PE Week Wire: Thurs., May 3, 2007

Royal Ahold NV yesterday announced that it has (finally) agreed to sell its U.S. Foodservice distribution unit to KKR and Clayton, Dubilier & Rice for $7.1 billion. What it didn’t announce, however, were any other financial details. So here they are:

The total transaction price includes $2.6 billion in equity and $4.5 billion in funded debt, according to sources close to the process. It represents a staggering 8.5x leverage multiple, plus a $1 billion unfunded revolver at closing and no covenants on either the bank or high yield notes (which is becoming a disturbing status quo on LBO deals).

J.P. Morgan Chase managed the auction process, which included a rival bid from Bain Capital, Blackstone Group and Wellspring Capital Management. If you’re wondering how (relatively) small Wellspring got into that mega-mix, remember that it already owns a food distribution platform called Vistar. Experience can sometimes offset lack of capital.

Speaking of capital, U.S. Foodservice represents another mega-LBO in which limited partners will be asked to double/triple/quadruple up with co-investments. CD&R and KKR are equal partners on the deal, which means that each must come up with a $1.3 billion equity check. That would be virtually impossible for CD&R to do alone, since it would represent nearly a quarter of its current fund. So, instead, I hear that CD&R will invest $600 million from its general fund, around $150 million from a dedicated co-investment fund and then syndicate the remaining $550 million to limited partners. So if you add the co-invest fund with additional co-investments, LPs will directly contribute more to this deal than will CD&R’s general fund…

*** In semi-related news, expect Royal Ahold to continue selling off North American assets. I hear the next to go should be supermarket chain Stop & Shop.

*** Blackstone yesterday filed with the SEC to trade under ticker symbol BX. I think it should have gone for humor, and tried registering as SEIU.

*** I reached out to some media buyout folks yesterday, and heard absolutely no interest in acquiring Dow Jones. More specifically, I heard no interest in acquiring Dow Jones at a price that could beat Murdoch. Pearson is now considered the most likely (albeit still unlikely) to offer a rival bid, although I think Bloomberg makes more sense from a strategic perspective. It’s possible that my own corporate overlords are giving it thought (we certainly have the money and M&A fever), but my biased perspective is that integration would be too difficult.

*** Josh Kopelman has a detailed post on the difference between the “Catch and Release” model and “Catch and Keep” model – in terms of how social networks generate and retain traffic. Must read for those investing in social networks, and probably for those in the overall online content space.

*** MBA candidates: I have a few more internship listings to enter into the MBA Forum this morning. Check back by 1pm ET, if you’re interested in additional opportunities.

Top Three

Madison Dearborn Partners has agreed to acquire VWR International Inc. from Clayton, Dubilier & Rice. No financial terms were disclosed for the deal, but a source puts the pricetag at approximately $3.8 billion. VWR is a West Chester, Pa.–based lab supply company that CD&R bought from Merck KGaA in April 2004 for $1.65 billion ($420m in equity). It reported 2006 revenue of over $3.2 billion.

Noxxon Pharma AG, a Berlin, Germany-based developer of biostable aptamers, has raised €37 million in Series C funding. New backers included TVM Capital, Sofinnova Partners, Edmond de Rothschild Investment Partners, Seventure, Dow Venture Capital, IBG Beteiligungsgesellschaft Sachsen-Anhalt and VC Fonds Berlin GmbH. Returning shareholders included Deutsche Effecten-und Wechsel-Beteiligungsgesellschaft (DEWB), FCP OP Medical BioHealth-Trends and the Dieckell Group.

Cavium Networks, a Santa Clara, Calif.-based provider of security, network services and content processing semiconductor solutions, priced 6.75 million common shares at $13.50 per share, for an IPO take of approximately $91.13 million. Morgan Stanley and Lehman Brothers served as lead underwriters. Cavium had originally filed to sell 6.25 million shares at between $10 and $12 per share. It began trading on the Nasdaq under ticker symbol CAVM, and closed up nearly 22% at $16.45 per share. Cavium had raised over $60 million in total venture funding since its 2000 inception, from firms like Menlo Ventures (29.98% pre-IPO stake), Diamondhead Ventures (9.19%), Alliance Ventures (13.89%), NeoCarta Ventures (5.46%). Menlo Ventures.

VC Deals

Topia Academy Inc., a South Korean private after-school tutoring company, has raised $20 million in growth capital funding from The Carlyle Group.

Delivery Agent Inc., a San Francisco-based provider of shopping-enabled programming and content monetization for entertainment properties, has raised $18.5 million in third-round funding. Bessemer Venture Partners led the deal, and was joined by fellow return backers Cardinal Venture Capital and Worldview Technology Partners. Delivery Agent has now raised $35 million in total VC funding.

Halt Medical Inc., a Pleasanton, Calif.-based developer of a uterine fibroid device, has raised $12 million in Series C funding, according to VentureWire. American Capital Strategies led the deal with an $8.9 million infusion, with individual angels and company management providing the remainder.

Lombardi Software, an Austin, Texas-based developer of business process management software, has raised around $7.95 million in Series D funding, according to a regulatory filing. Return backers include Austin Ventures, InterWest Ventures and Palomar Ventures.

Oree Inc., an Israel-based developer of optical packaging for the LED market, has raised $7 million in Series A funding. Genesis Partners led the deal, and was joined by GIMV.

Frengo Corp., a Redwood City, Calif.-based mobile social networking startup, has raised $5.7 million in Series A funding, according to TechCrunch. Trilogy Equity Partners led the deal, and was joined by return backers Khosla Ventures and Index Ventures. It had raised $2.3 million in Series A funding last August.

Pasteuria Bioscience, an Alachua, Fla.-based agricultural biotech company, has raised $5.3 million in Series B funding. LSP BioVentures led the deal, and was joined by return backers Advantage Capital and Gordon River Capital. Pasteuria focuses on products that can help reduce plant parasitic nematodes in agricultural and turf markets.

Marrone Organic Innovations Inc., a Davis, Calif.-based maker of organic weed and pest control products, has raised $3.75 million in Series A funding. Clean Pacific Ventures led the deal, and was joined by One Earth Capital, Saffron Hill Ventures, Calvert Social Investment Fund and Wavepoint Ventures.

Experticity, a Seattle-based provider of live video-assisted customer support solutions for the service and retail markets, has raised $2.7 million in Series A funding co-led by Portland Trust and Jammbid Partners. The company said that it will immediately begin raising a Series B round.

IntroNetworks Inc., a Santa Barbara, Calif.-based developer of online social networks for businesses, has raised $2.7 million in Series A funding led by Adobe Systems.

Catalist Homes Inc., a San Francisco-based provider of residential real estate sales in California, has raised around $4.5 million in Series D funding, according to a regulatory filing. Shareholders include WestRiver Capital, BainLab, The Halo Fund and The Angels’ Forum. Phil Schlein of US Venture Partners sits on the company’s board of directors.

Syndero Inc., a San Francisco-based online marketing company, has raised $2.2 million in Series B funding led by return backer Trident Capital.

VivoTech Inc., a Santa Clara, Calif.-based provider of wireless payment software and chips, has raised an undisclosed amount of Series C funding. First Data Corp. led the deal, and was joined by return backers like Alloy Ventures, Draper Fisher Jurvetson and Nokia Growth Partners. FT Partners served as financial advisor on the deal.

Buyout Deals

Clayton, Dubilier & Rice and Kohlberg Kravis Roberts & Co. have agreed to acquire U.S. Foodservice from Royal Ahold NV (NYSE: AHO) for $7.1 billion. U.S. Foodservice is the second-largest broad-line foodservice distributor in the U.S.

AIG Global Investment Group has acquired a 65% stake in Bulgarian Telecommunications Co., Bulgaria’s only fixed-line telephone operator, for €1.08 billion. AIG also is expected to soon acquire an additional 25% position.

The Blackstone Group reportedly has agreed to acquire Klöckner Pentaplast from Cinven and CCMP Capital for approximately €1.3 billion. Klöckner Pentaplast is a German manufacturer of rigid plastic films for food packaging and medical devices. It was acquired by Cinven and CCMP in 2001 for approximately €925 million.

Littlejohn & Co. has agreed to acquire plastic tape maker Intertape Polymer Group Inc. (NYSE: ITP) for $4.76 per share. The total transaction is valued at approximately $500 million.

Yucapia Cos. is considering an offer for National Enquirer publisher American Media Inc., according to The New York Post. American Media is owned by Evercore Partners and Thomas H. Lee Partners.

Bridgepoint has acquired Leeds Bradford International Airport (LBIA) for £145.5 million. It is Bridgepoint’s second airport deal, having become the largest single investor in Birmingham International Airport ten years ago, and later selling its stake in 2001. Leveraged financing for the LBIA transaction was provided by Royal Bank of Scotland, while the sale process was managed by Ernst & Young.

Circle Peak Capital has sponsored a recapitalization of Fieschbein LLC, a Statesville, N.C.–based manufacturer of highly-engineered packaging and material handling equipment. No financial terms were disclosed.

Sorenson Capital Partners and Peterson Partners have agreed to acquire institutional furniture maker MITY Enterprises Inc. (Nasdaq: MITY) for $21.50 per share.

DLJ Merchant Banking Partners has agreed to make a “significant investment” in Specialized Technology Resources Inc., an Enfield, Conn.–based provider of testing and quality assurance services for the consumer products industry.

PE-Backed IPOs

NeurogesX Inc., a San Carlos, Calif.-based drug company focused on pain management therapies, priced 4 million common shares at $11 per share ($13-$15 range), for an IPO take of approximately $44 million. Morgan Stanley served as lead underwriter. It began trading on the Nasdaq under ticker symbol NGSX, and closed down around 6.8% at $10.25 per share. NeurogesX had raised around $90 million in VC funding since 2000, from firms like ARCH Venture Partners (24.7% pre-IPO stake), Alta Partners (18.6%), Walden International (14.3%) Montreaux Equity Partners (10.2%) and Global Life Sciences Ventures (4.4%).

Cumberland Pharmaceuticals Inc., a Nashville, Tenn.-based specialty drug company that acquires and commercializes niche products, has filed for a $115 million IPO. It plans to trade on the Nasdaq under ticker symbol CPIX, with UBS serving as lead underwriters. Shareholders include Scout Healthcare Fund.

EnerNOC Inc., a Boston-based provider of demand response and energy management solutions, has set its proposed IPO terms to 3.75 million common shares being offered at between $21 and $23 per share. It plans to trade on the Nasdaq under ticker symbol ENOC, with Credit Suisse and Morgan Stanley serving as co-lead underwriters. The company has raised around $28 million in VC funding, including an infusion late last year at a post-money valuation in excess of 4215 million. Shareholders include Foundation Capital, Draper Fisher Jurvetson, Braemar Energy Ventures and DFJ New England.

PE-Backed M&A

Direct Group, a Pennington, N.J.-based provider of high-volume direct marketing services, has acquired Enterprise Marketing Solutions Inc., a Piscataway, N.J.-based database marketing company providing statistical modeling and analytics, data management, hosted database solutions and e-mail programs for the direct marketing industry. No financial terms were disclosed. Direct Group is a portfolio company of SV Investment Partners.

PE Exits

The J. M. Smucker Co. (NYSE: SJM) has acquired Gahanna, Ohio-based canned milk maker Eagle Family Foods Holdings Inc. from Warburg Pincus and GE Asset Management. The transaction is valued at $248 million, including $133 million in cash and the assumption of $115 million in debt. Warburg and GE formed Eagle Family Foods in 1998, following the purchase of a portfolio of dairy brands from Borden Foods.

Farmer Brothers Co. (Nasdaq: FARM) has acquired Coffee Bean International, a Portland, Ore.-based roaster and wholesaler of specialty coffee. The deal is valued at approximately $22 million in cash, with sellers including Svoboda Collins, Prairie Capital and WSG Partners.

Superior Essex Inc. (Nasdaq: SPSX) has agreed to acquire Invex SpA, a magnet wire producer owned by Italian private equity firm Investitori Associati. No financial terms were disclosed.

Firms & Funds

AlixPartners, a Southfield, Mich.-based corporate restructuring and consulting firm, has opened its first Chinese office in Shanghai.

Human Resources

Bruce Zimmerman has been named CEO of The University of Texas Investment Management Co. (UTIMCO). He previously was CIO and global head of pension investments for Citigroup.

Timothy Milanich has joined Case Western Reserve University as director of private investments. He previously was with National City.

Eric Shealy has joined I-banking boutique Innovation Advisors as a managing director. He previously was with Covington Associates.

Adam Cook has joined Clear Thinking Group as a managing director in the firm’s turnaround management and financial services group. He previously was a director with Glass & Associates, where he focused on M&A and refinancing transactions in the automotive sector.

Richard Kronthal has joined Andrews Kurth as a New York-based partner in the law firm’s corporate and securities practice. He previously was with Kaye Scholer LLP.

Karen Jakobi, CIO and co-founder of Pathway Capital, has joined the advisory board of New Enterprise Associates’ current fund (NEA 12).

Nixon Peabody has added three corporate finance attorneys: Robert Anderson, Benjamin Lau and Daniel Schmedlen Jr. Anderson will be based in San Francisco with a focus on commercial lending, equipment finance and project finance transactions. He previously was with Buchalter Nemer. Lau focuses on leveraged finance out of New York, and previously was with Mayer, Brown, Rowe & Maw. Schmedlen focuses on corporate finance and capital markets transactions, and joins Nixon Peabody from Lord, Bissel & Brook LLP.

Dollar Financial Corp. (Nasdaq: DLLR) said that Jonathan Seiffer, Jonathan Sokoloff and Michael Solomon have resigned from its board of directors. All three men are partners with Leonard Green & Partners, which sold its remaining stake in Dollar Financial two months ago.