PE Week Wire: Wed., Dec. 5, 2007

There aren’t too many good things to say about the credit crunch, but one silver lining seemed to be that it had killed off the quick-flip. You know, when private equity firms buy a company and then send it back to the public markets just months later. Big profits for private equity, questionable value-add for public market investors.

But it seems the obituary may have to be postponed. Reuters reported earlier this week that The Blackstone Group is planning to bring Travelport public in London early next year, with expectations of raising $2 billion. This comes just 15 months after Blackstone led a $4.3 billion carve-out of Travelport from Cendant Corp., alongside minority co-investors One Equity Partners and Technology Crossover Ventures.

Before continuing, it’s worth noting that many buyout pros despise the term quick-flip when it comes to IPOs, because they often end up holding a majority or control stake even after the company is listed. So I’ll stipulate that the Travelport will not represent an actual exit for Blackstone. But let me also point out that it represents the first giant step down a specific exit path, and also will generate revenue due to the absurd fees typically attached to buyout-backed IPOs.

And most of that revenue — plus all other Travelport-related dollars — will represent a positive return for Blackstone, which had basically made back its initial equity investment back via a dividend recap earlier this year (pre-credit crunch, natch). So the real question isn’t whether or not Travelport is a winner for Blackstone (it is), but whether its IPO will spark another run of quick-flip IPOs.

I wish I had a prediction for you, but my pro/con list is at even. On the pro-spark side, you have two factors: (1) Despite its short holding period, Blackstone has changed and strengthened Travelport quite a bit. It did an IPO for subsidiary Orbitz, and bought Worldspan. (2) Most everything Blackstone touches turns to gold. I know that’s not terribly analytical, but it can’t be ignored.

On the con side: (1) Orbitz stock has tanked post-IPO, which can’t make public market investors feel good. (2) That dividend recap also should make folks queasy, as it’s the type of thing that has led to buyout-backed IPOs underperforming “regular” IPOs in 2007.

If the pros win out, expect to see a bunch of new issues. If it’s the cons’ night, then PE firms will keep on talking about being long-term investors.

*** The 5th Annual Internship Rodeo is underway, with hundreds of first-year MBAs logging in so far to check out the listings. Huge thanks to the more than 80 firms that are participating, including the last few that I plan on posting later this morning.

*** John Montgomery talks wind power biz, with Ted Noble of Wintec Energy.

*** The Clear Channel buyout will now drag into 2008, due to FCC delays. Will buyers Bain Capital and TH Lee stick it out?

* Silicon Alley names its 100 most influential peoplein theNew York digital media scene. Good to see my new incoming boss (actually my boss’s, boss’s, boss’s boss) is #35…

* I had thought thatquestionable managementat the Florida State board of Administration only related to private equity. But it seems to be far more wide-reaching.

* The UK government is losing the Northern Rock shoot-out.

Top Three

Cerberus has scrapped its agreement to acquire Option One Mortgage Corp. from H&R Block Inc. (NYSE: HRB). The two sides had tried renegotiating as the sub-prime mortgage mess cut into the unit’s value – the original deal was priced at the value of tangible net assets at the date of closing – but were unable to work out a deal. H&R Block now says that Option One is accepting no new mortgage applications, will lay off about 620 employees, close three offices and take a $75 million restructuring charge as it shuts down operations. The company also said it plans to sell its mortgage servicing business.

Precision Therapeutics Inc., a Pittsburgh-based oncology services company, has agreed to go public via a reverse merger with special purpose acquisition company Oracle Healthcare Acquisition Corp. (OTC BB: OHAQ). The merged company will retain the PTI name, and is expected to apply to trade its shares on the Nasdaq. PTI is currently in registration for an IPO, which it is expected to withdraw. The company has raised around $84 million in VC funding since 1996, from firms like Adams Capital Management (39.1% pre-IPO stake), Quaker BioVentures (21.5%), TVM Capital (9.1%), Birchmere Ventures (8.8%), Stephens Group (6.5%) and Draper Triangle Ventures.

CVC Capital Partners plans to begin raising a $2 billion infrastructure fund early next year, with a non-exclusive focus on opportunities in Europe. It will be run by Stephen Vineburg, who previously was global head for global infrastructure investment at Colonial First State Global Asset Management, a unit of Commonwealth Bank of Australia.

VC Deals

CardioMEMS Inc., an Atlanta-based developer of wireless medical pressure sensors, has raised $33 million in Series E funding. Arcapita Ventures led the round, and was joined by fellow return backers Boston Millennia Partners, Medtronic, Easton Capital Partners, Foundation Medical Partners, and Arboretum Ventures. New investors included Deerfield Capital Management, Vision Capital Advisors, Aperture Venture Partners and Rockport Venture Securities. This is the same round peHUB reported on back in September, based on a regulatory filing. CardioMEMS earlier this year pulled registration for an $86.25 million IPO, which it said would have been “discretionary.” At the time, it had raised $52.6 million in VC funding.

MyStrands, a Corvallis, Ore.–based developer of a personalized discovery platform and social recommender engine, has raised $24 million in Series B-2 funding. Spanish bank BBVA led the round, and was joined by return backer Debaeque. The company has now raised a total of $55 million.

TuVox Inc., a Cupertino, Calif.-based provider of enterprise software for speech applications, has raised $20 million in sixth-round funding. Glynn Capital Management was joined by return backers Norwest Venture Partners, Foundation Capital, Granite Ventures and Adobe Ventures. It has now raised nearly $60 million in total VC funding since 2002.

AxoGen Inc., an Alachua, Fla.-based commercializer of peripheral nerve regeneration technologies, has raised $12.1 million in Series C funding. Backers include Accuitive Medical Ventures, Cardinal Partners, De Novo Ventures and Springboard Capital.

Adapx, a Seattle-based provider of field data management solutions, has raised $10 million in Series A funding from OVP Venture Partners and Paladin Capital Group.

Cernium Corp., a Reston, Va.-based developer of video analytics-enabled products, has raised $10 million in new VC funding from Lurie Investments.

OPX Biotechnologies Inc., a Boulder, Colo.-based biotech company focused on improving the viability and cost-effectiveness of biofuels and biorefined chemicals, has raised $3.6 million in second round funding. Mohr Davidow Ventures led the deal, and was joined by return backer X/Seed Capital.

Buzzwire Inc., a provider of online multimedia streaming to mobile phones, has raised $8 million in Series B funding. Sequel Venture Partners led the round, and was joined by return backers Matrix Partners and Spark Capital. Buzzwire is jointly headquartered in Denver and Boston.

CrossLoop Inc., a Pacific Grove, Calif.-based provider of desktop sharing software, has raised $3 million in Series A funding. El Dorado Ventures led the deal, with partner Tom Peterson taking a board seat., a UK-based online retailer of hard-to-find and mainstream lingerie, has raised Gbp630,000 in seed funding from South West Venture Fund (managed by YFM Group) and individual angels.

VirtualLogix Inc., a Sunnyvale, Calif.-based provider of real-time virtualization software, has received an undisclosed amount of equity funding from Texas Instruments. The investment is related to a collaboration deal, whereby VirtualLogix will align its virtualization software roadmap with TI’s embedded application-specific multicore semiconductor direction. VirtualLogix shareholders include Esprit Capital Partners, Intel Capital, Cisco Systems, Atlas Venture and Index Ventures.

WildTangent Inc., a Redmond, Wash.-based online gaming network, has raised $20 million in venture debt funding from Hercules Technology Growth Capital. The company previously has raised $67 million in VC funding since 1999, from firms like Advanced Technology Ventures, ATI, CIBC Capital Partners, Grelock, IDG Ventures, Madrona Venture Group, Millennium Technology Ventures, New Millennium Partners, Sony Corp. and Washington Mutual.

Buyout Deals

J.C. Flowers and Icelandic bank Kaupthing reportedly will bid up to €1.5 billion to acquire Irish Nationwide Building Society. Kaupthing currently is in the process of buying Dutch bank NIBC from Flowers.

Sun Capital Partners has agreed to buy Smokey Bones Barbeque & Grill from Darden Restaurants Inc. (NYSE: DRI). The deal is valued at approximately $80 million, and is expected to close within 45 days. Smokey Bones is a restaurant chain with 73 locations.

Teco Energy (NYSE: TE) has sold shipping business Teco Transport Corp. to an investor group led by Greenstreet Equity Partners, for $405 million.

Tonka Bay Equity Partners has acquired the AST Bearings division of Axsys Technologies Inc. (Nasdaq: AXYS). No financial terms were disclosed for the deal, which was done in partnership with company management.

Citizens Bank, Lehman Brothers and Woodside Capital have sponsored a refinancing of National Investment Managers (OTC BB: NIVM), a provider of retirement plan administration with more than $10 billion in assets under administration. Citizens will provide $15 million in senior debt, while Woodside and Lehman will provide $12 million in mezzanine debt.

PE-Backed IPOs

NetSuite Inc., a San Mateo, Calif.-based provider of business management application suites for SMEs, has set its IPO terms to 6.2 million common shares being offered at between $13 and $16. It would have an initial market cap of approximately $952 million, were it to price at the high end of its range. The company plans to trade on the NYSE under ticker symbol N, with Credit Suisse serving as lead underwriter. NetSuite has raised around $85 million in VC funding from firms like Cross Atlantic Capital Partners and St! arVest Partners.

PE Exits

Fox Entertainment Group, a unit of News Corp., has acquired Beliefnet, a website that focuses of faith and spirituality-related content. No financial terms were disclosed. Beliefnet had raised $26 million in VC funding between 1999 and 2002 from firms like Highland Capital Partners and Primus Capital Funds, but then filed for Chapter 11 bankruptcy protection. It would later raise around $7 million from Softbank Capital and Blue Chip Venture Co. Beliefnet was advised on the sale by Savvian LLC.

Nokia has acquired Avvenu, a Palo Alto, Calif.–based provider of secure remote access and private sharing technology that allows users to access and view PC files remotely. No financial terms were disclosed. Avvenu had raised around $10 million in VC funding since 2005, from firms like Charles River Ventures, Motorola Ventures and Worldview Technology Partners.

PE-Backed M&A

Intelenet Global Services, an Indian business process outsourcing company recently acquired by The Blackstone Group, has made two acquisitions: Upstream, a Fargo, N.D.-based BPO company; and Travelport ISO, an Indian provider of back-office services to fellow Blackstone portfolio company Travelport.

Metastorm Inc., a Columbia, Md.-based provider of business process management software, has acquired Spotlight Data, a provider of software for process data collection and analysis. No financial terms were disclosed. Metastorm has raised $96 million in total VC funding, including a 2004 recap round. Backers include ABS Capital Partners, Internet Capital Group, 3i Group and Wall Street Technology Partners.

Firms & Funds

Chrysalix Energy Venture Capital and European asset manager Robeco have formed a joint venture to invest in European companies focused on green energy and climate mitigation technologies. The effort has an initial capitalization of €50 million, and is expected to grow to more than €100 million next year. Limited partners include DELTA NV and Essent NV, while the fund’s independent management team is led by Rene Savelsberg, who previously led the corporate venture arm of Philips.

Towerbrook Capital Partners plans to raise $2.5 billion for its third fund, according to LBO Wire. It closed its second vehicle last year with $1.3 billion.

BlueRun Ventures has opened a new office in Beijing. The move follows the firm’s recent additions of William Qu and Mike Ding to its China team.

Human Resources

Jon Karlen has been promoted to general partner of IDG Ventures Boston. He joined the firm two years ago as a principal, and has led such deals as Zing Systems (later acquired by Dell) and GuildCafe.

Alan Lacy, a senior advisor to Oak Hill Capital Partners, has been elected to the board of Bristol-Myers Squibb Co. (NYSE: BMY).

Grail Partners, a New York-based merchant bank, has promoted John Siciliano to managing partner. He’ll share the title with firm founder Donald Putnam. Siciliano joined Grail this past January, before which he was chairman and CEO of BKF Asset Management and its parent company BKF Capital Group. .