peHUB Wire: Friday, June 12, 2009

Last month, The Carlyle Group paid $20 million and adopted a “code of conduct” authored by Andrew Cuomo, in exchange for a promise that none of its executives would face criminal charges related to the New York kickback scandal. I wrote that it was a lousy settlement for the public, but a wonderful one for Carlyle – which had basically bought its way out of future legal trouble, with a small check (for them) and the promise to never act badly again (without admitting any bad acts in the first place). In other words, I totally understood why Carlyle did what it did.

What I don’t understand, however, is why Riverstone Holdings yesterday cut its own deal with Cuomo. On its surface, the agreement is similar – “code of conduct” and a check for $30 million (the higher amount is based on higher fees that NY’s state pension fund paid Riverstone). But before you think Cuomo got snookered again, realize that he didn’t promise to end the criminal investigation into David Leuschen, Riverstone’s co-founder and senior managing director. In fact, he explicitly stated that the investigation remained ongoing.

As such, what was Riverstone thinking? One might think the answer is that it plans to cut Leuschen loose, but a firm spokesman said: “Nothing has changed with respect to David Leuschen and nothing is expected to change.” Just confounding…

The spokesman declined to answer further questions, such as what Riverstone thinks it did wrong (sorry, I don’t buy that it paid $30m out of the goodness of its heart). He also declined to say where the money would come from (management company or partner pockets).

*** Yesterday, there was a bit of an online blowup between Bloomberg and TheDeal, over whether or not car-sharing service Zipcar plans to go public next year. Each pub basically accused the other of ignorance, and I’ve posted the back-and-forth here.

I also talked to some folks familiar with the situation, and have learned the following: Zipcar would like to go public next year, as would most private companies of a similar age and balance sheet. It’s also been heartened to see the public market success of fellow consumer-focused companies like OpenTable and Rosetta Stone. In fact, it would have been more surprising to hear Zipcap CEO Scott Griffith say he didn’t want to go public next year.

That said, Zipcar hasn’t actually begun the going-public process. For example, it has yet to have IPO conversations with bankers, let alone pick one. But a company like Zipcar might be able to go public in just a few months from start to finish, assuming the SEC, bankers and buyers cooperate.

So if we haven’t heard anything formal by this time next year, then we should revisit the company’s 2010 IPO prospects. As for right now, it’s all a bunch of noise.

*** Chicago Shindig Almost Sold Out: There are just 15 tickets remaining for the peHUB Shindig next Monday night in Chicago. In other words, get yours right now.

The evening is being sponsored by Bank of Ireland and Crowe Horwath, with ticket proceeds being donated to a charity that will be selected to attendees.

Top Three

Pacific Alliance Group has hired Morgan Stanley to help it shop portfolio company Goodbaby Group, a Chinese maker of baby strollers. The deal could be worth around $300 million, with possible bidders including EQT Partners and TPG Capital. Pacific Alliance paid $122.5 million for a 67% stake in Goodbaby three years ago.

Huntsman Corp.’s lawsuit against lenders Credit Suisse and Deutsche Bank is due to go to trial Monday, following a delay related to jury selection. The chemical company is suing the banks for allegedly reneging on an agreement to provide leveraged fina! ncing of a takeover of Huntsman by Hexion Specialty Chemicals, a portf olio company of Apollo Management.

Galil Medical Ltd., an Israeli maker of cryotherapy systems for use in kidney and prostate cancer treatments, has sued Endocare Inc. (Nasdaq: ENDO), to enforce a merger agreement between the two companies that was announced last November. EndoCare allegedly terminated the agreement, claiming difficulty in receiving regulatory approval from the FTC. Under terms of the proposed deal, EndoCare stockholders would hold 52% of the combined company, while Galil shareholders would hold the remaining 48 percent. Galil Medical has raised over $60 million in VC funding from firms like Thomas, McNerney & Partners, The Vertical Group and Elron Electronic Industries Ltd.

VC Deals

Alios BioPharma Inc., a South San Francisco-based drug startup, has closed its Series A round with a total of $32 million. This includes a first close from last December, from firms like Novo AS, Novartis BioVentures and Roche Finance Ltd. The second close came from SR One Ltd., the corporate venture arm of GlaxoSmithKline. The company says that it plans to “treat diseases in virology by activating pathways in the innate immune system.”

DTT Surveillance Inc., a Los Angeles-based provider of digital surveillance solutions for the quick service restaurant industry, has raised $7 million in growth equity funding. Post Capital Partners led the round, and was joined by Gemini Investors.

Xenon Pharmaceuticals of Vancouver has signed a strategic partnership with Merck & Co., related to novel small molecule candidates for the potential treatment of cardiovascular disease. Under terms of the agreement, Xenon receives research funding and is eligible for up to $94.5 million for the first target and up to $89.5 million for subsequent targets. Xenon previously raised over $90 million from firms like Invesco, Roche and Takeda Research Investment.

Buyout Deals

Candover confirmed that it is in talks to sell its equity stake in UK-based energy research and consulting firm Wood Mackenzie. It did not identify a buyer, although earlier press reports fingered Charterhouse Capital Partners in a deal that would be worth approximately £550 million.

Claire’s Stores, a fashion accessory and jewelry retailer owned by Apollo Management, posted a $29 million Q1 loss. This is down from $35.6 million in Q1 2008, but the company warned that sales have weakened in the second quarter.

Prada said that it had turned down an approach from investors interested in acquiring a minority stake. The Italian fashion house did not identify its suitors, but a local newspaper last weekend reported that both Investindustrial and Clessidra had expressed interest.

PE Exits

AOL has agreed to acquire Going Inc., a provider of event information for young urban adults. No financial terms were disclosed. Going has raised around $10 million in VC funding from General Catalyst Partners and Highland Capital Partners. In other AOL news, the company announced plans to acquire Patch Media, an online news and information company focused on local communities.

DineWise Inc. (OTC BB: DWIS) has acquired Home Bistro Foods, a Plattsburgh, N.Y.-based direct-mail provider of chef-prepared gourmet meals. No financial terms were disclosed. Home Bistro had raised just under $7 million in VC funding, from firms like CEI Ventures, SJF Ventures and the New York Community Investment Company.

Ping An Insurance (HK: 2318) reportedly is planning to buy around $1.8 billion worth of shares of China’s Shenzhen Development Bank, in a deal that would eventually make Ping An the largest Shenzhen shareholder. The total deal would include the purchase of both new Shenzhen shares, plus some shares from TPG Capital, whose Newbridge Capital affiliate currently holds a 16.76% stake in Shenzhen.

Firms & Funds

3i Group (LSE: III) said that 96.6% of shareholders subscribed to a $1.2 billion rights issue, which was designed to strengthen the firm’s balance sheet.

Human Resources

Kari-Pekka Wilska has joined BlueRun Ventures, according to VentureWire. He previously was a venture partner with Austin Ventures, where he served on the boards of companies like 724 Solutions, BrightPoint, Mavenir Systems, Paragon Wireless and PulseWave RF. Prior to joining Austin Ventures in 2005, Wilska spent more than 20 years with Nokia.

Investcorp has eliminated the position of chief operating officer, in order to “streamline its management.” CEO Nemir Kirdar will take over the duties of COO Gary Long, who leaves the company immediately after 14 years.

Daniel von Preyss has joined Impax Asset Management as a managing director of private equity for a fund focused on renewable power generation. He previously ran Babcock & Brown’s Northern European infrastructure activities.

Neil Midler has joined Chicago-based Cook Associates as a managing director in the firm’s M&A advisory services unit.

Shad Qurashi has joined NewOak Capital as vice chairman and head of business development and strategy for the firm’s advisory, asset management and capital markets businesses. He previously was joint head of UBS’ distressed real estate workout group.

Tim West has been named director of marketing and investor relations for WCAS Fraser Sullivan Investment Management, a debt investment partnership formed in 2007 between Welsh, Carson Anderson & Stowe and Fraser Sullivan Investment Management. He previously was a senior managing director with MacKay Shields.