PE Week Wire: Monday, November 24, 2008

Last week I wrote that brand-name private equity firms had begun internal layoff discussions. Now it seems that some of those talks have evolved into action.

Financial News is reporting that The Carlyle Group has decided to close its Central and Eastern Europe (CEE) operations, which means pink slips for ten staffers in a Warsaw office opened just last year. It also has killed off an Asia leveraged finance team formed just a few months earlier, which means seven more layoffs.

Carlyle spokesman Chris Ullman this morning confirmed the cuts, which include CEE managing directors Ryszard Wojtkowski and Janusz Guy, and Asia leveraged finance chief Eric Mason. He emphasized, however, that the moves are program-specific, rather than a wholesale pullout from the emerging markets (as the article’s headline suggests). “Carlyle remains committed to product and geographic diversity, and is firmly committed to the emerging markets,” he said.

Carlyle will continue to monitor CEE opportunities from its London office, and will consider making investments there out of its Carlyle Europe Partners or Carlyle Europe Technology Partners funds. The firm did not close on any commitments for the dedicated CEE fund it was looking to raise.

*** The markets finished way up Friday, but Blackstone just kept getting hammered. The stock traded as low as $4.21 per share, before closing at $4.65 per share. That represented an 8.82% loss ($.0.45 per share), and an 85% decline since pricing its IPO at $31 per share.

For the sake of extrapolation, let’s assume that Apollo Management’s equity has experienced a similar value loss. The firm sold 20% of itself on July 13, 2007 to CalPERS and the Abu Dhabi Investment Authority for $1.2 billion. That gave it an enterprise value of $6 billion. Based on the drop in Blackstone’s share price since that date (when it closed at $29.85), Apollo would be worth just under $1 billion as of Friday. Moreover, CalPERS’ and Abu Dhbai’s $600 million stakes would be valued at around $94 million a piece. Ugh!

Also worth noting that it was a bad day for Fortress Investment Group (down 13.04% to $2 per share) and Allied Capital (down 9.55% to $1.80 per share). On the plus side, American Capital (up 2.07% to $4.43 per share) and Och Ziff Capital Management (up a penny to $1.99 per share) posted modest gains. Given the Citi news, it’s expected that all of them will bump up today.

*** Speaking of last Friday, it seems my proposal to end the trading day at 3pm would have gone over like a lead balloon. On the other hand, perhaps Tim Geithner’s nomination would have just been leaked an hour earlier…

*** Speaking of last Friday II: More than two dozens emails complementing or complaining about Chinese Democracy. You’re the folks who get me through the day…

*** Where in the World: I’ll be in Dallas on December 11, to moderate a pair of panels for the inaugural Buyouts Texas event. First up for me is an LP panel, and later is a session on energy deal-making. Get more info, including the full agenda and registration instructions, by going here.

Top Three

A South Korean court today rejected claims that the 2003 sale of Korea Exchange Bank (KEB) to Lone Star Funds was illegal, a verdict that may clear a key hurdle to putting control of the bank back up for sale.

Crown Capital Partners has raised C$250 million for a new fund that will make private equity and debt investments in mid-market Canadian companies.

Deborah Bernstein and Jason Rotman have joined Aquiline Capital Partners as investment professionals. Bernstein previously was a general partner with Pequot Ventures, where she co-led the firm’s financial services practice. Rotman previously was with Swiss Re as head of alternative investments.

VC Deals

Sezmi Inc., a Belmont, Calif.-based developer of a set-top box that combines traditional television content with on-demand movies and Internet video, has secured nearly $28 million of a $50 million Series C round, according to a regulatory filing. peHUB first reported on the deal back in August. Advanced Equities is serving as a placement agent, while participants include Morgenthaler Ventures and OmniCapital Group. In other Sezmi news, the company has laid of around 20 of its 100 employees. is in the midst of raising a $20 million funding round at a $90 million pre-money valuation. Oak Investment Partners would be among the new investors, while returning shareholders include Greycroft Partners and Softbank Capital Partners.

Zuberance, a Palo Alto, Calif.-based provider of on-demand customer sales force software, has raised $4 million in Series A funding from Emergence Capital Partners.

Venture capitalists disbursed $964 million to 59 companies in Mainland China during the third quarter, according to Dow Jones VentureSource. That brings the yearly total to $3.29 billion, compared to the previous annual record of $2.88 billion set in 2001.

Buyout Deals

Abu Dhabi Investment Co. has agreed to acquire OrasInvest from Orascom Telecom for $180 million, including $90 million in cash and $90 million in interest-bearing promissory notes due 12 months after the deal closes. OrasInvest builds and maintains mobile phone transmission towers, and provides other related services. It will maintain its contracts with Orascom Telecom.

Alpha Media Group Inc., publisher of men’s magazine Maxim, reportedly is in restructuring talks that could result in the company being turned over to creditors. Quadrangle Group bought Alpha Media last year for approximately $250 million, including around $90 million in equity.

Cosi Inc. (Nasdaq: COSI), a quick-casual sandwich shop operator, has formed a special committee to “evaluate strategic alternatives.” It also has retained North Point Advisors. The company’s stock closed trading Friday at $0.40 per share.

Spire Capital Partners has sponsored the formation of AssetNation Inc., a Houston-based provider of online industrial auctions. No financial terms were disclosed.

Whole Foods Market Inc. (Nasdaq: WFMI) on Friday was denied a request for a larger panel of judges to review an appeals court decision that questioned the legality of its already-completed merger with Wild Oats. Earlier this month, Leonard Green & Partners bought $425 million of preferred shares in Whole Foods.

Wockhardt Ltd. (Bombay: MCKH), an Indian drug maker, is in talks with private equity firms to raise between $150 million and $200 million. The capital would be used to meet convertible bond redemptions.

PE Exits

Carrier Corp., a unit of United Technologies Corp. (NYSE: UTX), has acquired Noresco from OCM/GFI Power Opportunities Fund II, a private equity fund co-managed by GFI Energy Ventures and Oaktree Capital Management. No financial terms were disclosed, although LBO Wire places the sale price at approximately $250 million. Noresco is a Westborough, Mass.–based provider of energy management and performance contracting services in the United States. It was advised on the sale by Harris Williams & Co.

Yahoo has sold European comparison shopping service Kelkoo to Jamplant, a new UK-based private equity firm launched by the founders of USwitch (sold to EW Scripps in 2006 for £210 million).

PE-Backed M&A

IMImobile, a Hyderabad, India-based developer of wireless technology platforms and content aggregation services for mobile operators, has acquired dx3, a London-based provider of content delivery services. No financial terms were disclosed. IMImobile has raised $14 million from NewMedia Spark and FirstMark Capital, while dx3 had raised over $24 million in funding from NewMedia Spark in 2000.

Firms & Funds

The Blackstone Group has scaled back the size of a planned Asia-focused hedge fund, according to The Wall Street Journal. The vehicle was originally expected to be between $500 million and $1 billion, but will now be sized at around $200 million.

Yankee Equity Solutions has launched a $50 million private equity fund, with a focus on helping Massachusetts-based medical technology companies increase revenue and expand commercialization efforts.

Human Resources

Babson Capital Management has promoted Thomas Finke to chairman and CEO, and also named him chief investment officer of MassMutual. Babson also has promoted Clifford Noreen to president.

Danny Fishman is stepping down as co-CEO of Israeli investment firm Tamir Faishman, according to VentureWire. His fellow co-CEO Eldad Tamir will continue on as sole CEO beginning January 1.

Charles-Henri Filippi has joined CVC Capital Partners as a senior advisor. He is the former chairman and CEO of HSBC France.