peHUB Wire: Monday, April 26, 2010

Last month, Rajat Gupta announced that he would not stand for reelection as an independent director at Goldman Sachs. Last Friday, the WSJ reported that his decision may have been prompted by a letter from federal prosecutors, informing Gupta that they had intercepted phone calls that could implicate him in the Galleon insider trading case.

What does any of this have to do with private equity? Well, Gupta currently serves as chairman and co-founder of New Silk Route, an India-focused private equity firm with $1.4 billion in capital under management. He has not yet been charged with any crime, but the WSJ reports that he is believed to have tipped off Galleon manager Raj Rajaratnam about a $5 billion investment that Berkshire Hathaway was about to make in Goldman Sachs.

Gupta has denied any wrongdoing through his attorney, but certainly has an existing relationship with Rajaratnam. In fact, Rajaratnam was listed as a New Silk Route principal, according to a 2008 SEC filing (he is no longer on the firm’s website). Moreover, DealBreaker reported last week that the New Silk Route principals appear to have raised money under a different moniker — Taj Capital — which put around half of its money into Galleon funds (I have not been able to confirm that info).

What may be even more inte! resting is that Gupta and Rajaratnam are not the only current/former NSR pros who know their way around an insider trading investigation.

The other would be NSR senior advisor Victor Menezes. Don’t let the title fool you: Menezes is one of just three people identified on the “leadership” page of NSR’s website, alongside Gupta and Parag Saxena (co-founder of Vedanta Capital and former head of Invesco Private Capital).

Back in 2006, the SEC alleged that Menezes, then a Citigroup senior vice chairman, sold nearly $30 million of Citigroup stock just before the company announced a large quarterly loss related to the Argentinian debt crisis. The sale allegedly helped Menezes avoid around $1.5 million in losses. He later settled with the SEC for $2.7 million, without admitting or denying any wrongdoing.

All of this melds together into a nightmare narrative for New Silk Route, which currently is investing out of a $1.4 billion fund rai! sed in 2007. Its most recent deal was a co-investment with KKR on Indi an coffee shop chain Cafe Coffee Day, while in 2006 it co-invested with Galleon on a $300 million deal for Reliance Telecom Infrastructure.

Most of the firm’s staff is in India, save for the leadership in New York (plus two principals) and a few folks in Dubai. One had to wonder if the India folks could eventually take over management, thus leaving behind the New York baggage. I’ve reached out the firm firm for comment, but have no yet heard back.

*** Field of Dreams: One final call for anyone who would like to play softball at Fenway Park, as part of the Field of Dreams fundraiser. We only have 12 players so far, and need to double that to field a team.

The game will take place on Monday, June 7. The cost is nearly $700 per head, with the proceeds going to anti-poverty group ABCD (to fund its summer jobs program for at-risk teens). Yes, it’s expensive — but it is everything you would hope it could be. Please let me know via email ! if you’d like to play.

Top Three

GTCR has agreed to acquire Protection One Inc. (Nasdaq: PONE), a Lawrence, Kansas-based provider of electronic security services to the residential, commercial and wholesale markets. Sellers include Quadrangle Group and Monarch Capital Partners. The deal is valued at $828 million, including the refinancing of debt. Protection One stockholders will receive $15.50 per share, which represents a 13% premium to Friday’s closing price.Debt financing has been committed by JP Morgan Chase Bank,Barclays Capital and TCW/Crescent Mezzanine.

Prommis Solutions, an Atlanta-based provider of outsourced foreclosure and bankruptcy processing services to U.S. law firms, has filed for a $150 million IPO. Credit Suisse and Deutsc! he Bank Securities are serving as co-lead underwriters. The company reports nearly $255 million in 2009 revenue, compared to $192 million in 2008 and $128 million in 2007. Its 2009 net income was $7.8 million, compared to net losses the prior two years. Great Hill Partners holds a 66.7% ownership position, based on an investment in February 2006.

The Universities Superannuation Scheme has acquired a $135 million stake in the $1.77 billion Neuberger Berman Secondary Opportunities Fund II. This makes USS the fund’s largest limited partner. The seller was the Lehman Brothers Estate, which retains a $50 million position in the fund.

VC Deals

WISeKey, aGeneva-based e-security company, has raised $20 million in”pre-IPO” funding at a $200 million valuation. No investor information was disclosed, except that backers came from the U.S., Switzerland and elsewhere in Europe.

Implanet SA, a French developer of surgical implants for orthopedic and spine surgery, has raised €8 million in new VC funding. Backers include CM-CIC Private Equity, Edmond de Rothschild Investment Partners, Wellington Partners and Seventures Partners.

Alter-Eco Inc., a San Francisco-based maker and sourcer of organic, fair trade food products, has raised $2 million in Series A funding. Backers include Good Capital, Serious Change Fund and Renewal2 Investment Fund.

Stockopedia, a UK financial media website, has raised over $700,000 in seed funding from London-area angels.

Mirina Corp., a Seattle-based developer of microRNAtherapeutics, has raised an undisclosed amount of Series A-1 funding. Versant Ventures led the round, and was joined by return backers Alexandria Real Estate Equities, ARCH Venture Partners, OVP Venture Partners and WRF Capital. The company had raised a $3.6 million Series A round in 2008.

Buyouts Deals

The Blackstone Group and Wellcome Trust have dropped their joint bid for bank branches being sold by RBS, according to the Daily Telegraph. The deal is expected to be worth more than £1 billion, with four bidders remaining.

CKE Restaurants (NYSE: CKR) has accepted a $694 million buyout offer from Apollo Management, and terminated a lower offer from THL Partners.

McGraw-Hill Cos. reportedly has dropped out of the auction for financial information company Interactive Data Corp. (NYSE: IDC). Remaining bidders include KKR/CVC, Advent International/Bain Capital, Warburg Pincus/Hellman & Friedman/Silv! er Lake Partners.

PE-Backed IPOs

Chr. Hansen, a Danish food ingredients maker, plans to raise around $605 million via an IPO on the Copenhagen bourse. It was taken private in July 2005 by PAI Partners for approximately $1.5 billion.

NetMotion Wireless Inc., a Seattle-based provider of mobile VPN solutions, hasindefinitely postponeda proposed C$30 million IPO. It had planned to liston the Toronto Stock Exchange. NetMotion has raised over US$31 million in VC funding, from Dolphin Equity Partners, Mitsui & Co. Venture Partners (MCVP), Northwest Venture Associates and Alexander Hutton Venture Partners.

Nielsen, a TV and consumer measurement company taken private for $10 billion in 2006 by six private equity firms, plans to being hiring IPO bankers, according t! o the Financial Times. The offering reportedly would value the company’s equity and debt at around $21 billion.

Roadrunner Transportation Services Inc., a Cudahy, Wis.-based provider of non-asset based transportation and logistics services, has set its IPO terms to 10.6 million common shares being offered at between $14 and $16 per share.It would have an initial market cap of approximately $472 million, were it to price at the high end of its range. The companyplans to trade on the NYSE under ticker symbol RRTS, with Baird, BB&T Capital Markets and Stifel Nicholas serving as co-lead underwriters. It reports $450 million in 2009 revenue, compared to $537 million in 2008. Shareholders includeThayer | Hidden Creek Entities (72.5% pre-IPO stake), Eos Partners (18.5%) and American Capital Strategies (7.3%).

PE-Backed M&A

Hertz Global Holdings (NYSE: HTZ) has agreed to acquire rival Dollar Thrifty Automotive Group (NYSE: DTG) for around $1.17 billion. Dollar Thrifty stockholders would receive $41 per share, which represents around a 6% premium to Friday’s closing price. Hertz was acquired in a 2005 buyout by The Carlyle Group, Clayton Dubilier & Rice and Merrill Lynch Global Private Equity. The firms later took Hertz public, but still hold a majority stake.

Wall Street Systems, a developer of financial trading and treasury engines, has acquired the assets of Speranza Systems Inc., a Portland, Maine-based provider of a web-based platform for administering ba! nk relationship and signatory/authorization management. No financial terms were disclosed. Wall Street Systems is a portfolio company of Warburg Pincus.

Firms & Funds

Eastern Link Capital is raising up to RMB 200 million (approx US$29m) for a China-focused fund that will invest in late-stage and mid-market companies. The industry focusis on consumer spending, with an emphasis on IT. Thefirm already has held a first close on RMB 100million, and expected to secure the remainder within the next sixmonths.

Index Ventures has launched a dedicated seed program, which aims to do around 20 deals over the next two years. Index will partner on the program with The Accelerator Group (TAG), and TAG’s Robert Klein will serve as an Index venture partner.

Millennium Technology Ventures, a New York-based direct secondaries firm, has closed its second fund with $280 million in capital commitments.

Stifel Financial (NYSE: SF) has agreed to acquire Thomas Weisel Partners (Nasdaq: TWPG), in an all-stock deal valued at more than $300 million.

Human Resources

Alex Laats has joined Commonwealth Capital Ventures as a general partner. He is a former Commonwealth venture partner who most recently was with BBN Technologies, a Commonwealth portfolio company acquired last year by Raytheon.

Janice Bourque has joined Hercules Technology Growth Capital as a Boston-basedmanaging director in the firm’s life sciences group. She previously was an advisor to Commons Capital, and helped work on a joint venture between Commons and Oxford Bioscience Partners.

Rob Go has stepped down as a senior associate with Spark Capital, in order to help launch a startup that is still in stealth mode.