PE Week Wire: Thursday, September 18, 2008

*** Here’s your daily carnage report: TPG waves dilution rights on WaMu, Blackstone Group gets advisory role on AIG, Hank Greenberg still wants to find a private capital alternative for the insurance giant, Lehman Asia is running short on time, Lloyds takes out HBOS and Morgan St! anley remains in merger talks. Oh, and stocks are up in early trading.

*** Semantic silliness: Most everyone is referring to the Fed move on AIG as a bailout, but Nick Gartmore demurred last night on CNBC: “I’m amused that everyone is calling it a bailout. I’m sorry but AIG is borrowing money at close to 12%. You can borrow money from Nick the Knife for less that that!”

Before contemplating a new nickname for Bernanke (Bennie the Blade?) or Paulson (Hank the Shank?), let’s also reconsider the use of “bailout.” It’s true that AIG doesn’t get to walk away free and clear, so perhaps this is best described as a diamond-studded life preserver. Plenty of ways to cut the drowning man, but it’s far better than the alternative. The downside is that diamond can also cut rope, which means the life preserver’s owner also runs a major risk of not retrieving his treasure (but he just couldn’t bring himself to not at least try).

*** Legislative update: The Senate’s Small Biz Committee filed the SBIR reauthorization as an ammendment to the DOD authorization bill, which is currently before the Senate. But a Senate source says that the Bush Administration has “managed to get the ammendment blocked,” which means it can’t yet go into conference with the House. Time is running very short…

*** VC Survey Time: Venture Capital Journal wants to know how Wall Street’s woes are affecting the VC business. So if that’s your line of work, please take a moment and participate here.

*** Unexpected casualties: A London colleague emails to say that the American School of English is losing students by the truckload, as Lehman bankers lose their school fee benefits.

*** For positive news, let’s shift coasts to Silicon Valley, where True Ventures has quietly closed its second fund with $195 million in capital commitments.

We reported on a $165 million first close back in July, saying that the fund would be capped just south of $200 million. Seems that’s a toxic number to the True team, which wants to stay small enough whereby its seed/early-stage investment strategy still makes sense. Its prior fund capped out at $155 million in 2006, plus a $9 million side vehicle.

“Fund II for us is a continuation of our core business,” says True Ventures partner Jon Callaghan. “We have a great core team and expect to change very little.”

That means more deals in sectors like software, mobile and digital media. The final new deal from its first fund was TextDigger, a provider of semantic search, optimization and optimization solutions. True also has made its first investment from Fund II, but has not yet disclosed it.

Top Three

Sapphire Energy Inc., a Sonoma, Calif.-based company that creates “green” gasoline by produces crude oil out of algae, announced that it has raised Series B funding that brings its overall funding to over $100 million. It had previously raised over $50 million from firms like Arch Venture Partners, Venrock and the Wellcome Trust.Cascade Investment LLC participated on the new round.

Trivest Partners has closed its fourth fund with $325 million in capital commitments. The Miami-based firm focuses on founder/family-owned business in North America, and had raised just under $320 million for its third fund in 2001. Hudson Partners served as placement agent, while limited partners include Morgan Creek Capital Management, Parish Capital, AIG Investments, Credit Suisse, Southern Farm Bureau Life Insurance Co. and GE Equity.

Jay Light, dean of Harvard Business School, has joined The Blackstone Group’s (NYSE: BX) board of directors.

VC Deals

PCH International, a Cork, Ireland-based provider of supply chain management outsourcing services, has raised $21 million in first-round funding. Backers include Lightspeed Venture Partners, Norwest Venture Partners and Focus Ventures.

Trillium Therapeutics Inc., a Toronto-based drug company focused on immune-mediated disorders has raised C$12 million in third-round funding. Return backers include VenGrowth Private Equity Partners, BDC Capital and Canadian Medical Discoveries Fund (CMDF).

Hollywood Interactive Group Inc., a producer of interactive content, has raised $5 million in Series A funding led by BlueRun Ventures. The company’s first project is, a “women’s web destination for celebrity and entertainment news, casual games, fashion and community.”, a Bethesda, Md.-based online platform for “crowd-sourcing” books, has raised more than $5 million in second-round funding. Vertex Venture Capital led the round, and was joined by return backer Greylock Partners Israel and individual angels.

BAC BV, a Dutch company focused on affinity purification of biological materials, has raised €1.5 million from return backers Unilever Ventures and FF&P Private Equity.

ChemGenex Pharmaceuticals (Nasdaq: CXSP), an Australia-based oncology drug company, has raised A$12.9 million via a private share placement. It included an A$6.5 million investment by existing shareholders Alta Partners, GBS Venture Partners and Merck Santé.

Buyout Deals

HgCapital has joined Capvis on its €325 million acquisition of Koenig Verbindungtechnik, a Swiss maker of fastenings and sealing products, from Klöckner. Capvis had originally announced that deal in July.

Linden LLC has acquired Drayer Physical Therapy Institute, a Hummelstown, Penn.-based operator of outpatient physical therapy clinics throughout the Eastern United States. No financial terms were disclosed for the deal, which was done in partnership with company management.

Moody’s Investors Service has downgraded Hawaiian Telcom Communications from B3 to Caa2, after the carrier announced that it had retained Lazard Freres to examine its balance sheet. The Carlyle Group acquired Hawaiian Telcom from Verizon Communications in 2005 for approximately $1.6 billion.

PE Exits

Biovail Corp. (NYSE: BVF) has acquired Prestwick Pharmaceuticals Inc., a Washington, D.C.-based drug company focused on CNS disorders, for $100 million in cash. Prestwick had raised around $120 million in total VC funding since 2002, from firms like Atlas Venture, Pequot Ventures, Scale Venture Partners, Sofinnova Ventures, Vivo Ventures and Warburg Pincus.

Cortec Group has agreed to sell Cortland Cos. to Actuant Corp. (NYSE: ATU) for approximately $230 million. Cortland is a Cortland, N.Y.-based maker of electro-mechanical cables and umbilicals, synthetic ropes and steel cable and assemblies. Harris Williams is advising Cortland on the deal, while Morgan Stanley is advising Actuant.

PE-Backed M&A

Tethys Bioscience, an Emeryville, Calif.-based developer of multi-biomarker technology, has acquired Lipomics Technologies, a West Sacramento, Calif.-based developer of metabolite profiling technology. No financial terms were disclosed. Thethys has raised $54 million in total VC funding, from firms like Kleiner Perkins Caufield & Byers, Mohr Davidow Ventures, Intel Capital and DAG Ventures. Lipomics had raised an undisclosed amount of funding from firms like DFJ Frontier.

Firms & Funds

Bank of China reportedly has agreed to acquire a stake in private bank La Compagnie Financiere Edmond de Rothschild.

Human Resources

Makram Azar has joined KKR as a managing director and head of Middle East & Africa (MENA). He had spent the past 18 years with Lehman Brothers, most recently as managing director, global head of sovereign wealth funds and chairman of media I-banking for Europe and the Middle East.

Mark Johnson, former vice chairman of CheckFree Corp., has joined Total Technology Ventures as a partner. TTV is an Atlanta-based firm focused on the financial services industry.

Eric Keller has agreed to join Kleiner Perkins Caufield & Byers as chief operating officer. He previously was CEO of enterprise software company Movaris, and before that was CFO of medical device company Ventritex.

David Mott has joined New Enterprise Associates as a general partner focused on biotech and specialty pharma opportunities. He previously was president and CEO of MedImmune, which was acquired by AstraZeneca in 2007.

Rod Sherwood is leaving The Gores Group, where he has spent the past three years as CFO. He will become CFO of radio company Westwood One Inc. (NYSE: WON), which received a $100 million investment from Gores Group earlier this year.

Jed Sherwindt has joined Evercore Partners as a senior managing director in the firm’s San Francisco office. He previously was with Citigroup, as managing director and head of its global software I-banking group.

Gregg Wurster has joined PCG Asset Management as a senior associate. He previously was a trader with hedge fund Alpha Vision Capital.