PE Week Wire: Monday, August 4, 2008

The New York Times editorial board yesterday came out against an easing of Fed banking regulations, in order to better facilitate private equity investment in the sector. It’s the same subject that Erin wrote about last week at peHUB (btw: She’s not gone, just vacationing).

NYT makes a compelling case: The regulations are in place for valid reasons, and PE firms can’t guarantee that their short hold-times will deflect disaster. On the other hand, Erin suggested that the regs are outdated, since they only really considered public equity capitalizations.

I haven’t given this enough thought yet to form an opinion, so am hoping you can help persuade me one way or the other (via email). Please argue the merits, not your firm’s self-interest.

*** Lots of reporting over the weekend about how Time Warner apparently blocked former CEO Jon Miller – now a venture capitalist with Velocity Interactive Group – from joining the Yahoo board of directors. Apparently he has a non-compete that runs through next March.

Maybe that’s why Miller’s partner Ross Levinsohn was so forceful last month, when I asked him about rumors that Miller would replace Jerry Yang. “Our fund is kicking ass and we (Jon and I) are having as much fun as we’ve ever had professionally. Three of our companies are in acquisition talks (not w/ Yahoo though). Guess we’re flattered that people think Jon/I could help Yahoo, but we’re very happy where we are and what the future holds for Velocity… [There isn’t] any wiggle room.”

Not knowing about the non-compete, I had kind of assumed that Ross’ statement was a lot like a governor being asked about the vice presidential nomination. You say you’re happy, don’t want to nomination and won’t take it if offered. But, at the same time, you know it’s an offer you can’t actually turn down. Guess I was wrong…

*** Speaking of possible veeps, Politico has a piece about how some PE pros are worried that a Romney nomination could subject the industry to another round of intense scrutiny. This is a pretty universal view, although most folks I speak with believe the pros (an industry-friendly/knowledgeable VP) far outweigh the negatives (bad PR, possible skeleton unearthing).

So let me offer a different hypothesis: Romney’s business experience could actually hurt McCain more than help him in Michigan – the one state where he would be expected to make a positive difference (his father was a popular governor). Why? Because most Michigan voters have been inundated with news about Cerberus’ troubles with Chrysler – including the thousands of layoffs. Going from Romney to Feinberg is not a major mental leap, and certainly one the Obama folks would seek to exploit.

*** Some of my fellow Bostonians were upset with my closing comment in Friday’s Wire, which read: “Go Dodgers.” No, I’m not giving up my Sox fandom, but am bothered by how easily management was able to carry out a negative PR campaign against a player it hasn’t wanted since Day 1. Reminded me of what happened with Derrick Lowe and Mo Vaughan (I know, different ownership).

Semi-related: Great letter to the editor in the Boston Globe. Channeling Manny situation vis-à-vis Col. Nathan Jessup.

Top Three

Asciano Ltd. (AX: AIO), Australia’s largest port and rail operator, has rejected an unsolicited Au$2.9 billion buyout offer from TPG Capital and Global Infrastructure Partners. The company said that the Au$4.40 per share offer undervalued its business.

Sezmi (f.k.a. Building B), a developer of set-top boxes that combine traditional television content with on-demand movies and Internet video, is raising up to $50 million in new Series C funding. Advanced Equities is serving as placement agent.

H.I.G. Capital has sold Stream Holdings Corp. to Global BPO Services Corp. (AMEX: OOO), a blank check company backed by Ares Management. The deal is valued at $200 million in cash. Stream is a Richardson, Texas-based provider of technical support and other business process outsourcing services. It was acquired by H.I.G. in 2003 via a $75 million acquisition of Software Spectrum’s call center unit, and later grew via the 2004 acquisition of Stream from Solectron.

VC Deals

Plastic Logic Ltd., a UK-based developer of plastic circuits for mass applications, has raised $50 million in new VC funding. Return backers Oak Investment Partners and Amadeus Capital Partners co-led the round.

Xoft Inc., a Sunnyvale, Calif.-based maker of micro x-ray catheter for radiation therapy, has raised $25 million in Series E funding. Chicago Growth Partners led the round, and was joined by return backers like Easton Capital, Maverick Capital, MPM Capital, Sutter Hill Ventures, Mosaix Ventures, Frantz Medical Ventures and Frazier Healthcare Ventures. VentureWire reports that the post-money valuation was $170 million, which was around 10% higher than the post-money on Xoft’s $33.2 million Series D round last year.

HandyLab Inc., an Ann Arbor, Mich.-based maker of a DNA analysis device, has raised $19.2 million in Series D funding. Dow Ventures and Lurie Investments co-led the round, and were joined by return backers EDF Ventures, Ardesta, Arboretum Ventures and Pfizer Strategic Investments. The company has now raised around $44 million in total VC funding.

InterKrin Therapeutics Inc., a Los Altos, Calif.-based metabolic drug company, has secured $18.25 million of a $26.14 million Series C round, according to a regulatory filing. Amgen and Skyline Ventures were joined by return backers like Sofinnova Ventures, OrbiMed Advisors, Asset Management, Sears Capital Management and Vivo Ventures. The company has now raised over $54 million since early 2007.

InstallFree Inc., a Stamford, Conn.-based provider of desktop virtualization technology, has raised $8.5 million in second-round funding. Ignition Partners led the round, and was joined by Trilogy Equity Partners. InstallFree raised $1.7 million in Series A funding last November.

Tabula Digita Inc., a New York-based educational gaming company, has secured $6 million of a $7.57 million Series B round, according to a regulatory filing. Return backer Ascend Venture Group led the deal.

Agami Systems, a Sunnyvale, Calif.-based enterprise storage company, has shut down. It had raised around $90 million in VC funding since 2003, including a $45 million Series C infusion earlier this year. Advanced Equities led that round, and was joined by return backers New Enterprise Associates, Kleiner Perkins Caufield & Byers, Apex Venture Partners, Alta Partners, DAG Ventures and TIF Ventures. It also raised venture debt from Hercules Technology Growth Capital.

Social.FM (f.k.a. Mercora), a Sunnyvale, Calif.-based social music and music search startup, has shut down, according to GigaOm. The company launched in June 2005, and had raised $5 million from Norwest Venture Partners.

Buyout Deals

Avista Capital Partners and Nordic Capital have completed their $4.1 billion acquisition of wound care company ConvaTec from Bristol-Myers Squibb.

Chrysler Financial, the finance arm of Cerberus-owned Chrysler LLC, has renewed its credit facilities, but cut the amount from $30 billion to $24 billion.

Code Hennessey & Simmons has acquired an undisclosed stake in Heartland Dental Care Inc., an Effingham, Ill.-based chain of affiliated dental practices. No financial terms were disclosed.

General Electric reiterated today that it has no plans to sell NBC Universal.

RJD Partners has sponsored a £30 million buyout of Raphael Healthcare, a UK-based provider of specialist mental health services for women.

PE-Backed IPOs

Jiangsu Rongsheng Heavy Industries Co Ltd. reportedly is planning an overseas IPO that would raise at least $1 billion. The Chinese shipbuilder last year raised $250 million in private equity funding from firms like Goldman Sachs and D.E. Shaw.

Zogenix Inc., a San Diego-based drug company focused on pain management and CNS disorders, has withdrawn registration for an $86.25 million IPO, citing “general market conditions.” The company recently secured an $18 million loan facility from Oxford Finance Corp. and CIT Healthcare. It had previously raised $78 million in VC funding from Domain Associates (23.2% pre-IPO stake), Clarus Ventures (23.1%), Scale Venture Partners (15.4%), Thomas McNerney & Partners (13.2%) and Abingworth Ventures (10%).

PE Exits

E Source, a provider of energy business intelligence, has acquired EnergyWindow Inc., a Boulder, Colo.–based provider of online tools and services that support energy-sourcing decisions and procurement. No financial terms were disclosed. EnergyWindow had raised a small amount of VC funding from Altira Group.

Homax Cos., a household care products manufacturer owned by Olympus Partners, has sold two product lines to W.M. Barr & Co., according to LBO Wire. No financial terms were disclosed.

Telegraaf Media Group has exercised an option to acquire a 12% stake in German broadcaster ProSiebenSat.1, from KKR and Permira.

PE-Backed M&A

LogiXML Inc., a McLean, Va.-based provider of Web-based reporting and analysis products for the enterprise, has acquired OnDemandIQ, a Los Angeles-based provider of on-demand sales analytics. No financial terms were disclosed. LogiXML last year raised $5 million from Updata Partners.

Firms & Funds

Accretive Exit Capital Partners has acquired “meaningful minority positions” in give companies from Evercore Capital Partners II. The deal was valued at $110 million, but the specific companies were not publicly disclosed.

The Blackstone Group is opening an office in Beijing. It will be led by Shan Fu, who previously was vice president of Beijing Mainstreets Investment Group. Before that, Fu worked in several Chinese government agencies, including the National Development and Reform Commission.

Evergreen Pacific Partners, a Seattle-based private equity firm focused on the middle-markets, has closed its second fund with $425 million in capital commitments. Limited partners include the Washington State Investment Board, the Public School Employee Retirement System of Pennsylvania, Credit Suisse and the Guardian Life Insurance Co. of America.

KCP Capital, a new cross-border merchant bank, has been formed via the merger of three firms: KIT Capital, a special situations merchant bank; MNA Partners, a boutique corporate finance firm focused on the MENA region; and River Road Ventures, a U.S.-based early-stage investment firm.

Human Resources

John Bryson, former chairman and CEO of Edison International, has joined Kohlberg Kravis Roberts & Co. as a senior advisor. He will focus on global infrastructure opportunities.

Andrew Leek and Clara Chen have joined Inflexion Private Equity as an assistant director and investment executive, respectively. Leek has previously worked with Alchemy Partners and SaatchInvest, while Chen was previously was Marakon Strategy Consultants. The firm has also promoted Tim Smallbone to partner, and both Christian Hamilton and Catherine Richards to investment director.

Glyn Jones has been named chairman of UK pension fund manager Hermes. He previously was CEO of Thames River Capital and Gartmore Investment Management.

John Canning, chairman and co-founder of Madison Dearborn Capital Partners, has joined the board of Midwestern utility Exelon (NYSE: EXC).

Garrett Van Wagoner is stepping down as manager of Van Wagoner Emerging Growth, according to the Wall Street Journal.