PE Week Wire: Thurs., Oct. 25, 2007

The Service Employees’ Union International is a giant thorn in the side of private equity, but perhaps there are ways to soften the prickliness of SEIU president Andy Stern. For example, invite him to a concert.

Such was the strategy of Warren Hellman, co-founder and chairman of Hellman & Friedman. During the Q&A portion of a recent speech at Stanford University, Hellman was asked if PE firms deserve to be known as locusts. His response, in part, included the following:

“In this country… There’s the whole thing that Andy Stern and the SEIU leadership has gone through about us laying off people, us laying off divisions, etc… It’s not really what we do, so I think we’re kind of an outlier. In fact, Andy Stern was my guest at my bluegrass festival last weekend, so hopefully he feels a bit differently about us.”

You can get video of the entire speech, which was given at Stanford University’s Rock Center for Corporate Governance. Make sure to note that when Hellman briefly brings up the carried interest tax issue, he puts his hands over his mouth instead of offering an opinion… Were we just a lapse of discretion away from finally having a big-name PE pro break ranks with his U.S. brethren? Looked like it, but judge for yourselves…

*** Still hoping to get a pair of World Series tickets to auction up for charity. No offers yesterday, but they are obviously hard to come by. And a quick admission: I did end up going last night, thanks to a friend who snagged some right field box seats one hour before game-time. Still running on euphoria.

*** Two errors from this week’s Wires that deserve above-the-fold corrections: First, I mistakenly referred to SVG Capital yesterday, when talking about firms that tell their receptionists to pretend like departed partners are still in the fold. I mean to refer to Standard Life Investments. Also, I mentioned layoffs associated with Wynnchurch’s coming acquisition of GDX International. Those layoffs are happening, but being made by GDX pre-buyout, not by Wynnchurch. Apologies on both counts.

*** No correction for yesterday’s item about Blackstone Group possibly raising multiple funds (core plus geographically-focused ones), rather than its traditional of raising one giant enchilada. LBO Wire today called that information inaccurate, but I stand by it. As of this morning, both options are still on the table.

*** peHUB first Read

*** I’ll be on a plane to Chicago tomorrow morning, so Larry Aragon will pinch-hit. Be back Monday, from Las Vegas…

Top Three

Microsoft Corp. is investing $240 million for a 1.6% equity stake in Facebook, a social networking company that is now valued at around $15 billion. The deal also expands an existing strategic relationship between the two companies. Facebook previously had raised $38 million in VC funding from Accel Partners, Greylock and Meritech Capital Partners.

TA Associates has agreed to sell Alere Medical Inc., a Reno, Nev.-based provider of disease management services to group health plans, to Inverness Medical Innovations (AMEX: IMA). The deal is valued at $302 million, including $125 million in cash and $177 million in Inverness common stock. It comes just six months after TA acquired Alere for $175 million from a syndicate of venture capital firms, and is expected to close by year-end. .

Bank of America Corp. said that it will cut 3,000 jobs in its investment banking division, following a 32% drop in third-quarter earnings.

VC Deals

CamSemi, a UK-based fabless semiconductor company focused on reducing energy consumption of consumer electronics, has raised $26 million in Series C funding. 3i Group and return backer Scottish Equity Partners co-led the deal, with new investor Carbon Trust Investments also participating.

Paratek Pharmaceuticals Inc., a Boston-based drug company focused on antibiotic resistance, has closed the first tranche of a $40 million Series H round. VentureWire puts the tranche at $22 million, with the second tranche expected to close in early 2008. Aisling Capital led the round, and was joined by D.E. Shaw, Boston Life Science Venture Corp. and Pacific Growth Equities (also served as placement agent). Return backers included Nomura Phase4 Ventures, Novartis BioVentures, BioFund Ventures, HBM BioVentures, Lombard Odier Darier Hentsch, BioVeda Fund and Hercules Technology Growth Capital. .

mFoundry Inc., a Sausalito, Calif.-based mobile application publisher and platform provider, has raised $15 million in Series C funding. Motorola Ventures led the deal, and was joined by PayPal, NCR Corp. and a “leading wireless operator” that was not named. Return backers included GRP Partners and Ignition Partners. Prior investor Apax Partners did not participate. mFoundry has now raised around $25 million in total VC funding.

Xencor, a Monrovia, Calif.–based developer of protein therapeutics and antibody drugs, has raised $15 million in additional Series E funding. The round total now stands at $60 million, including a $45 million first close in October 2006. Oxford Bioscience Partners and Merlin Nexus came aboard as new investors on this tranche, while existing shareholder Novo Nordisk also participated. Other first tranche backers included MedImmune Ventures, HealthCare Ventures and Zen Investments. Xenxor has raised over $145 million in total VC funding since its 1997 inception. .

Interactive Supercomputing Inc. of Waltham, Mass. has raised $11 million in Series B funding. Ascent Venture Partners led the deal, and was joined by Fletcher Spaght Ventures and return backers Flagship Ventures, Rock Maple Ventures and CommonAngels. The company has now raised $18 million in total VC funding. The company developers software that helps scientists, engineers and analysts build algorithms and models on their desktops using familiar mathematical tools, and then run them instantly and interactively on parallel computers with little to no modification.

Resolute Solutions Corp., a Bellevue, Wash.-based technology consulting firm, has raised $7.6 million in new private funding. The deal included a $4 million equity tranche led by Aequitas Capital Management. .

EchoSign Inc., a Palo Alto, Calif.-based developer of a business document exchange platform, has raised $6 million. Emergence Capital led the deal, and was joined by return backer Storm Ventures.

Phase Bioscience Inc., a Durham, N.C.-based biotech company focused on the delivery, production and purification of protein-based therapeutics and small molecules, has raised $5.4 million in additional Series B funding. The round is now closed at $6.6 million. Fletcher Spaght Ventures co-led the tranche alongside existing Series B backer Johnson & Johnson Development Corp. Founding investor Hatteras Venture Partners also participated. .

JibJab, a digital comedy studio, announced that it has raised Series B funding from existing shareholder Polaris Venture Partners. No financial terms were disclosed, but peHUB reported that the investment was $3 million. This comes on top of a Series A round that a regulatory filing indicates was worth nearly $6.4 million.

Buyout Deals

The Blackstone Group has closed its $26 billion buyout Hilton Hotels Corp., with Hilton stockholders receiving $47.50 per share. Hilton has de-listed from the NYSE.

3i Group has invested $30 million to support a management buyout of John Hardy Group, a Hong Kong-based maker of high-end designer jewelry and lifestyle accessories. 3i will receive a minority ownership position. .

Elevation Partners has completed its acquisition of a 25% stake in handheld device maker Palm Inc. (Nasdaq: PALM) for $325 million. As part of the deal, Palm paid a special distribution of $9 per share, or about $940 million in cash, to shareholders for their reduction in ownership. .

Eureka Growth Capital has acquired Everite Machine Products Co., a Philadelphia-based electrochemical grinding company with core competencies in high precision engineering, manufacturing and supply chain optimization. No financial terms were disclosed, except that Citibank provided senior financing and Roynat Merchant Capital provided subordinated notes. The deal was done in partnership with Everite management. .

H.I.G. Capital has agreed to acquire Flight Options LLC from Raytheon Co. (NYSE: RTN) for an undisclosed amount. Flight Options is a Cleveland-based private jet aviation company that operates a fleet of 130 luxury aircraft for businesses and high-net-worth clients.

Lee Equity Partners has completed its buyout of retailer Deb Shops Inc., a Philadelphia-based retailer of apparel, shoes and accessories for juniors in both regular and plus sizes. The deal’s total equity value was approximately $395 million, with Debs stockholders receiving $27.25 per share. Debs has de-listed from the Nasdaq.

Palm Beach Capital has sold its equity interest in Quantum Fine Casework to Wingate Partners. No financial terms were disclosed. QFC is a Weston, Fla.-based manufacturer of high-end customized store fixtures for retailers. Palm Beach was advised on the sale by Farlie Turner & Co. .

Tecumseh Products Co. (Nasdaq: TECUA) has agreed to sell its Engine & Power Train business operations to Platinum Equity. The deal is valued at $51 million, and is expected to close later this quarter. Tecumseh was advised on the deal by Rothschild. .

PE-Backed IPOs

Ulta Salon, Cosmetics & Fragrance, a Romeoville, Ill.-based beauty retailer and salon operator, has raised $153.71 million in its IPO. The company priced around 8.54 million common shares at $18 per share ($17-$18 range), which gives it an initial market cap of approximately $1.02 billion. Ulta trade on the Nasdaq under ticker symbol ULTA, while JPMorgan and Wachovia Securities served as co-lead underwriters. Shareholders include GRP Partners (26.3% pre-IPO stake), Doublemousse BV (22.5%) and Oak Investment Partners (12.9%).

Agria Corp., a Chinese provider of upstream agricultural solutions like corn seeds, sheep breeding products and seedling products, set its IPO terms to 17.15 million American depository shares at between $14.50 and $16.50 per share. It plans to trade on the NYSE under ticker symbol GRO, with Credit Suisse serving as lead underwriter. Shareholders include Brothers Capital Ltd. (84.6%), TPG (8.4%) and Dubai Investment Group (6.4%).

ICx Technologies Inc., a Washington, D.C.-based provider of sensor solutions for the homeland security market, has set its IPO terms to five million common shares being offered at between $17 and $19 per share. It would have an initial market cap of pproximately $636 million, were it to price at the high end of its range. ICxplans to trade on the Nasdaq under ticker symbol ICXT, with Lehman Brothers serving as lead underwriter. Wexford Capital isthe company’smajority shareholder.

Reliant Pharmaceuticals Inc., a Liberty Corner, N.J.-based cardiovascular drug company, has set its IPO terms to 11.72 million common shares being offered at between $25 and $27 per share. It would have an initial market cap of approximately $1.4 billion, were it to price at the high end of its range. Reliant plans to trade on the NYSE under ticker symbol RRX, with Goldman Sachs and Merrill Lynch serving as co-lead underwriters. This is the company’s second swing for the IPO fences, having filed for a $300 million offering in early 2005, only to pull it several months later due to “unfavorable market conditions.” It has not raised any private funding since then, but previously had raised over $500 million from firms like Alkermes Inc., Bay City Capital, Invermed Associates, Morgan Stanley Private Equity, Goldman Sachs, Versant Ventures.

PE Exits

GTCR has sold Morton Grove Pharmaceuticals Inc. to Wockhardt Ltd. of India for $38 million. The deal represents a steep loss for GTCR, which led a $200 million buyout of Morton Grove back in January 2003. Martin Grove is an Illinois–based liquid generic and specialty dermatology company.

PE-Backed M&A

80108 Media and Go2 have merged, into a single company focused on localized, personal mobile content. No terms of the deal were disclosed. 80108 has raised VC funding from General Catalyst Partners, IDG Ventures Boston, Khosla Ventures and Borealis Ventures. .

Liquid Air Lab GmbH, a Germany-based developer of “spodradio” mobile radio and podcasting solutions, has acquired Finland-based Rocket Science, developer of the Poison framework. Liquid Air has raised over $12 million in VC funding from Balderton Capital and Baytech Venture Capital. .

Pioneer Surgical Technology, a Marquette, Mich.-based maker of spinal and orthopedic implants, has acquired Angstrom Medica Inc., a Woburn, Mass.-based developer of an implantable nanotech-based medical device that can remodel human bone. No financial terms were disclosed. Pioneer has raised over $32 million in VC funding from such firms as Pharos Capital Group, Highlander Partners, Hopewell Ventures and River Cities Capital Funds.

Xtera Communications, an Allen, Texas-based optical networking and services company, has acquired AscenVision Technologies, a San Jose, Calif.-based developer of IP networking solutions. No financial terms were disclosed. Xtera has raised over $218 million in total VC funding, including a $52 million seventh round earlier this year. Backers include The Wellcome Trust, New Enterprise Associates and Arch Venture Partners. .

Firms & Funds

BlueRun Ventures (f.k.a. Nokia Venture Partners) is preparing to raise $350 million for its second fund since becoming an independent entity, according to PE Week. The firm raised $315 million for its first such effort in 2005.

The Pennsylvania State Employees’ Retirement System has approved the following fund commitments: $100 million to New York Life Capital Partners IV, €70 million to Nordic Capital Fund VII and $30 million to Fillmore West Fund.

Human Resources

Michael Hehn and Eric Fry have joined Morgan Stanley Private Equity as managing directors. Hehn will be based in London beginning in December, and previously was with Allianz Capital Partners. Fry previously was a managing director with Metalmark Capital, which was formed as an independent spinout from Morgan Stanley. .