PE Week Wire: Tues., April 29, 2008

Buyout fund performance is strong, but not as strong as it was just three months ago. Let’s not jump to conclusions… yet.

The numbers are for the period ending December 31 (these stats always lag), and are calculated by analyzing LP and GP reports of cash flows and returns. They show a dip in all investment horizons except for one, including a drop from 15.7% to 13.5% in one-year performance, and a 10-year drop from 8.8% to 8.4 percent. Shorter-term horizons suffered even worse atrophy, while only five-year performance rose, from 14.8% to 15.3 percent.

This is a similar story to what we saw yesterday, when the NVCA and Thomson Reuters released performance data for venture capital funds. Go here to download both the buyout and venture stats.

*** It’s been at least a few weeks since we last discussed a private equity-related lawsuit (excepting Clear Channel), which is just way too long for my standards. So here’s a newbie: Private Equity Capital Corp. is being sued by one of its former employees (David Losch), for such nasties as age discrimination, breach of fiduciary duty and breach of good faith and fair dealing.

I know what you’re probably thinking: What on earth is Private Equity Capital Corp? I also didn’t know, but it turns out to be a fundless sponsor based in Connecticut that has been around since 1998. Losch and the firm have declined to comment (the firm also has yet to file its legal response), but we’ve got a recap and copy of the complaint posted at peHUB.

*** I’ve probably had a dozen conversations with VC limited partners over the past week, and every one of them has asked me some variation of: “Why are Sequoia Capital and KKR expanding beyond traditional venture capital?”

It’s a great query, and the consensus answer lies somewhere between hubris and a recognition that venture capital rarely produces the outsized returns that it once did (we call this “PE envy”). The principals themselves aren’t talking, so let me suggest another option in which I play pop psychologist: These firms have been at the top forever, and are in little danger of being knocked off (particularly Sequoia). So the only option is to continue being the best VC firms indefinitely (i.e., status quo) or they can try to become the best at something new (i.e., challenge themselves). Plus, the latter option lets them recognize some brand equity without selling a 20% firm ownership stake to Dubai. Just thinking aloud…

Top Three

Cox Enterprises Inc. has agreed to acquire Adify, a San Bruno, Calif.-based online advertising network. The deal is valued at $300 million. Adify has raised around $27 million in VC funding since late 2006, from firms like U.S. Venture Partners, Venrock, GE Commercial Finance, NBC Universal and Time Warner Investments.

Francisco Partners has agreed to sell Metrologic Holdings Corp. to Honeywell International for $720 million in cash. Francisco had led a $346 million take-private buyout of Metrologic in December 2006, alongside hedge fund Elliott Associates and Metrologic chairman and then-interim CEO Harry Knowles. Metrologic makes data capture and collection hardware and software.

Fred Buenrostro announced that he is stepping down as chief executive of CalPERS, to pursue private sector opportunities. The move comes just days after CalPERS chief investment officer Russell Read resigned to launch a cleantech-focused venture capital fund.

VC Deals, a Chinese online video sharing site, has raised $57 million in Series D funding. The capital is reported to come mostly from insiders, which include IDG Technology Venture Investment, Granite Global Ventures, General Catalyst Partners, Capital today, Jafco Asia, KTB Ventures and JAIC. Todou has now raised $85 million in total VC funding.

Constellations Pharmaceuticals Inc., a Cambridge, Mass.-based developer of drugs that target selective regulators of epigenetic function, has raised $32 million in Series A funding. The round was co-led by Third Rock Ventures, The Column Group and Venrock.

InvenSense Inc., a Sunnyvale, Calif.-based provider of motion sensing solutions for mobile consumer applications, has raised $19 million in Series C funding. Sierra Ventures led the round, and was joined by Foxconn, Inventec Appliances Corp., Skylake Ventures, DoCoMo Capital, VentureTech Alliance and return backers Artiman Ventures, Partech International and Qualcomm Ventures. InvenSense has now raised $38 million in total VC funding.

Intacct Corp., a San Jose, Calif.-based provider of on-demand financial applications, has raised $15 million in new funding. Bessemer Venture Partners led the round, and was joined by return backers Emergence Capital, Sigma Partners and Sutter Hill Ventures. The company had previously raised $60 million, including from JK&B Capital and Hummer Winblad Venture Partners.

SkyFuel Inc., an Albuquerque, N.M.-based developer of utility-scale solar thermal power systems, has raised $17 million in Series B funding. AIM-listed Leaf Clean Energy Co. led the round.

TechnoSpin Inc., a New York-based developer of small wind turbines for residential and commercial use, has raised $8 million in Series A funding led by 21Ventures.

The Search Agency, a Santa Monica, Calif.-based provider of search engine marketing and optimization solutions, has raised an undisclosed amount of funding from JMI Equity. RBC Capital Markets served as placement agent.

Buyout Deals

Centrica, a listed UK utility, reportedly has approached Blackstone Group and Apax Partners about co-funding large offshore windfarms.

CVC Capital Partners has acquired a 53.85% stake in Chinese printing company Hung Hing Printing Group Ltd. (HK: 0450), for approximately $112 million. The transaction involved 323.5 million existing shares being sold at HK$2.70 per share.

Nordic Capital has agreed to buy CPS Color Group Oy from Industri Kapital for an undisclosed amount. CPS is a Vantaa, Finland-based supplier of tinting systems.

SunRay Renewable Energy of Malta has received an initial $200 million equity commitment from Denham Capital Management, to develop a portfolio of European solar energy projects. SunRay also has secured project finance commitments that could translate into a €1.2 billion portfolio.

PE Exits

Advent International has agreed to sell Bolix, a Polish provider of exterior insulation finish systems to the B2B market, to Berger Paints India Ltd. No financial terms were disclosed.

MMC Ventures has sold its stake in UK-based MoneyExpert Ltd. to company chairman Nigel Warr, Eurocall and serial entrepreneur Gregory Pennington. The deal was valued at around £7.2 million. MoneyExpert is an online financial services aggregator, and raised £25 million last month from Technology Crossover Ventures.

PE-Backed M&A

FleetPride, an independent aftermarket distributor of heavy-duty truck and trailer parts, has acquired Keller Truck Parts Inc., a provider of heavy-duty replacement parts in Maryland and Delaware. No financial terms were disclosed. FleetPride is owned by Investocrp, Banc of America Capital Investors and company management.

First Data Corp., a payment processing company owned by KKR, has agreed to acquire InComm, a provider of stored value gift and prepaid products. No financial terms were disclosed. InComm had over $300 million in 2007 net revenue.

Grupo Panrico SA, a Spanish bakery company owned by Apax Partners, has agreed to acquire the Artiach biscuit business of Kraft Foods. No financial terms were disclosed.

Wall Street Systems, a developer of financial trading and treasury engines, has agreed to acquire the assets of Aleri Global Banking, the wholesale banking division of Aleri Inc. No financial terms were disclosed. Wall Street Systems is a portfolio company of Warburg Pincus, while Aleri Inc. has raised over $30 million in VC funding from St. Paul Venture Capital, Early Stage Enterprises, Allegra Partners and Portage Venture Partners.

Firms & Funds

Fountain Healthcare Partners today launched as an Ireland-based spinout from Elan’s New York-based corporate venture capital group. It has €75 million in committed capital for its debut fund, from limited partners like the European Investment Fund, the National Pension Reserve Fund and Enterprise Ireland. Fountain is targeting a total of €100 million. Fountain will maintain a New York office, but most of its investments will be in Europe.

Panorama Capital, the former venture capital team of JPMorgan Partners, has closed its first independent fund with $240 million in capital commitments. The firm spun out of JP Morgan in 2005, and had initially been seeking to raise at least $400 million.

Human Resources

William “Bing” Gordon has agreed to join Kleiner Perkins Caufield & Byers as a partner, effective this June. He has spent the past decade as chief creative officer for Electronic Arts, which he helped co-found in 1982.

Daniel Galante has joined Alvarez & Marsal Transaction Advisory Group as a managing director and national practice leader. He previously was a senior managing director of FTI Consulting.

James Holzer has joined Brown Brothers Harriman as head of software and tech-enabled services, within the firm’s M&A group. He previously was with CIBC World Markets.

Mark Hootnick has joined Broadpoint Capital as a managing director in the firm’s recapitalization and restructuring group. He previously was a managing director with Imperial Capital.