PE Week Wire: Tuesday, September 2, 2008

Welcome back to those of you who’ve been off – or “working from home” – for the past month or two. Gotten through all your voicemails and rearranged the knickknacks that somehow got rearranged on your desk? You’d better, because the stretch run begins today.

Accountants and calendar-makers will tell you that Q4 doesn’t begin for another 30 days, but we all know that the period between Labor Day and Thanksgiving is more important than either Q3 or Q4. This is when deals get signed, because (A) You can get people on the phone, and (B) Bonus triggers are moving from ethereal to tangible. Lots of those transactions technically close in December, but Sept-Nov is when the real work is done.

The outstanding question, therefore, is whether we’re going to see our first substantive uptick in deal activity post-credit crunch. Erin and I each spent part of last week feeling out investors in a totally unscientific manner, and mostly heard stagnation. Not only because of continued leverage and liquidity concerns, but also because sellers still haven’t internalized decreased valuations.

Fair enough, but there comes a point when dealmakers need to do deals. If not, they might as well become candlestick makers. So I’m betting that the cobwebs will begin to shake off today, and that we’ll soon begin seeing a deal activity increases from both the VC and buyout sectors. Well, not actually betting, but predicting. Nothing massive, but noticeable nonetheless. Now it’s up to you to prove me right…

*** Google is introducing a new browser today, which has sent the techie blogs into orgasmic convulsions. Not surprisingly, most of the talk is about how the move will affect Microsoft. My question, however, is how it will affect the handful of VC-backed startups developing new browsers and browser add-ons. Is this a killer for them, or do they now pivot to become compatible with Google?

Top Three

Hexion Specialty Chemicals, a portfolio company of Apollo Management, has rejected a plan to salvage its $6.5 billion buyout of Huntsman Corp. (NYSE: HUN). Hexion reiterated that Huntsman’s financial situation has deteriorated to the point that the combined company would not be solvent. Huntsman has vehemently disagreed, and is demanding more than $3 billion in damages if the acquisition is not consummated.

DCITS, a provider of IT services in China, has raised $73 million in VC funding as part of a spinoff from Digital China Holdings Ltd. (HK: 861). The round was co-led by the Infinity I-China Fund and China Singapore Suzhou Industrial Park Ventures Co.

Carol Womack is leaving Vanderbilt University, where she serves as managing director of private market investments. She will join wealth management firm Diversified Trust Co., which was founded in 1994 by former Vanderbilt CIO Bill Spitz. The school has begun searching for a replacement.

VC Deals

Baxano Inc., a Mountain View, Calif.-based developer of minimally-invasive spinal devices, has raised $20 million in Series B funding, according to a regulatory filing. VentureWire reports that Kearny Venture Partners led the round, and was joined by return backers Prospect Venture Partners and Three Arch Partners. The company had previously raised $8.64 million.

Xunlight Corp., a Toledo, Ohio-based developer of low-cost and flexible thin-film silicon solar modules, has raised $11 million in Series C funding. Rabo Ventures led the round, and was joined by return backers Trident Capital and Emerald Technology Ventures. The company had previously raised $29 million.

Runcom Technologies Ltd., an Israel-based developer of silicon solutions for user terminals and base stations, has raised $10 million in Series C funding from TLcom Capital.

Buyout Deals

Actis has sponsored a management buyout of Teknicast, a Malaysian manufacturer of aluminum die-casting products. No financial terms were disclosed, except that the company has annual revenue of over $40 million.

Apollo Management has entered the auction process for Reed Business Information, the trade magazine unit of Reed Elsevier PLC. Final offers are due at the end of September, and are expected to value the unit at around $1.8 billion.

Close Brothers Private Equity has sponsored a £129m management buyout of Warwick International from Sequa Corp. Close Brothers invested £55 million, while RBS led a four-bank leveraged financing syndicate. Warwick International is a UK-based company with two separate businesses: Specialty chemical maker focused on the global laundry detergent market, and a network of niche chemical distributors across Europe and Asia.

LDC has acquired UK vehicle management group Leasedrive Velo, in an £80 million secondary buyout from Lyceum Capital.

Linden LLC has acquired MedSystems, a maker of enteral devices and surgical protection products, from Cardinal Health (NYSE: CAH). No financial terms were disclosed. MedSystems will be renamed Corpak MedSystems. Cardinal Health was advised on the deal by Harris Williams & Co.

Ratos, a listed Swedish private equity firm, has sponsored a €50 million recapitalization of GS-Hydro, a Finland-based portfolio company that provides non-welded piping systems.

Summer Street Capital Partners has acquired Willcare, a Buffalo, N.Y.-based provider of home healthcare services in parts of New York and Ohio. No financial terms were disclosed, except that Summer Street typically invests between $5 million and $30 million in companies with between $20 million and $100 million in annual revenue.

PE-Backed IPOs

Noble Environmental Power LLC, an Essex, Conn.-based developer of wind-powered renewable electric generating projects, said that it will offer around 24.44 million common shares in its IPO. The company has still not disclosed a price-range, although it originally filed to raise $375 million. Noble It plans to trade on the Nasdaq under ticker symbol NEPI, with Lehman Brothers, Credit Suisse and JPMorgan serving as co-lead underwriters. The company’s principal shareholder is JPMorgan Partners (managed by CCMP Capital), while the CPP Investment Board is a minority backer.

PE Exits

Change Capital has sold Violine, a holding company for luxury fashion house Jil Sander, to Japan’s Onward Holdings Co. for €167 million.

Temasek has set a Wednesday deadline for second-round bids in its sale of Senoko Power, Singapore’s largest power generation company. The deal is expected to be worth upwards of $3 billion.

PE-Backed M&A

AFS Technologies Inc., a Phoenix–based provider of enterprise software for the food and beverage industry, has raised $13 million in new VC funding. CIBC Capital Partners led the round, and was joined by return backer Ticonderoga Capital. The company also secured a $25 million credit facility arranged by Wells Fargo Foothill. Part of the capital was used to acquire IRM Corp. and Motek Information Systems Inc.

Reservoir Group, a Scottish portfolio company of SCF Partners, has acquired Extreme Machining, an Australian maker of drilling tools. No financial terms were disclosed.

Human Resources

Summit Partners has hired four vice presidents: Amit Chaturvedy (Boston), formerly with Kildare Enterprises, Chris Crawford (Boston), previously with Goldman Sachs, Matthias Steinberg (London), previously with PlateTronic International, and Rytis Vitkauskas (London), previously with Merrill Lynch.

Liam Ratcliffe has joined New Leaf Venture Partners as a New York-based venture partner. He previously was with Pfizer as senior vice president and global head of clinical R&D.

Stephen Campe has been named president of Investor Growth Capital. He originally joined the firm in 1998, as co-head of its U.S. healthcare venture investing group. He succeeds the retiring Henry Gooss, who will remain a senior advisor to the firm.

Steven Gray has joined LDC Scotland, the mid-market private equity arm of Lloyds TSB, after previously having been a director of integrated finance with HBOS.

Anthony Yan-Hong Siu has joined Baird as a managing director in the firm’s new Shanghai office, which also houses members of Baird Private Equity. He previously was an investment banker with Standard Chartered Bank, and will focus on cross-border M&A.

Commerzbank announced plans to cut 9,000 jobs.