As Dan mentioned last week, I’m taking care of the Wire while he’s on vacation, so send your press releases and news tidbits to me at erin.griffith@thomsonreuters.com.
This weekend we said goodbye to the two remaining BCC (before credit crunch) deals, closing the book on both Penn National and BCE. Each found long-anticipated resolutions that seemed relatively painless for those involved. End of story.
But as we bid farewell to that era, a different deal opened up a whole new can of worms for dealmaking in today’s market. The most interesting development of the weekend, in my opinion, was the deal for The Weather Channel. The Blackstone Group, Bain Capital and NBC Universal’s buyout of the media company signals a few notable things for the future of large buyouts (which, most would argue, is anything over $1 billion.)
Some questions and answers (based on conversations I had):
Q: Blackstone and Bain got much of the financing for the deal from hedge funds they own (GSO Capital and Sankaty Advisors, respectively). Is this the only way to finance a deal these days?
A: Turns out the firms shopped the finance package to a number of lenders, but in-house backing made the most solid commitment in the eyes of the seller. GSO and Sankaty provided financing across the entire capital structure, with an emphasis on mezzanine, by the way.
Q. Landmark Communications was looking for more than $5 billion at one point. I am constantly hearing complaints that the main villain behind today’s dearth of deals is “unrealistic seller expectations.” So how did anyone convince Landmark to sell for $3.4 billion?
A: As we know, Landmark is selling all of its assets. The company’s owners were concerned with the potential change in the capital gains tax this year and didn’t want to wait for the economic environment to improve before selling, so they settled.
Q. Partnering with strategic buyers seems like the way to go these days. But when two or more entities with very different long-term goals own an asset, who is in the driver’s seat, and more importantly, what does the exit look like?
A: In the case of Weather Channel, the PE firms thought it might wither as a standalone entity, so the support and infrastructure of NBC made sense. But, in the interest of an exit, they’re keeping the business independent from Bain’s media holdings and NBC’s current weather biz, Weather Plus (though I have to wonder about the fate of that business going forward). Still, the independent status means no synergies, just cross-promotion.
As far as control goes, Bain, Blackstone and NBC will have equal board representation.
And exit-wise, rumors that GE would divest or spin off NBC make exit possibilities really interesting. Speculatively speaking, NBC could sell to Bain, Blackstone or both. NBC could be spun off and buy out the firms’ holdings. NBC could remain under GE’s umbrella and buy out the PE firm’s stakes. You get the drift.
Q: Blackstone, Bain and NBC threw in 50% equity. That’s a lot for a deal larger than $1 billion, and definitely a lot more than either of those PE firms are used to investing.
A: This type of deal won’t be easy for the firms to do often, but The Weather Channel is a “remarkable business,” with its market share more than 5 times that of any competitor. Also, its Internet business is growing at around 20%, cable growing 5-8% and its mobile business emerging quickly.
Stay tuned for tomorrow’s guest column from Paul Kedrosky (the blogger behind Infectious Greed)
Top Three
Cerberus Capital Partners last month injected equity into troubled portfolio company IAP Worldwide Services Inc. as part of a debt restructuring of the defense contractor, according to an LBO Wire account of ratings agencies’ reports. Moody’s and Standard & Poor’s said the move, in which Cerberus Capital paid off some interest on IAP’s first and second-lien loans, should avert a near-term default. The company had been in technical default since 3Q 2007.
Robert Cavalli, an Italian fashion house reported to be in sales talks with private equity firms, has taken itself off the market due to pricing concerns, local news outlets report. TPG, Candover, Doughty Hanson, Carlyle Group and Lion Capital were reported to have expressed interest.
San Diego City Employees’ Retirement System will allocate approximately $250 million $5 billion in assets to private equity investments.
VC Deals
Plimus, a San Jose-based e-commerce service company, received $18 million in first round venture funding from Susquehanna Growth Equity. The firm invests in growth capital and late state venture companies in tech and business services and is an affiliate of Susquehanna International Group.
Dubilier & Co. invested an unknown stake in OosakaNews, a water industry trade publication based in Virginia.
Innovalight, Inc. has received $5 million in commitments from ATEL Ventures, a San Francisco-based venture capital firm. The financing comes in the form of an equipment lease. Innovalight makes low price point portable solar power systems using nanotechnology. ATEL Ventures is part of ATEL Capital Group.
Accuri Cytometers, a life sciences company that develops cytometer systems, has raised $14 million in a Series C financing. Flagship Ventures and Fidelity Biosciences led the round.
Paragon Lake, a customized jewelry supplier, raised $5.4 million in a Series A round of fundraising from Highland Capital Partners and Canaan Partners.
Corefino Inc. raised $13.6 million from Bay Partners and Opus Venture Partners. It is the web-based accounting system developer’s first round of fundraising.
DepotPoint Inc, a Washington-based foreclosure tracking company, raised $7 million from OVP Venture Partners in a Series C round of fundraising. DepotPoint’s existing investor, Trident Capital participated.
Cyber-Rain Inc, a technology company focused on water management, raised $1.5 million in Series A financing from Funk Ventures, Momentum Venture Management and others.
Buyout Deals
Cerberus Capital Partners last month injected equity into troubled portfolio company IAP Worldwide Services Inc. as part of a debt restructuring of the defense contractor, according to an LBO Wire account of ratings agencies’ reports. Moody’s and Standard & Poor’s said the move, in which Cerberus Capital paid off some interest on IAP’s first and second-lien loans, should avert a near-term default. The company had been in technical default since 3Q 2007.
AIG Investments and Alumni Capital Network closed the buyout of the Personal Communications Division of UTStarcom, Inc. The deal for the mobile device distributer is the first for Alumnia Capital Network, a private equity firm created in 2007 by former senior partners of Accenture.
Winona Capital has purchased a controlling stake in Dragon Alliance LLC, a sport eyewear maker, from Oakley (now part of Luxottica Group). The deal terms were not disclosed but management will invest alongside Winona. The firm, based in Chicago and Seattle, manages funds backed by high net worth families and individuals.
Blue Sage Capital has invested $10 million in industrial marchinery manufacturer MultiCam Inc. The deal represents a majority stake sale. Fifth Third Bancorp served as a debt provider.
Peterson Partners, has completed the previously announced purchase of the Consumer Solutions Business Unit of FranklinCovey. The carve-out will be named FranklinCovey Products. The Salt Lake City-based LBO shop paid $32 million in cash for the unit.
Steel Partners, a US hedge fund, has recommended to Sapporo Holdings, a Japanese brewer, that the company sell itself. Steel Partners holds an 18.6% stake in the business. The firm has proposed to buy a larger chunk of Sapporo shares in the past.
Robert Cavalli, an Italian fashion house reported to be in sales talks with private equity firms, has taken itself off the market due to pricing concerns, local news outlets report. TPG, Candover, Doughty Hanson, Carlyle Group and Lion Capital were reported to have expressed interest.
Ares Management and New Leaf Ventures will invest up to $300 million in a spin-out of Angiotech Pharmaceuticals Inc. The subsidiary, Angiotech Pharmaceutical Interventions (API), will run the company’s operations while the publicly traded entity, Angiotech, will handle royalty operations. The investment comes in the form of convertible notes and values API at $625 million.
Alchemy Partners, a UK buyout firm, has expressed interest in the motoring division of insurance company Aviva PLC, according to LBO Wire.
Carlyle Group’s Carlyle Asia Partners invested $87 million in Chinese rubber product market Sinorgchem. No financials were revealed.
Colony Capital last month completed its previously reported plan to increase its stake in French hotelier Accor SA, according to LBO Wire. Colony Capital now owns 20 percent of the company, whose brands include Novotel and Ibis, while Colony Capital’s partner, Eurozeo, boosted its stake to 10 percent.
Friedman Fleischer & Lowe’s $16.50 per share bid for financial services firm Loring Ward International appears to be in jeopardy. The company yesterday announced that it’s received a $17.50 per share offer from Werba Reinhard Inc. Friedman Fleischer & Lowe reached its deal for Loring Ward last month.
PE-Backed IPOs
EnergySolutions Inc., a nuclear materials company backed by Lindsay Goldberg and Peterson Partners, will announced a secondary share offering worth $35 million. The Salt Lake City-based company went public in November; Lindsay Goldberg retains a stake worth nearly 70% while Peterson Partners’s stake is less than 10%.
GT Solar International Inc., a solar power supply chain company, priced its IPO between $15.50 and $17.50 per share with 30.3 million common shares. The company is backed by OCM/GFI Power Opportunities Fund II LP, a joint fund managed by GFI Energy Ventures and Oaktree Capital Management. The company will trade under the ticker SOLR.
PE Exits
Reliant Technologies, a venture-backed life sciences company, sold itself to Thermage Inc. for $95 million. The company had raised around $35 million from Delphi Ventures, Meritech Capital Partners, Three Arch Partners and individuals, according to VentureWire.
PE-Backed M&A
Winona Capital and Chicago Growth Partners-backed American Education Group has purchased Georgia-based private school operator Shreiner Academy from its founders. Deal terms were not disclosed, but the transaction is American Education’s fourth add-on since taking on a $40 million investment from the PE firms last year.
Waterland, a UK private equity consortium, is in negotiations to restructure the buyout debt of its Dutch gaming portfolio company JVH Gaming. The business blames its struggles on a new smoking ban and tax. The debt in question is worth €295 million ($461 million). Waterland bought the company in 2006 from ABN Amro and NPM Capital.
Firms & Funds
Relativity Capital is targeting $300 million for its first fund, slated to close by the end of the year, according to Buyouts. The Washington, D.C.-based firm was founded by vets of Carlyle Group and Cerberus Capital in 2006 and has made two investments. Investors include Michigan 21st Century Investment Fund and the Philadelphia Pension Fund.
CVC Capital Partners has opened an office in Beijing. The Luxembourg-based LBO firm manages more than $46 billion worth of private equity funds.
Shuaa Partners, Dubai-based private equity firm, has raised $165 million for a first close on Shuaa Hospitality Fund I. The firm is a subsidiary of Shuaa Capital PSC.
Longitude Capital, a California-based life sciences venture firm, launched its first fund, Longitude Venture Partners, L.P. The fund raised $325 million, surpassing its $250 million target.
San Diego City Employees’ Retirement System will allocate approximately $250 million $5 billion in assets to private equity investments.
Contra Cost County Employees’ Retirement System has committed $50 million to funds-of-funds manager Adams Street Partners’s 2009 program, according to LBO Wire. Adams Street expects to raise as much as $2.1 billion for the 2009 effort.
Los Angeles Fire and Police Pensions is preparing to commit $20 million to two secondaries funds managed by Landmark Equity Partners and ARCIS Group, according to LBO Wire. Landmark Equity is seeking $2 billion for its U.S. mid-market-focused fund, while ARCIS Group is seeking $550 million for its European vehicle.
Human Resources
Gregory L. Taber and Daniel L. DeSantis have been promoted to managing directors at Ohio-based LBO shop Linsalata Capital Partners. Taber joined Linsalata in 2000; DeSantis came on board in 2001.
Bank of Ireland Corporate Banking hired Richard Michalik as managing director of US leveraged finance and Pat Laughlin as managing director and head of US health care. The hires hail from National City Bank and ABM Amso/LaSalle bank, respectively. They’ll be based in Bank of Ireland’s newly opened Chicago office.
Advent Venture Partners has hired Mike Chalfen to its technology team. Previously Chalfen was a partner on Apax Partners’s European team.
CVC Capital Partners, a Luxembourg-based LBO firm has hired Zhu Wei as a managing director to head its newly opened Beijing office. Zhu was previously a managing director heading Goldman Sach’s Shanghai investment banking team.
ABS Capital Partners promoted Senior Associate Rob Tobin to Vice President. Tobin focuses on media and communications at the Baltimore-based ate-stage growth investment company.
J. Mikesell Thomas has joined financial services-focused firm Castle Creek Capital as a principal. He was most recently CEO of the Federal Home Loan Bank of Chicago. He previously spent 21 years at the First National Bank of Chicago in a variety of roles. Get more info.
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