PE Week Wire: Thurs., May 1, 2008

Earlier this week I made a typo that now seems kind of prophetic. In discussing later-stage/public equity initiatives at venture capital firms, I mistakenly wrote “Sequoia Capital and KKR,” instead of “Sequoia Capital and Kleiner Perkins.” Now KKR and KP are very different animals, but both firms this morning announced major initiatives in the green space. In fact, both announcements worked their way into the exact same WSJ article.

Ok, maybe not prophetic, but at least very coincidental…

First up is KKR, which has formed a partnership with the Environmental Defense Fund to “measure and improve the environmental performance of companies within KKR’s U.S. portfolio.” The venture is a continuation of work the two groups did together for KKR’s acquisition of TXU, which was widely lauded for its attention to environmental detail. This too deserves laurels, and could serve as a possible model for other private equity firms with large portfolios. If big PE firms can use shared services to cut down on health insurance costs, they can certainly cut down on waste (water, greenhouse gas emissions, toxic substance use, etc.) portfolio-wide. The only addendum I’d make is that the program should apply to KKR’s worldwide portfolio – not just its companies in the U.S.

As for Kleiner Perkins, the venture firm confirmed what we reported last week: It has formed a “green growth” fund to invest in later-stage cleantech companies. It’s being co-run by KP partner John Denniston and former Goldman Sachs energy investor Ben Kortland. The size is $500 million, with part of that money coming from Al Gore’s Generation Investment Management. In other KP news, the firm also has raised $700 million for its thirteenth early-stage venture fund.

*** Speaking of green issues, the SEIU showed up at Carlyle Group’s offices yesterday, demanding that the firm do additional health and environmental testing on sludge that is disposed of by Carlyle portfolio company Synegro. I do not yet have nearly enough information on the matter to write definitively about it, but figured it was worth letting you know in the interim. The protesters were able to meet with a Carlyle spokesman, who confirmed the meeting but directed all of my sludge-related questions to Synegro.

*** Answer Key: Yesterday I asked you name the mid-market debt and equity investor that was shutting down its San Francisco and Philly offices, and also was planning additional layoffs. As many of you correctly emailed, the answer is American Capital Strategies.

The firm declined to confirm or deny the office closures, except to issue some emailed boilerplate about how declining M&A volume is requiring it to “make modest adjustments to our operations.” Firm spokespeople declined repeated requests to be interviewed, or to explain why they denied the Philly closure in a phone call with me last month.

Short story: If you’re looking to hire some mid-market pros in Philly or San Fran, now is a good time to do so.

*** Speaking of publicly-traded BDCs, it seems that Allied Capital is launching its first traditional leveraged buyout fund. Some info here at peHUB, and the full story here for subscribers to Buyouts.

*** ABC News reported yesterday that Cerberus was in talks to invest in Blackwater, the private military company under investigation for just about everything except putting sugar in granny’s gas tank. By end of day, however, Cerberus had abandoned the deal. Hopefully no other firm will fill the void, as this is exactly the type of transaction private equity doesn’t need right now. My explanation here.

*** A123 Systems, a VC-backed maker of lithium-ion batteries, has selected Goldman, JPMorgan and Merrill as bankers for its IPO, according to Scott Kirsner. The company is waiting to file the S-1 until its Q1 financials are finalized. At that point, expect a September road show and a valuation that could top $1 billion. I’ve since confirmed Scott’s information with a source close to the company.

*** peHUB First Read, including an update on the launch of Carl Icahn’s corporate governance blog.

Top Three

Softbank Corp. has agreed to acquire a 35% stake in Oak Pacific Interactive, a Chinese operator of Web 2.0 sites like social network The entire deal is valued at $430 million, with Softbank to initially acquire 14% and build up to 35% by the end of next year. Oak Pacific had previously raised $58 million over two rounds of funding, from Accel Partners, DCM, General Atlantic, Legend Capital and Technology Crossover Ventures.

Optimal Solutions Integration Inc., an Irving, Texas–based SAP consulting and staffing firm, has raised up to $100 million in financing led by Tailwind Capital Partners. The deal gives Tailwind a majority equity stake in Optimal.

Robert Aguallo Jr. has been named a managing partner of the Cardinal Americas Fund, a $150 million private equity fund focused on the infrastructure space. He is the former general manager of the Los Angeles City Employees Retirement System (LACERS).

VC Deals

Xactly Corp., a San Jose, Calif.-based provider of sales compensation and performance management software, has raised $30 million in fourth-round funding. Glynn Capital Management and Cheyenne Ventures were joined by return backers Alloy Ventures, Bay Partners, Rembrandt Ventures, Outlook Ventures and Spinner Asset Management. The company has now raised nearly $60 million in total VC funding since 2005.

Meebo Inc., a Mountain View, Calif.–based provider of Web-based instant messaging, has raised $25 million in Series C funding. Jafco Ventures led the round, and was joined by Time Warner Investments, KTB Ventures and return backers Sequoia Capital and Draper Fisher Jurvetson. No valuation was disclosed, but VentureBeat had previously reported that the company was looking for between $200 million and $250 million.

Esperion Therapeutics Inc., an Ann Arbor,Mich.-baseddeveloper of drug compounds to treat cardiovascular and metabolic disease, has raised $22.75 million in Series A funding. The deal helps spin Esperion out of Pifizer, which had acquired it in 2003. The round was co-led by Aisling Capital, Alta Partners and Domain Associates, with Pfizer retaining a minority equity position.

DATAllegro, an Aliso Viejo, Calif.-based maker of a data warehousing appliance, has raised $19.6 million in Series D funding. Hillman Co. led the round, and was joined by return backers Adams Capital Management, Focus Ventures, Intel Capital, JAFCO Ventures, Palomar Ventures and Venrock.

On Deck Capital Inc., a New York-based provider of financing for small businesses that wouldn’t normally qualify for bank loans, has raised $10 million in Series B funding. RRE Ventures led the round, and was joined by Village Ventures, First Round Capital, Khosla Ventures and Contour Venture Partners. The deal closed last December.

Astute Medical Inc., a San Diego-based medical diagnostics company focused on high-risk conditions, has raised $6.25 million in Series A funding led by De Novo Ventures.

Watercooler, a Mountain View, Calif.-based developer of entertainment applications for social networks, last fall raised $4 million in first-round funding from Canaan Partners.

New Relic Inc., a Menlo Park, Calif.-based provider of Ruby on Rails application performance management solutions, has raised $3.5 million in first-round funding from Benchmark Capital. Read more…

OZ Communications, a Montreal, Canada-based provider of consumer mobile messaging solutions, has raised Cdn$10 million in venture debt from Wellington Financial. The company has raised around US$60 million in VC funding from firms like Caisse de dépôt et placement du Québec, Fonds de Solidarite and VantagePoint Venture Partners.

Buyout Deals

Altor Equity Partners has completed its acquisition of paper and packaging retailer Papyrus from Stora Enso. The deal was valued at €640 million, including EUR 490 million in cash. Sweden-based Papyrus reported 2007 sales of just over €2 billion. Debt financing was arranged by Handelsbankenm.

David Buchler, the former European chairman of Kroll, has joined BC Partners in its $1.5 billion bid to buy Kroll from Marsh & McLennan Cos., according to The Financial Times. Kroll is a risk consultancy.

Gridiron Capital has formed a landscaping acquisition platform called Yellowstone Landscape Group Inc. Its first two additions are BIO Landscape & Maintenance Inc. of Houston and Piedmont Landscape Contractors LLC of Atlanta. No financial terms were disclosed for either transaction, on which Gridiron was advised by Amvest Financial Group.

Paine & Partners has completed its acquisition of Stabilus GmbH, a German manufacturer of gas springs, from Montagu Private Equity. No financial terms were disclosed, although initial reports indicated that the price-tag was upwards of €500 million.

Platinum Group has acquired the assets of map publishers Lawrence Mapping and Graphics Inc. of Oakdale, Calif. and King Enterprise Solution of St. Louis. No financial terms were disclosed.

Sun Capital Partners is the final bidder to acquire Romano’s Macaroni Grill from Brinker’s International Inc., according to The Deal. Brinker is expected to announce a sale by June 25. Romano’s is a casual Italian eatery chain with 230 North American units. Read more…

Werther Partners has acquired substantially all the assets of Sorbee International Ltd., a Philadelphia-based maker of confectionary and bakery products. No financial terms were disclosed for the deal, except that debt was provided by Firstrust Bank. Werther Partners principal Daniel Werther will take over as Sorbee’s chief executive.

WL Ross & Co. has completed its $1.1 billion acquisition of the mortgage loan services unit of Option One Mortgage Corp. from H&R Block Inc. (HRB). H&R Block last year had agreed to sell all of Option One to Cerberus Capital Management, but the deal later collapsed.

PE Exits

3i is auctioning off Swiss healthcare provider Ambea, for up to 900 million. Bidders reportedly include PAI Partners, Doughty Hanson and Merrill Lynch Private Equity. 3i holds a 75% stake in Ambea, while the Singapore government owns 15.9% and company management owns the remainder.

EQT Partners has sold its remaining 22% stake in listed German diesel engine manufacturer Tognum AG to Daimler AG.

United Online Inc. has agreed to buy floral delivery company FTD for approximately $800 million in cash and stock (including assumed debt). Sellers include Leonard Green & Partners, which sponsored a $422 million take-private buyout of FTD in February 2004.

Firms & Funds

HarbourVest Partners is targeting $2 billion for a dedicated secondaries fund, according to regulatory filings. Called Dover Street VII, the vehicle already had secured over $940 million in commitments as of February. Goldman Sachs, Deutsche Bank Securities and Lehman Brothers are serving as placement agents. HarbourVest has traditionally made secondary deals out of both its Dover Street and general fund-of-funds vehicles, but LBO wire reports that it plans to shift toward only doing secondaries out of Dover Street.

Headway Capital Partners has closed its second private equity secondaries fund with €150 million in capital commitments. The UK-based firm had raised €52 million for its debut fund in June 2005.

Presidio Financial Partners has closed its first private equity fund with $44.5 million in capital commitments. It will invest in lower middle-market companies across the U.S

Human Resources

Adrian Johnson is stepping down as CEO of LGV Capital, the private equity investment unit of UK insurer Legal & General, after almost 20 years with the group. No word yet on the reason for his departure, or on his successor.

Benjamin Silver has joined Babson Capital Management as a managing director in the firm’s mezzanine and private equity group. He will work out of Babson’s Los Angeles office, and previously was with GE Commercial Finance as a senior vice president of corporate lending.

Jones Day has made two additions to its private equity team in Pittsburgh: Fran Muracca II as a partner and Samuel Goncz as counsel. Both men previously were with Buchanan Ingersoll & Rooney.