peHUB Wire: Friday, March 12, 2010

The sky is gray, another VC-backed IPO managed to price and my presence here is just a mirage (I’m writing this at 6am, in order to help judge a VCIC regional event at MIT – while Erin is doing the actual Wire legwork). In other words, it’s time for some Friday Feedback.

*** First up were some replies to Tuesday’s column, about how the New York VC Restoration is not yet a threat to Boston’s legacy position as the nation’s #2 venture market:

Amish: “I think when most people are talking about the rise of NYC, it’s really focused on software, media and Internet based businesses I did some quick math on the MoneyTree data, adjusting for areas either that people aren’t referring to when they talk about the rise of NYC or industries that would never be here. For example, If you exclude healthcare, the numbers tell a different story for 2009. New England used to be well ahead of New York under the decade averages, but for 2009 they are almost even. If you th! en exclude other areas that would never be appropriate for NYC, such as cleantech and semis, you find that New England beats New York Metro in the decade average, but that NYC has moved ahead of New England in 2009. This data would support the general notion that people see an acceleration in NYC, but for the industries NYC focuses on.

Now, the obvious argument is ‘Who’s to say that the venture companies NYC has are the ones to want – maybe it’s healthier to have a stronger life sciences and cleantech market.’ And that’s separate very fair discussion to have. But I’d bet the people you were talking to were not from the clean tech or healthcare areas. Those of us in the tech space think part of the reason for the shift is that technology has moved from fundamental research to now using the Internet and web platform to disrupt existing businesses, and most of those large businesses are based in NYC.”

Damion: “This is a great first run analysis, but I’m h! aving trouble with the omission of angel metrics. Without them we’re n ot really having a quantitative discussion. It appears the MoneyTree data specifically excludes angel investor metrics. That’s a large missing variable.”

*** Moving onto carried interest taxation (for the last time, I promise, until/unless something concrete happens legislatively). Per usual, the dissents are legion:

Kevin: “The area where I do think you’re quite a ways off the mark is in thinking about whether or not established VCs will leave the industry if this rule is changed. I agree with you that they likely will not, but that isn’t the point.The point is that this will contribute to a trend already in place and many more VCs will leave very early stage investing behind.The risk for early-stage biotech and tech isn’t getting any lower and so decreasing the potential reward will lead many to move downstream and shift the equation to something that works. That’s the big risk here.”

James: “We can agree to disagree about t! he treatment of carried interest. Your position has been clear and consistent. But please don’t throw out the word “fairness” in the discussion. There is nothing fair about a tax system where a large percentage (in excess of 35% and growing) either pay no income tax or receive a subsidy from the government.”

Anon: I appreciated your article.It’s right on. Carried interest is a fee for service. Now don’t use my name.”

David: “For the record, there’s a lot of PE/VC pros that disagree with you re. carried interest taxation. And, no, it’s not so ‘pure and simple.’ It’s offensive that you would presume your opinion as fact. I’m less interested to read you now. Get off the tired carried interest debate – you’re wrong anyway! Maybe if you actually worked as a PE professional, you would better understand the issues…”

A Different David: “Just where do you see the unfairness?The government isn’t robbed, since it’s getting whatever t! ax it wants on the entire capital gain.The investor isn’t hurt at all… The fact is, that it’s difficult to make profits on venture and private equity funds. Let the market take care of any unfairness issues”

Shawn: “You logic on carried interest is flawed.The tax liabilities passed through are currently and should continue to be based on the underlying nature and duration of the assets owned. The capital gains tax is meant to encourage longer term investment and stability. Your support of changing this tax removes that incentive. Again, the tax attributes should pass through based on the nature and duration of assets held, which consistent with tax law and its original intent.”

Michael: “I joined a venture capital firm just before the dotcom bubble popped, and am still there today. I’m also still waiting for enough carried interest to make me care about this debate one way or another.”

*** Have a great weekend. Make sure to get your Boston Shindig tix i! f you haven’t already, and we’ll have details on the San Francisco event on Monday…

Top Three

KKR has officially filed for an NYSE listing with the SEC. The firm intends to register $2.2 billion worth of shares, representing a 30% stake in the entire company, leaving 70% held by the firm’s principals.

Cinemark Holdings, a publicly traded movie house operator, completed a $660 million fundraising from a joint venture between AMC and Regal Entertainment Group, led by JPMorgan and Blackstone Advisory Partners. The company’s backers, Madison Dearborn Capital Partners, Syufy Enterprises LP and Mitchell Special Trust, will sell some of their shares, leaving Madison Dearborn with a 32.1% stake, Syufy Enterprises with 5.3% and the Mitchell Special Trust 4.9%.

AVEO Pharmaceuticals Inc., a Cambridge, Mass.-based oncology drug company, raised around $81 million via its IPO. The company priced nine million shares at $9 per share, compared to plans to sell seven million shares at between $13 and $15 per share. The company will trade on the Nasdaq under ticker symbol AVEO, while J.P. Morgan and Morgan Stanley served as co-lead underwriters. AVEO had raised around $151 million in VC funding, from firms like Biogen Idec (14% pre-IPO stake), MPM Capital (10.7%), Highland Capital Partners (9.9%), Venrock (8%), Prospect Venture Partners (7.8%), Bessemer Venture Partners, Merlin BioMed Group, Mitsubishi UFJ Financial Group, Flagship Ventures, Oxford Bioscience Partners, Greylock Partners, Lotus Biosciences, GE Capital and Vatera Holdings.

VC Deals

Betaworks, the new media company behind such applications as and Twitterfeed, received an undisclosed investment co-led by Intel Capital. The company previously received investments worth $10 million from AOL president Tim Armstrong; Huffington Post co-founder Ken Lerer; investors Ron Conway and Bob Pittman; and RRE Ventures.

Genetix Pharmaceuticals, a gene therapy company developing treatments for severe genetic disorders, completed a $35 million Series B financing with new investors Third Rock Ventures and Genzyme Ventures joining TVM Capital, Forbion and Easton Capital.

Buyouts Deals

Willcom, a bankrupt mobile phone company majority-owned by Carlyle Group, has garnered and investment from Softbank Corp., a Japanese competitor.

Apollo Management LP and Ares Management, along with holding company Access Industries, have agreed to back a $2.8 billion rights offering by LyondellBasell. The company will raise $3.25 billion in debt as it begins to emerge from bankruptcy.

Advent International hired Close Brothers to advise it on a potential sale of budget store chain Poundland, the Financial Times reported.

SkillSoft Plc, an Irish E-learning software maker, said the $1.1 billion offer made by Advent International, Berkshire Partners and Bain Capital, is the only option left at the end of its go-shop period. The news sent the company’s shares of the company down more than 5 percent on heavy volumes on Thursday.

SunGard has acquired 365 Hosting Limited, a Dublin, Ireland-based cloud computing and data centre services company which trades as ‘Hosting 365’. Terms were not disclosed. SunGard was acquired for $11.4 billion in 2005 by Bain Capital, Blackstone Group, GS Capital Partners, KKR, Providence Equity Partners, Silver Lake Partners and TPG Capital.

Regence BlueShield of Washington has acquired the assets of Kinetix Living Corp., a Seattle-based provider of customized health and nutrition programs to corporate clients and individuals. No financial terms were disclosed. Kinetix had been a portfolio company of Maveron LLC.

PE-Backed IPOs

MCM Capital Partners and Blue Point Capital have sold portfolio company Amprep, Inc., Marietta, Georgia-based manufacturer of specialty chemicals, to Zep, Inc. Total enterprise value for the transaction approximately $74 million. .

Willbros Group, Inc. agreed to acquire InfrastruX Group, Inc., a utilities services company backed by Tenaska Capital Management, for $480 million in cash and stock. The company had previously filed to undergo a $290 million IPO. Tenaska acquired InfrastruX from Puget Energy Inc for $275 million in 2006.

Private equity fund CVC Partners has agreed to sell Paperbox Holdings Ltd to Japan’s Oji Paper Co Ltd for an undisclosed amount. CVC acquired Paperbox in 2007 from Malaysian gaming group Genting for $212 million. .

PE-Backed IPOs

Courts Asia, a Singapore and Malaysia-based furniture and electronics retailer, is planning to raise more than $100 million in a Singapore initial public offering, Reuters reported. Courts was taken over in 2008 by Asia Retail Group, an entity partly owned by Barings Private Equity.

Sensata Technologies Holding’s shares rose by 5.6% in its market debut on Thursday. The auto parts maker is backed by Bain Capital.

Firms & Funds

Florida Mezzanine Fund has been launched by former partners of Gator Mezzanine Fund with backing from CapitalSouth Partners of up to $450 million. The fund will invest from $500,000 up to $30 million in debt and equity in small and mid-sized Florida companies. The firm made two investments in tandem with its official launch, in Great HealthWorks, Inc., a Fort Lauderdale-based marketing and distribution company, and Association Financial Services, a Miami-based financial services company for condo and homeowner associations.

SinoLatin Capital, a Latin American natural resources private equity fund, has been approved by the Shanghai-Pudong Government to raise and manage an RMB-denominated private equity fund. The firm is the first only Latin America-focused firm to have been approved to manage RMB-denominated private equity funds in China.

Mubadala Development Company has agreed to acquire a 9 percent equity stake in The Raine Group LLC, a firm which they seeks to capitalize on emerging investment opportunities in the media, entertainment and sports sectors around the world. Mubadala Development Company and William Morris Agency will be investors in Raine alongside private equity pioneer Ted Forstmann. Raine, a boutique merchant bank, was founded by Joe Ravitch, former senior partner and global head of media at Goldman Sachs, and Jeff Sine, former Vice-Chairman and global head of Technology! , Media & Telecom at UBS.

Human Resources

DFJ Esprit, a European venture capital firm, has appointed Mikko Suonenlahti a Senior Adviser to focus on investments in the B2B and B2C software, med-tech, Bio-IT and energy efficiency.

Canopy Financial’s co-founders Jeremy Blackburn and Anthony Banas pled not guilty to wire fraud charges brought against the company last fall, VentureWire reported. The company filed for bankruptcy in November.