PE Week Wire: Monday, December 1, 2008

The sky is gray, the beloved Patriots are maddening and I did very little actual work after sending out Friday’s surprise edition. In other words, it’s time for some Monday Mouth-Off.

First up are some comments on last Tuesday’s column about the shrinking transparency of Form D filings with the SEC. VC portfolio company CFO Daniel writes: “Form D is unnecessary. Private companies should not have any requirement to disclose information to the SEC. The investors, if they are SEC regulated, should perhaps have a disclosure obligation. I’ve never understood the purpose of Reg D other than to allow you to scoop and report deals.”

Aidan agrees: “Not only does Regulation D unfairly shine a light on private startups that want to stay under the radar, but it also costs them thousands in unnecessary legal fees. The revised regulations reduce the cost by allowing electronic filing, but a better solution would be to just get rid of the filings altogether.”

CT: “I feel like this is the sort of cronyism and special interests garbage the Bush administration has cranked out for the past 8 years. Take a common sense, beneficial move and bend it to serve the interests of the lobby and harm the public interest.”

Jeremy: “Companies are not required to use the new forms until mid-March 2009, but I fear you just gave them a roadmap to avoid PE Week Wire mention during the intervening four months. Undo, Undo! Your dear readers want this information dearly.”

Tax attorney Dan on the issue of PE firms buying debt in their own portfolio companies: “In your story on conflicts of interest when private equity firms buy discounted debt in their own portfolio companies, there is an important tax component. When debt is purchased by a related party the purchase can trigger cancellation of debt (COD) income to the portfolio company. (The related party rules often apply to PE firms and their portfolio cos.) Sometimes, the net result still works from an economic perspective; sometimes the portfolio company has sufficient losses to absorb the tax and there are also various exceptions to the COD rules that can apply.”

Ron on private equity layoffs: “Isn’t the corollary to this that private equity firms are going to have to begin reducing the size of already-raised funds? Or at least lower the management fees on committed capital?” Yes Ron, in a sane world that is exactly what it would mean. But it will only happen if LPs band together and demand the changes. There is a revisionist history about how VC firms “gave back” committed capital without prompting in 2002 and 2003, but the truth is that most did so only after LPs began to yell. And, if that didn’t work, LPs would complain to people like me (who don’t mind being used in such scenarios), in the hopes of shaming their general partners.

Adam: “Do you really think it would be better for Ontario Teachers to have to pay a C$1.2 billion termination fee to BCE, than to buy the company at the current agreed-upon price?” Yes, although these things usually get negotiated down.

Holly: “Are you sad that GM might cut the Pontiac brand as part of its reorganization plan to get the bailout money?” Better word would probably be nostalgic…

Top Three

The Blackstone Group has agreed to buy a majority stake in the outsourcing unit of India-based CMS Computers Ltd. The unit, which also manages card solutions and ATM cash management, would be spun off into a new company run by former Microsoft India CEO Rajiv Kaul. CMS would retain! a minority ownership position. No financial terms were disclosed.

Genstar Capital has agreed to acquire Long Term Care Group Inc. from Advent International and CCP Equity Partners. No financial terms were disclosed. LTCG is an Eden Prairie, Minn.-based provider of outsourced services to the long term care insurance industry and the geriatric care market. It will serve as the cornerstone of a new senior care services platform called UniVita.

Actis has raised $2.9 billion for its third global emerging markets fund, which will focus on minimum investments of $50 million in buyout and growth equity transactions.

VC Deals

Recupyl SAS, a Grenoble, France-based developer and operator of battery recycling plants, has raised €14.5 million in new venture capital funding. AGF Private Equity led the round, and was joined by return backer Aloe Private Equity.

SiBeam Inc., a Sunnyvale, Calif.-based developer of semiconductor systems solutions for wireless communications platforms, has raised an undisclosed amount of strategic funding from Panasonic and Samsung. The company previously raised around $71 million from Foundation Capital, New Enterprise Associates and U.S. Venture Partners.

PassAlong Networks Inc., a Nashville, Tenn.-based provider of digital music distribution and sharing services, is planning to close a $30 million round of funding later this month, according to VentureWire. It previously raised $40 million from individual angels.

Buyout Deals

BCE Inc. would demand that Ontario Teachers’ Pension Plan pay a C$1.2 billion termination fee if its proposed C$34.8 billion buyout of BCE fails, according to the Globe and Mail.

Citi Infrastructure Partners has agreed to acquire the highway business of Spain-based Sacyr Vallehermoso for €7.9 billion.

Golden Gate Capital and Preferred Unlimited Inc. have completed their acquisition of U.S. Silica from Harbinger Capital Partners. The deal included around $200 million in equity and mezzanine notes from Golden Gate, a $102 million senior note financing arranged by BNP Paribas and a $35 million revolving credit facility from Wachovia. U.S. Silica is a Berkeley Springs, West Va.-based maker of industrial silica sand. Harbinger bought it from Harvest Partners last year for an undisclosed amount.

KKR is expected to invest $100 million in China’s Mengniu Modern dairy, according to Reuters. The company may also secure an additional $150 million from other investors.

Longroad Asset Management has agreed to acquire Medford, Wis.-based Hurd Windows & Doors Inc. out of bankruptcy, according to LBO Wire. Longroad will pay $11.25 million and buy up around $14 million in bank debt held by the residential window and door maker.

Presidio Investors has acquired a minority stake in The Interface Financial Group, a Potomac, Md.-based franchisor of professional bookkeeping and invoice discounting services. No financial terms were disclosed.

PE Exits

Temasek Holdings is in talks to sell its 69.7% stake in Singapore Food Industries (SI: SFIL).

PE-Backed M&A

Renal Advantage Inc., a Brentwood, Tenn.-based for-profit provider of dialysis services in the United States, has agreed to acquire National Renal Alliance LLC, a Franklin, Tenn.-based owner and operator of 45 dialysis facilities in 10 states. No financial terms were disclosed for the deal, which is expected to close later this month. Renal Advantage is a portfolio company of Welsh Carson Anderson & Stowe.

Firms & Funds

Catalyst Investors next year plans to raise between $300 million and $500 million for its third fund since spinning out of TD Bank in 2000, according to PE Week. The New York-based firm private equity firm focuses on opportunities in the communications, media and Internet services spaces.

Cybernaut (China) Investment has raised 650 million yuan ($95.24 million) for a pair of venture capital funds, with a focus on cleantech and healthcare opportunities. The group is a partnership between New Enterprise Associates and the government of eastern China’s Zhejian province.

Great Hill Partners is planning to close its fourth fund in Q1 2009 at its hard cap of $1.25 billion, according to Buyouts. The Boston-based firm already has secured more than its $1 billion target.

Standard Bank of South Africa will seek to raise a private equity fund from third parties within the next three years. In the meantime, it plans to make around 20 investments from its own balance sheet, with a focus on South Africa and Nigeria.

vSpring Capital Partners recently raised $39.6 million for a fund that will support portfolio companies of its $86 million second fund (raised in 2003), according to PE Week. The Salt Lake City-based firm also has passed the halfway mark for its $250 million-targeted third fund.

Human Resources

China Investment Corp. has hired Zhou Yuan, former head of Chinese investment banking for UBS, as its new head of alternative investments.