PE Week Wire: Monday, December 8, 2008

It was all about autos last Friday on Capitol Hill, with testimony from the Big 3 auto CEOs, UAW president Ron Gettelfinger, U.S. Comptroller General Gene Dodaro and a handful of academic types. Good witness list, save for one glaring omission: Stephen Feinberg, head of Cerberus Capital Management.

Representative after representative asked Chrysler CEO Bob Nardelli why U.S. taxpayers should inject capital into his company, when its majority equity owner had declined to do so. Nardelli replied that Cerberus had: (a) Allowed Chrysler to draw down $2 billion in equity, (b) Convert its second-lien debt into equity, and (c) Offered to give up any carried interest on its investment in Chrysler. What Nardelli was unable to do, however, was answer how much dry powder Cerberus has under management, how much it’s permitted to invest in a single company or anything else about the private equity firm’s status or strategy. They are questions that deserve answers.

I’m always a bit amused/frustrated to hear elected officials characterize private equity firms as Scrooge, as if public shareholders are Robin Hood. Nonetheless, it’s incumbent on Cerberus to explain its Chrysler strategy. Nardelli cannot answer why Cerberus will or won’t provide additional capital — any more than I can answer why Thomson Reuters won’t raise my salary. I could just chalk it up to penny-pinching, but can’t say anything definitively without seeing high-level balance sheets or strategy plans (which I don’t have access to for Thomson Reuters, and which Nardelli is unlikely to have access to for Chrysler).

Barney Frank should ask Cerberus to testify, and Cerberus should accept. Otherwise, the Chrysler debate is less productive than doing donuts in an empty parking lot. Feinberg may be notoriously reclusive, but that luxury expired the moment his iconic portfolio company asked for federal funds.

*** I’ve moderated two VC conference panels in the past month, and at both asked questions about Sequoia Capital’s “graveyard” presentation. One of those panels included a Sequoia partner, and one did not. Likewise, one of those panels included near-universal praise for the Sequoia presentation, while one included heavy doses of scorn.

*** Speaking of the “graveyard” presentation, Sequoia’s Mike Goguen told me Saturday that the firm had not expected the slideshow to leak. This is obviously in direct conflict with the many theories out there about how Sequoia itself was the leaker, in order to provide cover for portfolio company layoffs, secure later-stage funding for existing portfolio companies, drive out competition, etc.

Goguen says that Sequoia was promoted to make the presentation to its portfolio company CEOs after receiving a particularly gloomy market assessment from Eric Upin, the former Stanford University CIO who is heading up Sequoia’s asset management platform. Not all the CEOs could attend in person, however, so Sequoia used some of its portfolio technology (like TokBox) for those “dialing” in. Goguen assumes it was one of the remote users who sent the slideshow onto folks like me, although is not certain.

Sounded convincing. Thoughts?

*** I got some emails last week about our reporting of the American Capital layoffs. Specifically, some of you felt we should not disclose the names of specific staffers – particularly junior ones — who’d been let go. As one anonymous reader wrote: “It’s not like Henry Kravis is being let go from KKR – these are normal people who may not want your publicity.”

Understandable position, but one with which I respectfully disagree. Our mission is to cover the private equity industry, including the individuals involved. We try our best to let readers know when individuals get hired (including junior pros) and when they voluntarily change jobs. If those items are of import – and I believe they are – than so is true of when those same individuals are laid off.

*** Our Internship Rodeo is well underway in the MBA Forum of peHUB, with more than 65 listings and hundreds of MBA candidates having viewed them so far. If you are one of those MBA candidates, please be advised that I have a few more listings to post later today, so be sure to check back.

Top Three

Maxum Petroleum Holdings Inc., an Old Greenwich, Conn.-based energy logistics company, has secured a $300 million private equity commitment from Metalmark Capital and Waud Capital Partners. The company had been formed in October 2003 as an acquisition platform sponsored by Waud, Northwest Capital Appreciation and RBC Capital Partners. Northwest and RBC will retain an equity interest. No word yet if this deal will result in Maxum withdrawing its IPO registration. The company’s most recent filing indicated plans to sell 16.7 million shares at between $14 and $16 per share, with Credit Suisse, Bear Stearns and UBS serving as co-lead underwriters.

RightScale, a Santa Barbara, Calif.-based provider of automated management platform for Internet cloud computing services, has raised $13 million in Series B funding. Index Ventures led the round, and was joined by return backer Benchmark Capital.

CCMP Capital Asia has closed its third fund with $1.2 billion in capital commitments. The buyout firm also said that it is changing its name to Unitas Capital.

VC Deals

Expresso Fitness, a Sunnyvale, Calif.-based provider of interactive cardio fitness systems, has raised $7 million in new VC funding. Return backers include Sierra Ventures, Physic Ventures, and Enterprise Partners Venture Capital. The company also secured a $7 million working capital line from Silicon Valley Bank.

Aria Systems Inc., a Media, Penn.-based provider of on-demand billing and customer lifecycle management solutions, has raised $10 million in Series B funding. Venrock led the round, and was joined by return backers Hummer Winblad Venture Partners and Dave Labuda.

Biopta Ltd., a UK-based contract research organization focused on human tissue, has raised £900,000 in VC funding. TriCap was joined by return backers Braveheart Investment Group and Scottish Enterprise.

Idapted Ltd., a Beijing-based provider of live Mandarin and English language training, has raised an undisclosed amount of series A funding. Gobi Partners and Ambient Sound Investments co-led the round, and were joined by Russ Siegelman and Xu Xiao Ping.

Buyout Deals

Bain Capital reportedly is the leading bidder for Reed Business International, a unit of publisher Reed Elsevier that publishes such titles such as New Scientist, Variety and Estates Gazette. The unit is expected to be valued at approximately $1 billion.

Terra Firma Capital Partners may need to inject additional cash into UK music company EMI, to avoid defaulting on a loan from Citigroup. Terra Firma took EMI private last year for €6.2 billion, and three months ago gave the company £10 million to avoid default.

Wayzata Investment Partners has acquired a majority stake in Portola Packaging Inc., a Batavia, Ill.-based provider of packaging solutions. The deal helps bring Portola out of Chapter 11 bankruptcy, and includes a senior loan facility from Wells Fargo Foothill.

Woolworths, a troubled UK retailer, may have troubles finding a buyer in 2008, due to its store leases and restocking issues, according to The Financial Times.

PE-Backed IPOs

Acclarent Inc., a Menlo Park, Calif.-based developer of surgical devices for treating ear, nose and throat ailments, has withdrawn registration for an $86.25 million IPO, citing “unfavorable market conditions.” It had planned to trade on either the Nasdaq or NYSE Arca, with JPMorgan and Piper Jaffray serving as co-lead underwriters. The company has raised around $63 million in VC funding, from firms like New Enterprise Associates (44.2% pre-IPO stake) and Versant Ventures (15.3%). Meritech Capital Partners (8.3%) and Delphi Ventures.

PE Exits

Adidas International has acquired Textronics Inc., a Wilmington, Del.-based company that integrates heart rate, moisture and blood pressure monitoring technology into performance apparel. No financial terms were disclosed. Textronics had raised $11 million in VC funding since 2005, from firms like NGEN Partners, SAS Investors and Unilver Ventures.

PE-Backed M&A

Senior Care Centers of America, a portfolio company of Clearview Capital, has acquired Crozer Adult Day Health Center, which provides care to elderly and disabled adults on the campus of the Crozer-Chester Medical Center in Chester, Pennsylvania. No financial terms were disclosed.

Paramount Building Solutions, a janitorial services platform sponsored by LaSalle Capital Group, has acquired Janitorial Management Services Inc. of Tarzana, California! . No financial terms were disclosed.

Firms & Funds

Mayfield Fund, a Menlo Park, Calif.-based VC firm has formed its first fund dedicated to investing in India. The $110 million vehicle will focus on growth equity opportunities in the Indian tech, infrastructure and consumer sectors. Mayfield will use the fund for companies focused primarily on the Indian market, while its general fund will continue to back India-based companies focused on global opportunities.

Ripplewood Holdings has suspended fund-raising for its third vehicle, according to LBO Wire. The firm had been targeting $2.5 billion for more than a year, but had not yet held a first close.

Human Resources

Chung Min Pang and Samir Soota have joined EMP Global as managing directors. Pang will lead the firm’s Greater China effort, and previously helped lead Aureus Capital. Soota will focus on South and Southeast Asia out of EMP’s Singapore office, and previously co-founded Principia Management Group. In other EMP news, the firm has become part of the BMB Group, a pan-Islamic global alternative assets manager, in exchange for a “substantial investment.”

Clark Winter has joined SK Capital Partners, a private equity firm focused on the specialty chemical and healthcare sectors, as chief investment officer. He previously was with Goldman Sachs as a managing director and director of portfolio management. Before that, he was chief global investment strategist for Citigroup Global Wealth Management.

OVP Venture Partners is promoting Carl Weissman from a venture partner to a managing director. He originally joined the firm in February 2007 to focus on digital biology, and will continue to serve as president and CEO of the Accelerator program.

Brent Mathews has joined KCP Advisory Group as a Boston-based managing director. He previously was with CIT Group.

Citadel Investment Group, a Chicago-based hedge fund manager, said that it is closing its Tokyo office and its Asia principal investment operations. The moves will result in 12 job losses in Tokyo and 25 job losses in Hong Kong.

Legg Mason Inc. sad Friday that it will fire nearly 200 employees, or around 8% of its workforce.

John Thain, CEO of Merrill Lynch, reportedly is asking his company’s board of directors for a 2008 bonus of up to $10 million.

In Memoriam

Gavin McDonald, global head of M&A for Morgan Stanley, has passed away from a heart attack at the age of 47. He had spent his whole career with Morgan Stanley, and had taken on the global M&A role last year.