity firm focused on small-cap companies in the commercial security and homeland defense industry. Its principals are former apax partner Robert Chefitz, USBX founder and CEO John E. Mack and former Andersen partner Joseph Falkenstein.

Human Resources

Howard Yeh has joined, an online healthcare market and information company, as vice president of corporate development and finance. He previously was a vice president withy VantagePoint Venture Partners, where he focused on the online media and marketing areas.

Commonwealth Capital Ventures has promoted Stephen Hallowell from associate to principal. He recently was involved with both Constant Contact and Visible Assets, and currently serves as an observer on the boards of Copanion, Reval and

Chris Boyle has joined CLSA Capital Partners as managing director of the firm’s new Pacific Transport fund, which will invest in regional shipping and transport opportunities.

Nathaniel Zilkha, a principal with Kohlberg Kravis Roberts & Co., has joined the board of KKR portfolio company Jazz Pharmaceuticals Inc. (Nasdaq: JAZZ). He replaces KKR colleague Adam Clammer.