PE Week Wire: Monday, September 29, 2008

Greetings from the home office, where I’ve finally shaken off Friday’s sleepless red-eye back from Seattle. Last time I was here, Wachovia was considered a buyer rather than a target, the European/Asian markets were snickering a bit at the U.S. collapse and Paulson’s bailout bill was just three pages long. How far we’ve come…

To begin, let me state plainly that I support the bailout bill. A bunch of you have asked, so there you go. Oh, and I hate myself for it.

It’s difficult to support something with so many obvious imperfections, not to mention an extraordinary lack of public support. And it doesn’t help that there are some ringing similarities to the beginning of the Iraq War (presidential promises of pending calamity if Congress does not act, centralized power in a cabinet office, expert dissent being marginalized, etc.). But I deeply feel the alternative could be catastrophic, whereas this will be merely calamitous. Therefore, my gut says it’s the slight lesser or two evils (anyone who claims they’re going on much more than gut is deceiving both them and you).

A big part of my thinking on this has actually been informed by opponents of the bill, who argue that it pits Main Street versus Wall Street. What a ridiculous red herring. The idea that Main Street and Wall Street operate on separate planes should be absurd to anyone who’s gotten a business loan, home mortgage, bought public stock or any product from a non-local company that has accessed the capital markets (including food companies). Main Street and Wall Street are inextricably linked, even if Wall Street residents often have higher salaries and fancier cars. To argue otherwise is to be intellectually lacking or dishonest.

To be clear, I’m not arguing that there were not bad actors on Wall Street. There most certainly were, including go-along credit rating agencies that should be blown up and rebuilt from scratch. And there also were bad actors on Main Street, including folks who bought homes that they knew deep-down were out of their price-range (many were tricked, but many tricked themselves).

In the end, however, we need to work toward to most common good. I had pizza on Wednesday night with a friend who happens to run a small business in San Francisco. She noted that she is unable to get even a tiny loan to finance some sorely-needed equipment, and that she crosses her fingers each day that enough account receivables turn into cash so that employees can be properly paid. For her, this is not a conversation about economic theory or political expediency. It’s about keeping the core engine of our society alive. If that requires selling out some of our ideological purity, so be it.

*** As of this writing, Lehman Brothers has still not sold its investment management unit, which includes the $35 billion private equity program. Various reports say that the firm continues to negotiate with the Bain/Hellman & Friedman tandem, and I hear that the final deal will likely include an independent spinout of both Lehman’s buyout and venture capital practices. All still in flux, but expect Bain/H&F to hold onto the non-direct PE investment businesses (like the Crossroads funds-of-funds).

*** Square 1 Bank gave away new iPods as door prizes during each of our peHUB Shindigs last week. A bit heretical to do in Seattle, which is why attendees laughed when it was won by a Microsoft employee. To be more specific, a Microsoft employee with an iPhone in his pocket.

*** Yes, there will be more peHUB Shindigs before the end of 2008. If you are interested in sponsoring, please get in touch with me ASAP.

*** We are way overdue for a feedback column. That will be tomorrow, so send in those emails…

Top Three

Renhe Commercial Group, a Chinese developer of underground shopping centers, is planning to launch its IPO today in Hong Kong. The company hopes to raise upwards of $658 million, including a $50 million share purchase commitment from Warburg Pincus. Renhe last year raised around $300 million in private equity funding from firms like Sequoia Capital China, Capital International and New World Development.

Wind Power Holdings Inc. has raised $37 million in Series A funding co-led by RockPort Capital Partners and Allen & Company. The company has now raised $56 million in total funding, which has been used to buy and grow wind power company Northern Power Systems.

Nokia said that it is in advanced talks to sell its security appliances business to a financial investor.

VC Deals

Novagali Pharma SA, a French ophthalmic drug company, has raised €15 million in new VC funding from existing shareholders. The company had previously raised around $52 million since 2000 from firms like CDC Innovation, ADF Private Equity, Edmond de Rothschild Investment Partners and Credit Agricole Private Equity.

Send Word Now, a New York-based SaaS provider of emergency notification solutions, has raised $14 million in Series D funding. Palisade Capital Management led the round, and was joined by return backers Southpaw Asset Management and Ascend Venture Group. The company had previously raised around $19 million.

Skydeck, a San Mateo, Calif.-based provider of an online service for keeping track of mobile phone activity, has raised $3 million in Series A funding from Saban Ventures. The company had previously raised a $1 million angel round.

MarineCFO Inc., a Houston, Texas-based provider of software for the marine transport market, has raised an undisclosed amount of Series A funding led by EmergingISV Capital Partners (VentureWire puts the round amount at $2.8m).

The Compliers Group International BV, a Dutch provider of pharma packaging solutions that contain microchips to monitor a patient’s therapy compliance, has raised an undisclosed amount of private equity funding from DSM Venturing, a unit of Royal DSM NV.

ISTA Pharmaceuticals Inc. (Nasdaq: ISTA), an Irvine, Calif.-based ophthalmic drug company, has secured a $65 million credit facility from existing shareholders Deerfield Management, Sprout Group and Sanderling Ventures. RBC Capital Markets served as placement agent.

Buyout Deals

AIG reportedly has agreed to sell a 25% stake in London’s City Airport to Global Infrastructure Partners, for approximately £250 million. AIG will remain a minority shareholder, after having originally teamed up with GIP to acquire the airport for just under £750 million in late 2006.

Bayside Capital, an affiliate of H.I.G. Capital, has acquired Akrion Inc., an Allentown, Penn.–based provider of surface preparation systems to the semiconductor and solar industries. No financial terms were disclosed.

MFI, a troubled UK bathroom and kitchen retailer, has agreed to a management buyout that would remove Merchant Equity Partners as a shareholder.

Monomoy Capital Partners has acquired L&P Plastics LLC from Leggett & Platt Inc. (NYSE: LEG), for an undisclosed amount. L&P Plastics makes custom plastic components for the power tool, medical device, furniture and automotive industries. It has more than 400 employees and four facilities. Lazard Middle Market advised Leggett & Platt on the sale.

Nord Holding has acquired a 70% stake in German IT services company Igel Technology. No financial terms were disclosed.

Firms & Funds

Centerfield Capital, an Indianapolis-based mezzanine firm, has closed its second fund with $116 million in capital commitments, according to LBO Wire.

Lehigh University’s endowment is planning to increase its target allocation to private equity from 6% to 15%, according to Foundation & Endowment Money Management.

Human Resources

Colin Keogh is stepping down as CEO of British investment bank Close Brothers, although he will stay on while a successor is identified.

Lyceum Capital, a London-based private equity firm, has made four hires: Simon Hitchcock joins as a partner, after previously being a director with Sovereign Capital; Ian Williams joins as an associate