PE Week Wire: Wed., May 16, 2007

Count me among those surprised that Insulet priced its IPO yesterday. Not because I didn’t think it was a good enough company to go public (I did), but because I had believed that the original S-1 was filed to help better position Insulet for an acquisition. After all, VC-backed healthcare IPOs are more financing events than liquidity events, and the best companies can usually do better elsewhere.

Case in point is Asthmatx, a Mountain View, Calif.-based maker of catheter-based devices for the treatment of Asthma. You might recall that Asthmatx was 90 minutes away from pricing its IPO last fall, before receiving what it referred to at the time as a superior alternative offer. It took a very long time for that offer to become a signed agreement, but yesterday Asthmatx announced that it had raised $50 million in Series D funding from Olympus Medical Systems Corp. (Tokyo: 7733). Not only is this fairly close to what Asthmatx had been expected to raise in the public markets, but its $280 million pre-money valuation is around double what its pre-money IPO valuation would have been.

There is a bit of downside in that VCs will have to wait a bit longer for liquidity – the Series D was all new equity – but it’s hard to complain when an outside party has just valued your portfolio company at twice what it would have been worth just six months earlier.

*** Speaking of public/private financing issues, does anyone else think that Whitney & Co. is probably quite pleased that it was rebuffed in its efforts to reacquire Herbalife? After all, Whitney held over 17 million shares in Herbalife prior to its buyout offer, and then saw the shares go up over 20 percent in direct response to the offer. Most important, the share price didn’t really decline after Whitney got turned down – probably because shareholders expected a slightly better offer to follow from someone else (oh those public equity folks are eternal optimists). What did Whitney do? Sell its 17 million-plus shares at the inflated price. Not a bad result at all (for Whitney, at least)…

*** There are a number of new developments in the case of John Q Public vs. Private Equity. Not only is SEIU president Steven Lerner testifying in front of Congress today, but the AFL-CIO reportedly sent the SEC a letter asking that it should delay The Blackstone Group’s planned IPO. Why, because AFL-CIO believes that Blackstone may be sidestepping securities laws via its structure as a “partnership” rather than as an “investment company.” It’s unlikely to have any direct impact on Blackstone, but is another log added to the larger fire.

*** In related – albeit far less important – news, I spent an hour on NPR last night, discussing Chrysler and private equity with HBS professor Josh Lerner and former U.S. Labor Secretary Robert Reich. You can listen to the podcast here, and should pay particular attention when Reich comes on at around the 30 minute mark. He is the latest pol to speak out on the tax treatment issue, which he calls a “tax dodge” by private equity investors. He also wrote a blog post about it here (second post on page). If you got rankled by what I wrote on the subject, you should perhaps take a Tums before reading Reich.

*** Mark Frantz of Redshift Ventures has made his Vox Populi debut, to talk about why his firm just invested in geospatial data company TerraGo Technologies.

*** Bart Schachter of Blueprint Ventures chimes in with thoughts on the recent Supreme Court rulings on patent protection.

*** Quiz Time: Can you name the private equity firm that just lost some blue-chip endowments as limited partners, because of its love affair with the public markets? Hint: It’s not Blackstone.

Top Three

Warburg Pincus has agreed to acquire Bausch & Lomb (NYSE: BOL) for approximately $4.5 billion. The pricetag includes around $830 million in assumed debt, with Bausch & Lomb shareholders to receive $65 per share. Under terms of the agreement, Bausch & Lomb may solicit superior proposals for the next 50 days, but would be required to pay Warburg Pincus a $40 million breakup fee were it to accept an alternate offer. Bausch & Lomb is being advised by Morgan Stanley.

Ice Energy Inc., a Windsor, Colo.-based air conditioning startup, has raised $25 million in Series A funding. Goldman Sachs led the deal, and was joined by Good Energies Inc., Second Avenue Partners and Sail Venture Partners. The Ice Energy product is essentially an energy storage system that draws power from utilities at night (when power is cheaper), turns it into ice and then ices the ice as a coolant during the day.

Citigroup Venture Capital has sold FastenTech Inc. to Doncasters Group Ltd. for approximately $492 million. FastenTech is a Minneapolis–based manufacturer of industrial and aerospace-grade fasteners and precision components. Doncasters is a portfolio company of Dubai International Capital.

VC Deals

ID Analytics Inc., a San Diego–based provider of identity risk management solutions, has raised $20 million in Series C funding. Investor Growth Capital led the deal, and was joined by return backers Canaan Partners, Mission Ventures and Trinity Ventures. The company now has raised just over $45 million in total VC funding since its 2002 formation.

Marcadia Biotech, an Indianapolis-based drug company focused on diabetes and obesity, has raised $15 million in Series A funding. Frazier Healthcare Ventures seed backer 5AM Ventures co-led the deal, and were joined by other seed backer Twilight Venture Partners. As part of the deal, Frazier general partner Patrick Heron will join the Marcadia board of directors. Marcadia has a licensing agreement with Indiana University Research and Technology Corp. and a sponsored research agreement with Indiana University. Its founders are former executives from Eli Lilly and Guidant Corp.

uLocate Communications Inc., a Framingham, Mass.-based publisher of location-enabled mobile applications, has raised $11 million in Series C funding. Venrock led the deal, and was joined by return backers GrandBanks Capital and Kodiak Venture Partners. Ulocate previously had raised just over $5 million.

Convio Inc., an Austin, Texas-based provider of online constituent relationship management solutions for nonprofit organizations, has raised $10.1 million in new VC funding. The deal comes just after Convio acquired competitor GetActive Software Inc., and includes former GetActive shareholder El Dorado Ventures. Returning Convio backers include Austin Ventures, Adams Street Partners, Granite Ventures, Silverton Partners and Windspeed Ventures. A regulatory filing indicates that the transaction is Series C stock, even though it is Convio’s fifth round of funding. It has now secured over $46 million to date.

Compassoft Inc., a Scotts Valley, Calif.-based provider of SOX regulatory compliance and enterprise risk management software, has raised $7 million in Series B funding, according to a regulatory filing. Return backers include Advanced Technology Ventures and Leapfrog Ventures.

TerraGo Technologies, an Atlanta-based provider of geospatial distribution solutions, has raised $6.3 million in Series A funding. RedShift Ventures led the deal, and was joined by CNF Investments and In-Q-Tel.

The Institute for Corporate Productivity (i4cp), a St. Petersburg, Fla.-based research organization focused on improving workforce productivity and bottom-line results within corporations, has raised $6 million in Series A funding. IDG Ventures Boston and Trinity Ventures co-led the deal, with Jeff Bussgang of IDG and Patricia Nakache of Trinity joining the i4cp board of directors.

Mitrionics AB, a Lund, Sweden-based developer of a software performance acceleration platform, has raised $6 million in second-round funding. Grande Ventures led the deal, and was joined by return backers Creandum and Teknoinvest.

NexWave Inc., a France-based developer of embedded software for mobile devices, has secured $5 million of a $10 million Series C round, according to a regulatory filing. Shareholders include ABN Amro Capital, Eliaia Ventures and Wellington Partners.

Datacraft Solutuions, a Durham, N.C.–based provider of supply chain SaaS solutions, has held a first close on its Series A funding round, led by True Ventures.

SensorLogic Inc., a Dallas–based provider of asset management and control solutions, has raised $350,000 in strategic Series B funding from the UPS Strategic Enterprise Fund. The company has now raised just over $26 million in total VC funding, with existing shareholders including Boston Millennia Partners, Sevin Rosen Funds, Hunt Ventures, STARTech Early Ventures and Star Ventures.

Revive Systems Inc., a McLean, Va.-based provider of network security and reliability software, is planning to raise between $8 million and $10 million in Series B funding later this year. The company previously raised just around $2.5 million in Series A funding from Novak Biddle Venture Partners and Chart Venture Partners.

Buyout Deals

Permira has agreed to acquire a 29.6% stake in listed Italian fashion house Valentino Fashion Group SpA, for €782.6 million. Rival bidders had included The Carlyle Group and Apax Partners.

Providence Equity Partners has agreed to acquire USIS from The Carlyle Group and Welsh, Carson, Anderson & Stowe for approximately $1.5 billion USIS is a Falls Church, Va.–based provider of pre-employment screening solutions.

Limited Brands Inc. (NYSE: LTD) has agreed to sell its 67% interest in its Express brands to Golden Gate Capital for $548 million. The deal is expected to close by July 6. Limited Brands also announced that it would consider a sale of its Limited stores business, in order to refocus on other units like Victoria’s Secret and Bed, Bath & Beyond.

The Riverside Company has acquired WorkPlace Media, a Mentor, Ohio–based marketing firm that targets at-work consumers. No financial terms were disclosed.

Keane Inc. (NYSE: KEA) shareholders have approved a $14.30 per share buyout by Caritor Inc., a San Ramon, Calif.-based IT services provider. The total deal is valued at approximately $854 million, with Caritor receiving equity financing from existing shareholder Citigroup Venture Capital International and leveraged financingfrom Citigroup Global Markets, UBS Securities and Bank of America Securities.

Ingersoll-Rand Co. (NYSE: IR) said that it is exploring strategic alternatives for its Bobcat and construction-related businesses, which could include a sale or public spinout. The involved companies reported approximately $2.6 billion in 2006 revenue. Ingersoll-Rand said it expects to conclude the process in the second half of this year.

KKR is one of four finalists to acquire a significant minority position in Air Canada Technical Services, according to The Globe & Mail. The entire company is believed to be valued at between Cdn$700 million and Cdn$1 billion, with Air Canada expected to sell between 42% and 49 percent. Other bidders include Onex, Deutsche Lufthansa and an undisclosed non-Canadian firm.

LaSalle Capital Group and Marquette Capital Partners have acquired Paramount Building Solutions Inc., a provider of outsourced janitorial services to the retail industry.No financial terms were disclosed.

Gulf Fleet Management, a Lafayette, La.-based provider of personnel and supply transport services to the oil & gas market, has raised an undisclosed amount of private equity funding from H.I.G. Capital.

Insight Global Inc., an Atlanta-based provider of IT consultants to Fortune 1000 companies, has received an undisclosed amount of private equity funding from H.I.G. Capital.

PE-Backed IPOs

Insulet Corp., a Bedford, Mass.-based maker of wireless glucose pumps for diabetics, priced 7.7 million common shares at $15 per share, for an IPO take of approximately $115.5 million. It had previously filed to sell 6.7 million shares at between $14 and $16 a piece. It will trade on the Nasdaq under ticker symbol PODD, while JP Morgan and Merrill Lynch served as co-lead underwriters. Insulet had raised $120.2 million in total VC funding since its 2000 inception, from firms like Prism VentureWorks, Versant Ventures, Alta Partners, The Kaufmann Fund, MedVenture Associates, Pequot Capital, Oakwood Medical Investors, Orbimed Advisors, Red Abbey Venture Partners, SV Life Sciences, SightLine Partners and TIAA-CREF.

EnerNOC Inc., a Boston-based provider of demand response and energy management solutions, has increased its IPO pricing range from $21-$23 per share to $23-$25 per share. It still plans to offer 3.75 million common shares, and to trade on the Nasdaq under ticker symbol ENOC. Credit Suisse and Morgan Stanley are serving as co-lead underwriters. The company has raised around $28 million in VC funding, including an infusion late last year at a post-money valuation in excess of 4215 million. Shareholders include Foundation Capital, Draper Fisher Jurvetson, Braemar Energy Ventures and DFJ New England.

The IPO calendar for the remainder of May includes expected pricings from: Marquee Holdings Inc., Eurand NV, EnerNOC Inc., Trimas Corp., RSC Holdings Inc., Vantage Energy Services Inc. and LDK Solar Ltd.

PE-Backed M&A

Olympus Partners has agreed to sell Bermuda-based specialty insurance company Talbot Holdings Ltd. to Validus Holdings Ltd., a fellow insurance company backed by Aquiline Capital Partners, Goldman Sachs, New Mountain Capital and Vestar Capital Partners. No financial terms of the sale were disclosed. Talbot will serve as Validus’ principal operation in the direct insurance market and Talbot’s Syndicate 1183 will form its primary point of access to the London Market.

PE Exits

AOL has agreed to acquire Third Screen Media, a Boston-based provider of mobile advertising and marketing software. No financial terms were disclosed, although an earlier Wall Street Journal report had suggested an $80 million pricetag. Third Screen has raised $8 million in VC funding from firms like TD Capital Ventures and Blue Chip Venture Co.

Apax Partners has sold Crane Telecommunications Group Ltd. to Westcon, a subsidiary of Datatec Ltd. No financial terms were disclosed. Crane is a UK-based distributor of voice, data and converged communications solutions. It was advised on the sale by Corum Group.

KKR has agreed to sell Cleanaway Holdings Ltd., a provider of waste management services in Australia, New Zealand and Taiwan, to Transpacific Industries Group Ltd. for Au$1.25 billion. KKR will retain the BIS Cleanaway logistics business. KKR originally acquired the entire company for Au$1.83 billion last year – besting Transpacific – of which around Au$1 billion was for the assets currently being sold.

Firms & Funds

3i Group plans to list a new closed-end investment vehicle on the London Stock Exchange, which will acquire control positions in small and mid-cap quoted companies, primarily in the UK and continental Europe. 3i Quoted Private Equity (3i QPE) is expected to raise at least Gbp400m,of which 45% will come from 3i Group itself.

Advent International is looking to raise more than $1 billion for its fourth Latin American private equity fund, according to Dow Jones. A final close is expected in July.

Citi Alternative Investments has formed Citi Infrastructure Investors, which will manage equity investments in infrastructure assets and will oversee a management company focused on the operation of these investments. The CII team will be co-led by Juan Bejar, former CEO of Ferrovial Infrastructure in Spain, and Felicity Gates, former head of Deutsche Bank’s RREEF’s North America infrastructure business. CII also named three managing directors: Colin Campbell, previously with the global banking infrastructure team at Citi Markets & Banking; J.G. Duthie-Jackson, previously with Citi’s European infrastructure & corporate securitization group; and Michael Froman, current COO of Citi Alternative Investments and former CEO of CitiInsurance.

Mekong Capital is looking to raise up to $100 million for its third fund, which will focus on privatized companies in Vietnam.

Human Resources

Lamar Villere has joined the alternative investment team of Teachers’ Retirement System of Illinois, according to Buyouts Magazine. Villere previously led the domestic equities team of TRS, and before than was an equity analyst at Morgan Keegan & Co.

Canaan Partners has promoted Wende Hutton from venture partner to general partner. Hutton joined Canaan in March 2004, and currently sits on the boards of such life sciences companies as Alsius Corp., Apieron Inc., BiPar Sciences Inc., Northstar Neuroscience Inc. (Nasdaq: NSTR), Oculir Inc., ReVision Optics Inc., and Spaltudaq Corp.

Dow Kim has resigned from Merrill Lynch, where he had been co-president of global markets and investment banking, effective by year-end. He will form his own firm, which will count Merrill Lynch among its clients.

Mohammad Al Tuwaijri has joined JPMorgan as a managing director and senior country officer for Saudi Arabia. He has spent the past 12 years with SABB-HSBC, an affiliate of HSBC Group in Saudi Arabia, where he was group treasurer.