PE Week Wire: Thurs., Jan. 31, 2008

Is Chris Flowers beginning to wish he’d just stayed at Goldman Sachs? His snake-bitten private equity firm, J.C. Flowers & Co., suffered yet another setback yesterday, when Icelandic bank Kaupthing pulled out of an agreement to buy Flowers portfolio company NIBC for €3 billion. Kaupthing blamed “current instability” in the world financial markets, and comes less than a year after Flowers indefinitely postponed a public flotation for NIBC. Add this to the Sallie Mae and Northern Rock failings, and it’s enough to make a grown financial sponsor cry.

Flowers happens to be speaking tomorrow in New Hampshire at a Tuck School conference, but media is not invited. Hopefully some enterprising students will take some notes, ask some good questions and report back…

*** One question to ask might be how much J.C. Flowers shelled out in legal bills over Sallie Mae. That way we can begin to keep track of the following question: Will LBO firms pay more in litigation fees or banking fees in 2008?

Last week, French security company Ingencio sued Francisco Partners, alleging breach of a non-disclosure agreement. Then came news that Investcorp and Leonard Green & Partners are named as defendants in a complaint brought by creditors of bankrupt ladder maker Werner Company.

And yesterday we have yet another: Alliance Data Systems is suing Blackstone Group, for trying to weasel its way out of a $6.3 billion buyout. Blackstone told ADS last week that it would be unable to complete the transaction, because of what it felt were unreasonablerequirements being placed on it by the Office of the Comptroller of the Currency. It also suggested an alternate — and smaller — transaction, like a PIPE. ADS responded withlawyers, arguingthat Blackstone has not exercised “reasonable best efforts” to find an amenable regulatory solutions.

In other words, it’s the busy season for private equity litigators. Maybe they can ask their thumb-twiddling transaction partners to pitch in…

*** A detailed analysis of the ADS suit can be found here.

*** MBIA writes off $2.3 billion, but Warburg Pincus sticks to its word. How refreshing.

*** Lots of you have written in to point out that I misspelled Colombia on Monday. Just wanted to acknowledge your collective volume.

*** Quiz Time: Can you name the latest Silicon Valley venture capital firm to open a Boston office? Well, it’s not quite open yet, but it will be soon…

*** We’ve got a bunch of new jobs posted in the peHUB Careers section. If your firm is hiring, make sure to get the word out…

*** My CNBC spot this morning discussed Citi’s secondary sale attempts, rather than our regularly-scheduled topic of near-dead LBOs (which we’ll chat about next week sometime). You can watch it here…

*** Yet another of what will be countless reminders about Buyouts Madness, which is less than two months away.

Top Three

Etsy, a Brooklyn, N.Y.-based online marketplace for buying and selling handmade goods, has raised $27 million in new venture capital funding. Accel Partners led the deal, and was joined by return backers Union Square Ventures and Hubert Burda Media. Jim Breyer of Accel has joined the company’s board of directors.

Kesa Electricals PLC has agreed to sell BUT, its French electricals and furniture retailer, to a consortium that includes Colony Capital, Goldman Sachs and Merchant Equity Partners. The deal is valued at €550 million, and is expected to close in March.

WL Ross & Co. has closed its fourth fund with $4 billion in capital commitments. The firm focuses on financially-distressed companies, and became part of Invesco in October 2006.

VC Deals

Luxim Corp., a Sunnyvale, Calif.-based developer of energy-efficient lighting technologies, has raised $21 million in additional Series D funding. The round total now stands at $39 million, which brings the company’s overall venture capitalization to around $61 million. DAG Ventures led the new round, and was joined by return backers Sequoia Capital, Crosslink Capital and Worldview Technology Partners. The news was first reported by VentureBeat.

GreenRoad Technologies Inc., a provider of driver safety solutions with offices in London and Silicon Valley, has raised $14.5 million in VC funding. Virgin Green Fund and Benchmark Capital co-led the deal, and were joined by Balderton Capital.

VirtenSys Ltd., a Manchester, UK-based provider of I/O virtualization solutions, has raised $12 million in Series B funding. Return backers include Scottish Equity Partners, Celtic House Venture Partners and GIMV.

Ensenda Inc., a San Francisco-based provider of last-mile logistics, has raised $10.3 million in Series C funding, according to a regulatory filing. Questmark was joined by return backers Alloy Ventures and Bay Partners.

SJS Technology Inc., a Goleta, Calif.-based solid-state lighting startup, has secured $2.5 million of a $5 million Series A round led by Khosla Ventures, according to a regulatory filing.

AutoVirt Inc., a Nashua, N.H.-based provider of file virtualization and automation solutions, has raised $4 million in Series A funding from Kepha Partners and Sigma Partners. Jo Tango of Kepha and Bob Davoli of Sigmahave takenboard seats., a provider of an online collection of how-to video, has raised an undisclosed amount of Series A funding led by General Catalyst Partners.

Buyout Deals

TPG Capital today is expected to close its $450 million take-private buyout of Midwest Airlines (AMEX: MEH).

TVC Capital has acquired Del Mar DataTrace Inc. from Fiserv Inc. (Nasdaq: FISV), for an undisclosed amount. Del Mar DataTrace is a provider of back-office software for automating the residential mortgage lending process.

Vestar Capital Partners has agreed to acquire a majority interest in Press Ganey Associates Inc. from American Securities Capital Partners, for an undisclosed amount. Company management will remain in place, and roll over its equity position. Press Ganey provides healthcare performance improvement solutions to more than 40% of U.S. hospitals.

PE-Backed IPOs

SeaCastle Inc., a Wilmington, Del.-based lessor of intermodal equipment used in global containerized cargo trade, said that it is postponing its IPO, due to volatile market conditions. It had filed to sell 20 million common shares at between $15 and $17 per share, with Bear Stearns serving as lead underwriter. SeaCastle would have an initial market cap of approximately $2.2 billion, were it to price at the high end of its range. Fortress Investment Group holds a 97.4% ownership position, pre-IPO.

PE Exits

Excel Maritime Carriers Ltd. (NYSE: EXM) has agreed to acquire fellow dry-bulk shipping company Quintana Maritime Ltd. (Nasdaq: QMAR) for approximately $2.45 billion. Quintana was co-founded in 2005 by First Reserve Corp., and then went public later that year. First Reserve and its co-investors (American Metals & Coal International and chairman Corbin Robertson) still held around 20% of Quintana’s outstanding shares as of last October.

HgCapital has sold The Sanctuary Spa Group, a female body care brand in the UK, to PZ Cussons for £75 million. Close Brothers Corporate Finance advised HgCapital on the transaction.

Hoover’s Inc. has agreed to acquire Visible Path Inc., a Foster City, Calif.-based provider of relationship capital management solutions. No financial terms were disclosed. Visible Path has raised just over $20 million in VC funding since 2004, from firms like Kleiner Perkins Caufield & Byers, Menlo Ventures, Silicon Valley Bank and Integral Capital Partners.

PE-Backed M&A

Remmele Engineering Inc., a portfolio company of Goldner Hawn, has acquired EL-Tronic Precision Inc., a Coon Rapids, Mich.-based provider of engineering and contract manufacturing services to the medical device industry. No financial terms were disclosed.

Human Resources

Paul Walsh and Clyde Thomas have joined Calera Capital as operating partners, focused on the business and financial services sectors. They both had been with eFunds Corporation.

Conor Boden has joined Advent International as head of portfolio board development, a newly-created position focused on extending Advent’s operating partner program. Boden has spent the past nine years with 3i Group.

Stuart Armstrong has joined Aquiline Capital Partners as a senior advisor. He previously was president and CEO of Black Diamond Commercial Finance.

Bob Wright, vice chairman of General Electric, has agreed to serve as a senior advisor to Lee Equity Partners.