PE Week Wire: Thurs., Aug. 23, 2007

KKR is disputing a Times of London report that it has postponed its $1.25 billion IPO. Firm spokesman David Lilly emailed the following to Reuters: “As evidenced by the recent filing of an amendment to the registration statement, we are continuing to work on the IPO and have not postponed.”

What’s so odd about this exchange is that both the Times story and KKR’s response are based on the same faulty foundation: That the IPO postponement would be a major embarrassment to KKR.

The Times writes: “Postponing its IPO is the latest blow for KKR…” Issuers usually issue “no comment” on everything related to their IPO, so the very existence of KKR’s response seems to confirm that a postponement – which it denies – would indeed be a “blow.”

But what both sides are missing is that a postponement would be lauded in many quarters, including this one. I don’t know of any KKR limited partners pining for an IPO, particularly when it’s for such a paltry amount (relative to KKR’s overall capital under management). KKR would argue that it needs the $1.25 billion in order to launch new services, but that’s a canard. Sure $1.25 billion in public funding would make such initiatives easier, but wasn’t Blackstone able to do the same thing years before going public? And think of all the extra time and money spent on reporting…

Instead, the KKR IPO reads like a “Who’s is bigger” contest between Kravis and Schwartzman. And since we already know the winner, it would be pricing the IPO – rather than postponing it – that would be the real embarrassment to KKR.

*** Canadian telecom giant BCE has spun out its venture capital group into an independent entity called Summerhill Venture Partners. No big surprise, as BCE chief Michael Sabia has been selling off majority stakes in just about everything BCE owns (TeleSat, CGI, etc.), including BCE itself via a pending $33 billion take-private buyout.

BCE is following the playbook employed last year by Bank of America, when it spun BA Venture Partners out into an independent entity called Scale Venture Partners. It’s even using the same placement agent – Probitas Partners. What this means is that Summerhill is raising a new fund that will both buy up the existing BCE portfolio, and then use the remaining capital to make new investments. The overall fund target is $175 million, with $141 million already closed and the remainder expected to close next month. BCE is part of the first close, as a cornerstone limited partner.

It also is important to note that the firm – named for the historic Summerhill neighborhood in Toronto – has already completed its spinout from BCE. A VentureWire report this morning incorrectly suggested that the spinout wouldn’t officially occur until Q4.

*** Pet Peeve I know a lot of EAs read this so: If I call and ask for your boss, most of you ask for my name. Fair enough. Then you put me on hold for a few minutes, and hopefully put me through. But, if you don’t, please don’t tell me your boss isn’t in. Tell me he’s busy or (more honestly) that he doesn’t want to talk to me. When your boss really isn’t in, it’s the first thing you tell me (without the delay).

*** Some of you asked me to post the SpeedEdate Form D filing. So I did.

*** The WSJ’s Ahead of the Tape column today leads with the following: “Hedge funds that bet on stocks of takeover targets, many of which have been hammered on fears they won’t be sold, are calling in reinforcements. More than six big funds have gone to investors to raise fresh capital to buy such stocks, which have been trading at historically wide discounts to the bid prices. These so-called side-pocket funds or managed accounts are being designed as short-term investments to profit from dozens of deals that are likely to get done this year — despite fears that the credit crunch might prevent these deals from getting the funding they need to close.”

Again, tales of the buyout market’s disintegration have been greatly exaggerated…

Top Three

Perimeter eSecurity, a Milford, Conn.-based provider of managed network security services, has raised more than $50 million in new VC funding. The deal comes just weeks after the company received a $50 million infusion from Goldman Sachs, which was partially used to provide liquidity to existing Perimeter eSecurity shareholders. Goldman also participated on this round, and was joined by new investors Bessemer Venture Partners and the Stripes Group. Part of Perimeter eSecurity’s new bankroll will be used to acquire email security provider

MetalMark Capital has completed its $350 million acquisition of Hunter Defense Technologies Inc. from Behrman Capital. Hunter manufactures tactical shelters, power and temperature control equipment, and chemical, biological, radiological, and nuclear (CBRN) filters and systems for military and homeland security applications.

3i Group is forming an India Infrastructure Fund, with a target capitalization of $1 billion. Approximately half of the commitments will be solicited from third-party investors.

VC Deals

Movida Communications Inc., a Miami, Fla.–based provider of prepaid wireless services to Hispanic consumers, has raised $40 million in private equity and trade financing. Hedge fund Plainfield Asset Management and The Cisneros Group of Cos. co-led the deal, and were joined by Bay Harbour Management and Darby Overseas Investments.

TradeBeam Holdings Inc., a San Mateo, Calif.-based provider of on-demand global trade management software, has raised over $29 million in Series C funding. Camden Partners and Torch Hill Investment Partners co-led the deal, and were joined by return backers Carlyle Venture Partners, Enterprise Partners, Sigma Partners and The Sprout Group. TradeBeam has now raised $57.5 million in total VC funding since its august 2001 inception.

Luminary Micro Inc., an Austin, Texas-based maker of microcontrollers, has raised $25 million in Series C funding. Adams Street Partners was joined by return backers New Enterprise Associates, EXA Ventures and ATA Ventures. The company raised a $14 million Series B round in July 2006.

Lending Club has raised $10.26 million in Series A funding co-led by Canaan Partners and Norwest Venture Partners. The Sunnyvale, Calif.-based company provides a P2P lending service that originally launched as a Facebook application.

Aztek Networks, a Boulder, Colo.-based provider of emergency standalone switching products, has raised $7.5 million in Series B funding. Telecommunication Development Fund led the deal, and was joined by Legend Ventures and return backers Sequel Venture Partners and Grotech Capital Group.

Pluggd Inc., a Seattle-based provider of digital audio and video search software, has raised $6 million in Series A funding. Intel Capital led the round, and was joined by DFJ Frontier and Labrador Ventures.

CYA Technologies, a Shelton, Conn.-based provider of enterprise content backup and recovery solutions, has raised $3 million in Series B funding. H.I.G. Ventures and Connecticut Innovations co-led the round.

uPlayMe, a New York–based maker of a desktop application that automatically connects people through shared tastes in digital content, has raised an undisclosed amount of Series A funding. Backers include Warner Music Group and Village Ventures.

Buyout Deals

GFI Energy Ventures has acquired GoodCents, an Atlanta–based provider of marketing and field services for electric utility energy efficiency and peak load management programs. No financial terms were disclosed.

Kohlberg Kravis Roberts & Co. has received all the federal and international regulatory approvals it needs for its $26 billion acquisition of First Data Corp. (NYSE: FDC). Under terms of the deal, First Data stockholders would receive $34 per share. It is scheduled to close by the end of September.

Macquarie Bank and MBK Partners are nearing a deal to buy a 30% stake in South Korean cable TV group C&M from Goldman Sachs, according to The Financial Times. The deal would be valued at US$650 million, with Macquarie is also hoping to purchase the remaining 70% stake from C&M chairman Lee Min-joo and other shareholders.

Upper Deck Co. has withdrawn its $10.75 tender offer for sports card rival Topps Co. (Nasdaq: TOPP). The move leaves Topps with just one remaining offer: A $9.75 bid from Madison Dearborn Partners and Michael Eisner’s Toronte vehicle.

PE Exits

DivX Inc. (Nasdaq: DIVX) has acquired the assets of Veatros LLC, a Kansas-based provider of real-time video identification technologies. The deal could be worth up to $4.25 million, including $2 million in upfront cash and up to $2.25 million in milestone earnouts. Veatros was spun out of the University of Kansas, and received funding from T2 Venture Capital.

IBM (NYSE: IBM) has acquired WebDialogs Inc., a Billerica, Mass.-based provider of Web conferencing and communications services. No financial terms were disclosed. WebDialogs has raised around $17.5 million in total VC funding since 1998, from firms like Sofinnova Partners, Cross Atlantic Ventures, Velocity Equity Partners and Draper Richards.

Reuters has agreed to acquire StarMine, a San Francisco-based provider of analytics, equity research tools and performance ratings to securities analysts. No financial terms were disclosed. StarMine had raised nearly $15 million in VC funding since 1999, from Hummer Winblad Venture Partners, American Century Ventures and individual angels.

PE-Backed M&A

Dunkin Brands Inc. has agreed to acquire the 50% stake in its Spanish subsidiary – Dunkin Espanola SA – that it does not already own. The seller is Grupo Panrico SA, which has been owned by Apax Partners since 2005. No financial terms were disclosed. Dunkin Brands was acquired in March 2006 for $2.43 billion by Bain Capital, The Carlyle Group and Thomas H. Lee Partners.

Mattress Firm, a mattress retailer owned by J.W. Childs Associates, has agreed to acquire Mattress Pro, a mattress chain with 35 locations in Texas and Nevada. No financial terms were disclosed.

Senior Solution, a provider of software for the Brazilian financial services market, has acquired rival Intellectual Capital. No financial terms were disclosed. Senior Solutions shareholders include Stratus VC and the Brazilian National Development Bank.

Firms & Funds

The Carlyle Group has formed a team to focus on private equity investments in Central and Eastern Europe. It is led by new Warsaw-based managing director Ryszard Wojtkowski, who previously was managing partner with Enterprise Investors.

Allegiance Capital Corp., a Dallas-based I-bank serving the middle markets, is opening an office in Minneapolis-St. Paul. It will be overseen by new vice president Joe Chavez, and is the firm’s seventh office.

Human Resources

Christian Hollenberg has left Italian private equity fund Orlando Management, where he had been a founding partner. The news was first reported by Private Equity Online.

Tom Hunter has joined GormanThayer LLC as a partner. He previously was with KPMG as a managing in the transaction services department. GormanThayer is a Philadelphia-based M&A and capital-raising advisory.

Roel Campos, an outgoing SEC commissioner, reportedly has agreed to join Cooley Godward Kronish LLP as partner-in-charge of the firm’s Washington, D.C. office.