PE Week Wire: Tues., Oct. 9, 2007

There are three important developments today on the carried interest tax front. Since there also was an enormous amount of VC deal news today (read: I’m beginning the blue part at 9:50am), let’s do it in notes form:

1. Senate Majority Leader Harry Reid has told private equity chiefs that no carried interest tax bill will get through the Senate this year, according to The Washington Post. The stated reason is scheduling rather than desire, which could mean that carry legislation could be revisited in 2008. Two quick sub-notes: (1) The only pending carry bill is in the House, not the Senate, where it still may be put to a vote in 2007; (2) Reid’s statements do not reference the so-called Blackstone Bill, which would only affect publicly-traded partnerships.

2. The exact opposite scenario is playing out in the UK, where Chancellor of the Exchequer Alistair Darling today will unveil what The Guardian refers to as “substantial increases to the tax bills of private equity bosses.” These changes will be introduced later this hour, and we’ll be posting details at peHUB.

3. David Toll is reporting that certain buyout firms “have begun requesting clauses in their partnership agreements that let them try to maintain their anticipated level of after-tax profits in the event that proposed tax legislation passes.” Maybe they don’t believe Harry Reid, or perhaps are just thinking ahead to 2008. Either way, it would be a big mistake for any LP to sign such terms – at least as currently constructed. Toll reports that initial language would allow the GPs to amend their LPAs without LP approval, in response to a change in U.S. tax law affecting carried interest. Are you kidding? If you’re an LP who agreed to this (and some apparently have), let me know. And then direct me to your dealer.

Top Three

Sallie Mae has filed suit against its potential buyers, saying that it has no interest in renegotiating a lower sale price. Instead, it wants the J.C. Flowers-led consortium to either honor its original $60 per share offer, or pay a $900 million breakup fee. In addition to Flowers, the buyout consortium includes JPMorgan Chase, Bank of America and Friedman Fleischer & Lowe. Full story here.

ReachLocal Inc., a Woodland Hills, Calif.-based provider of online advertising solutions for local businesses, has raised $52.2 million in Series D funding. Rho Ventures led the deal, and was joined by Galleon Crossover Fund and return backer VantagePoint Venture Partners. ReachLocal previously had raised nearly $15 million.

Golub Capital Partners, a New York-based provider of debt financing to private equity sponsors, has withdrawn registration for a $150 million IPO. No reason was given. The firm had planned to trade on the Nasdaq, with Wachovia Securities serving as lead underwriter. The publicly-traded entity would have served as a holding company for Golub’s funds, including the $1 billion Fund V closed earlier this year.

VC Deals

Optherion Inc., a New Haven, Conn.-based developer of products to diagnose and treat dry and wet age-related macular degeneration, has raised $37 million in first-round funding. Backers include Quaker BioVentures, Domain Associates, Johnson & Johnson Development Corp., Purdue Pharmaceutical Products, Pappas Ventures, Biogen Idec New Ventures, and GE Healthcare Financial Services.

AngioScore Inc., a Fremont, Calif.-based developer of angioplasty catheters for use in the treatment of coronary and peripheral artery disease, has raised $30 million in Series E funding. Telegraph Partners led the deal, and was joined by return backers Psilos Group Management, QuestMark Partners, UV Partners, California Technology Ventures and Innomed Ventures. AngioScore previously raised over $45 million in VC funding, including a $30 million Series D round last year at a post-money valuation of approximately $75 million.

ConSentry Networks Inc., a Milpitas, Calif.-based provider of network security solutions, has raised $21 million in fifth-round funding. Teachers’ Private Capital led the deal, and was joined by Translink Capital, NCD Investors and return backers Sequoia Capital, Accel Partners, INVESCO Private Capital, and DAG Ventures. ConSentry has now raised $72 million in total VC funding.

Metastatix Inc., a Tucker, Ga.-based drug company focused on cancer and HIV, has raised $20 million in Series B funding, according to a regulatory filing. Frazier Healthcare Ventures led the deal, and was joined by return backers like H.I.G. Ventures, S.R. One, The Aurora Funds, Advanced Technology Development Center, CM Capital, MedImmune Ventures, Georgia Venture Partners and Centrosome Ventures.

Staccato Communications Inc., a San Diego-based developer of ultrawideband and wireless USB communications components, has raised $17.5 million in new VC funding. Return backers include Allegis Capital, Bay Partners, Charles River Ventures, Formative Ventures, Interwest Partners, and Vision Capital. Staccato has raised around $94 million in total VC funding since 2003.

Spinal Restoration Inc., an Austin, Texas-base developer of a minimally-invasive treatment for discogenic low back pain, has raised $16 million in Series B funding. Santé Health Ventures and MB Venture Partners were joined by return backers Austin Ventures and Path4 Ventures.

LS9 Inc., a San Carlos, Calif.-based developer of hydrocarbon biofuels, has raised $15 million in new VC funding. Lightspeed Venture Partners led the deal, and was joined by return backers Flagship Ventures and Khosla Ventures.

CommPartners Connect, a Las Vegas-based CLEC for small and mid-sized businesses, has raised $11 million in new VC funding led by PAR Capital Management. The company has now raised more than $57 million in total VC funding.

SeaTab Software Inc., a Bellevue, Wash.-based provider of on-demand analytics for small and mid-sized businesses, has raised $9 million in second-round funding. Emergence Capital Partners led the round (which closed at the end of August), and was joined by return backer Trident Capital.

AirInSpace, a supplier of mobile ‘catch and kill’ bio-protection devices in the French medical market, has raised $8.5 million in Series B funding. Matignon Technologies II FCPR led the deal, and was joined by Oddo AM. Aelios Finance served as AirInSpace’s financial advisor.

Send Word Now, a New York-based provider of on-demand alerting and response services, has raised $8.5 million in Series C funding. Southpaw Asset Management led the deal, and was joined by return backers like Ascend Venture Group. The company has now raised around $20 million to date.

Still River Systems Inc., a Littleton, Mass.-based developer of proton therapy solutions, has raised around $6.9 million in Series C funding, according to a regulatory filing. Shareholders include Z-3 Investors and American Shared Hospital Services.

WangYou Media, a Beijing-based provider of online diary, video and other content hosting, has raised $6.12 million in Series B funding, according to a regulatory filing. Return backer Charles River Ventures was joined by Transcosmos Investments & Business Development, ADS Global Partners (Tokyo) and Oxsino Venture Ltd. (Shanghai).

Iasis Medical Inc., a Hastings, Minn.-based medical device startup, has secured $1.5 million of a $10.5 million Series A round, according to a regulatory filing. No investor information was disclosed, although Bill Younger of Sutter Hill Ventures is on the company’s board of directors.

Podaddies, a San Francisco-based online video advertising startup, has raised $1 million in angel funding from The Band of Angels and The Angels Forum.

MicroSeismic Inc., a Houston, Texas-based provider of microseismic monitoring and passive seismic imaging, has secured a $2 million line of credit from Square 1 Bank. MicroSeismic has raised over $7 million in VC funding from firms like Altira Group, CTTV Investments and Rockport Capital Partners.

Buyout Deals

Baird Capital Partners has acquired MedData, a Seattle-based provider of medical billing, coding, and data management solutions to hospital emergency departments. No financial terms were disclosed. As part of the deal, former Open-c Solutions chief will become MedData’s CEO. Richard Pugh, MedData’s founder and retiring CEO, will retain a shareholder stake and board seat.

KKR has taken a 97.6% stake in Turkish shipping companyUN Ro-Ro for around $1.28 billion. UN Ro-Ro, once owned by 177 shareholders including 45 transport companies, retained Citigroup last November to sell a majority holding in the company.

Nogales Investors has agreed to acquire Insync Media, and then merge it with existing portfolio company Graphic Press. No financial terms were disclosed. The combined company will be named Insync Marketing Solutions, and will provide lithography and new media solutions.

Summit Partners has made a “significant minority investment” in Fermentas International Inc., a Burlington, Ontario–based maker of nearly 1,000 molecular biology products for use by researchers in university and commercial laboratories. No financial terms were disclosed.

PE-Backed IPOs

Genoptix Inc., a Carlsbad, Calif.-based provider of personalized medicine services for management of hematolymphatic disorders, has set its IPO terms to five million common shares being offered at between $14 and $16 per share. It would have an initial market cap of nearly $250 million, were it to price at the high end of its range. Genoptix plans to trade on the Nasdaq under ticker symbol GXDX, with Lehman Brothers serving as lead underwriter. Genoptix has raised around $49 million in VC funding since 1999, from firms like Enterprise Partners, Chicago Growth Partners, William Blair Capital Partners, Alliance Technology Ventures, Tullis-Dickerson and Excelsior Venture Partners.

Power Medical Interventions Inc., a Langhorne, Pa.-based developer of computer-assisted surgical instruments, set its IPO terms to 3.85 million common shares being offered at between $12 and $14 per share. It would have an initial market cap of approximately $231 million, if it were to price at the high end of its range. The company plans to trade on the Nasdaq under ticker symbol PMII, with Jefferies & Co. and Lazard Capital Markets serving as co-lead underwriters. Listed shareholders include Boston Scientific Corp., NGN Capital and Robin Hood Ventures.

PE Exits

Summit Partners has agreed to sell Dutch enterprise security software vendor SafeBoot NV to McAfee Inc. (NYSE: MFE) for $350 million in cash. Summit acquired a majority stake in SafeBoot two years ago from ABN Amro Capital for $47 million. The sale is expected to close later this quarter.

PE-Backed M&A

Canon Communications LLC, a Los Angeles-based B2B publisher and event organizer, has acquired two German trade shows: Interpart and Surfacts. No financial terms were disclosed. Interpart is a trade show for manufacturers and subcontractors in the automotive, electronics, medical, and machine construction industries in Southern Germany, while Surfacts serves European companies providing mechanical, chemical or thermal surface treatment, finishing technology, galvanizing technology or vacuum coating for a wide range of industries. Canon is controlled by Spectrum Equity Investors, and plans to co-locate the shows into a single exhibition called Medipart.

Laguna Ventures has acquired OakHill Group, a McLean, Va.-based government contracting firm that offers information security management, engineering and information systems development services. No financial terms were disclosed. Laguna was recently formed as an acquisition platform to buy companies that serve the U.S. intelligence community and U.S. Department of Defense. It is backed by an undisclosed amount of capital from CM Equity Partners, which assisted in the OakHill deal structuring and transaction financing.

Satmetrix Systems Inc., a Foster City, Calif.-based provider of applications and consulting services to improve customer loyalty, has acquired Informative Inc., a South San Francisco–based provider of interactive online solutions for engaging customers in order to drive loyalty. No financial terms were disclosed. Satmetrix has raised around $30 million in VC funding from firms like Aspen Ventures, Sutter Hill Ventures, Stanford University and Siebel Systems. Informative had raised around $75 million from firms like New Enterprise Associates, Walden International, Apex Venture Partners, Sevin Rosen Funds, Crystal Internet Venture Fund, BlueRun Ventures, Levensohn Venture Partners and global Catalyst Partners.

Firms & Funds

Clayton Dubilier & Rice plans to begin raising its eighth fund later this year, according to Private Equity Insider. The firm will target between $6 billion and $7 billion. It closed its previously fund with $4 billion last year, and later added a $550 million co-investment vehicle.

Human Resources

Stephen Gray and Robert Rivett have joined private equity fund placement agent Helix Associates as managing directors. Gray will work out of New York, and previously was a managing director with Henniker River Advisors. Rivett will be based in San Francisco, and previously was co-head of the private fund group and Credit Suisse.

Robert Kirby has resigned as president and COO of Handelman Co. (NYSE: HDL), in order to become CEO of a private equity-backed medical device company. No additional information was disclosed.