peHUB Wire: Monday, December 21, 2009

The sun is glistening off fresh snow, the stop/start healthcare bill is on start again and my beloved Pats are the least impressive 8-5 team imaginable. In other words, it’s time for some Monday Mouth-Off.

First up are two emails on my attempts to get certain valuation data out of CalPERS. Grant begins: “Thanks for fighting the good fight. The excuses [CalPERS] gave are laughable, but it sounds like you’ll have to sue if you really want them to stop laughing.”

Anon: “Whether it be Apollo, Carlyle or whichever GP, those ARE single companies. They are not funds, and thus, they would be akin to underlying portfolio companies on which they do not report values. This is consistent with their policy, which I think is very reasonable… Given the relatively small size of these investments in the overall portfolio, I do not believe the pensioners or the public has a right to know the company values, anymore than you have the right to know! about any underlying portfolio company values. You are lucky just to have stale information, I don’t believe you deserve any.”

*** A few emails on last Wednesday’s item about the FAS157 valuation dispute between Kohlberg Capital and Deloitte. Tom writes: “Isn’t the purpose of the internal review to question the audit work papers when necessary? If so then why is everyone so surprised that the internal review resulted in these questions and requests for additional documentation? Sounds like the review process is actually doing its job.”

CK: “This sounds like a fight between Deloitte’s valuation people and Duff & Phelps valuation people — with the company and Deloitte’s audit people caught in the middle.”

Robin: “This is fairly ironic, in light of the Canopy Financial situation. In that case, people keep talking about how terrible it is that the supposed audit was forged. Maybe this goes to show that it doesn’t always matter if the audit is real/right, because the auditor will just change its mind later.”

*** Jerry on carried interest taxation: “So if an attorney works on contingency and spends several years working on a case putting in significant sweat equity and resources with considerable uncertainty as to the outcome, should that award money be treated as long term capital gains? If a general contractor spends several years constructing a project and receives a bonus for cost savings, should those funds be taxed at the long term capital gains rate? That general ! contractor has also incurred significant sweat equity and uncertainty as to the outcome. What about those Goldman Sachs bankers who toil for low six figure pay all year in hopes of receiving a substantial bonus in the following year based on their performance and company profitability?”

Dave demurs: “The tax system is inherently unfair – to everyone. There’s always an argument to be made that someone is being taxed more than someone else – more on a gross dollar basis, more on a gross percentage basis, etc. No one WANTS to pay tax unless they’re just shy of a second stroke. That said, however, maybe when you start advocating raising taxes on a subcategory of the population, you should take a step back and realize that you’re advocating for higher taxes – period. Everyone knows that lower taxes are stimulative. Doubling the tax rate on anything will simply retard the growth of that thing if not drive the capital and capitalists into a tax regime arbitrage. If y! ou’re going to argue that it’s a matter of tax treatment and fairness more than tax rate, I’m going to tell you to take your face out of the tax code for 10 minutes and experience the real world.”

*** Anon on Canopy Financial: “Our firm places people on the boards of many portfolio companies, and I would flip your analysis of where the directors should have done better:

1. Directors cannot be expected to detect executives skimming from company or client accounts. It’s just not part of the job to, say, review or reconcile bank statements.

2. But they falsely claimed that their financials were audited. In my opinion, they never should have gotten away with that because it’s good practice for a board to have an audit committee, comprised of non-management directors, that meets periodically with the relationship partner and audit partner from the outside auditors. Unless Canopy manager sent in impostors to claim to be KPMG auditors and meet with the board (not beyond the realm of possibility), the board could have discovered the fraud earlier just by following standard industry practice.”

*** Albert was one of several emailers to say: “Your link to the Gottschalg study on the top-performing private equity firms didn’t work for me.” I do mess up the links sometimes, so a good rule of thumb is simply to go to (and keep checking back throughout the day, since it’s regularly updated). But here is that Gottschalg link again.

*** Finally, one more thanks for the hundreds of emails on my cat. Still trying to respond to them all. A number of you commented about how, when J and I were ready, we’d be able to provide a loving home to another animal. I didn’t think it would happen so soon, but we added a new member to the family over the weekend. He’s a bit old and deaf, but we just couldn’t leave him in the shelter (particularly when everyone else where was fawning over kittens! ). As odd as it may sound, your emails are the reason he’s not in a cage today…

Top Three

Airvana Inc. (Nasdaq: AIRV), a Chelmsford, Mass.-based provider of broadband network infrastructure, has agreed to be acquired for approximately $530 million, or $7.65 cash (23% premium to yesterday’s closing price). The buying consortium includes SAC Private Capital Group, GSO Capital Partners, Sankaty Advisors and ZelnickMedia., a Chinese video sharing site, has raised $40 million in the first tranche of a Series E funding round. Chengwei Ventures led the close, and was joined by fellow return backers Brookside Capital, Maverick Capital and Sutter Hill Ventures. The company has now raised $110 million in total VC funding, plus $10 million in venture debt from Western Technology Investment.

HM Capital Partners has agreed to sell Sturm Foods, a maker of hot cereal and powdered soft drink mixes, to TreeHouse Foods (NYSE: THS). The deal is valued at $660 million, and is expected to close by the end of Q1 2010.

VC Deals

Tioga Energy, a San Mateo, Calif.-based provider of renewable energy services , has raised $20 million in a first close on its Series B round. Backers include MEMC Electronic Materials (NYSE:WFR), NGEN Partners, Nth Power and Draper Fisher Jurvetson.

BridgeCo, an El Segundo, Calif.-based provider of digital home networking solutions, has raised $7.5 million in new VC funding. Earlybird Venture Capital and Christian Wenger co-led the round, and were joined by Brian Long (general partner with Atlantic Bridge). The company previously raised $59 million in private equity and debt funding, from Earlybird, Advent Venture Partners, Balderton Capital, Cipio Partners, Fidelity Ventures, Intel Capital and Wellington Partners.

LipoFIT Analytic GmbH, a German developer of new methods for routine assessments of the risk of developing atherosclerosis, has raised €4 million in VC funding. Backers include SHS Gesellschaft für Beteiligungsmanagement, KfW Bankengruppe and Bayern Kapital.

Lookout (f.k.a. Flexilis), a mobile security startup, has raised $5.5 million in first-round funding. Backers include Khosla Ventures, Trilogy Partnership, Chris Sacca, Phil Paul and Joseph Ansanelli.

Microdata Telecom Innovation AB, a Stockholm! , Sweden-based provider of radio solutions to OEMs andnetwork operator shas raised SEK10 million ($1.38m) in VC funding led by InnovationsKapital.

Generation Health Inc., a genetic benefit management company, has received a new investment from existing shareholder and strategic partner CVS Caremark. No financial terms were disclosed. Generation Health previously raised VC funding from Highland Capital Partners.

SolveDirect, a Vienna-based provider of pro! vider of service management solutions, has raised an undisclosed amount of VC funding from the 3TS Cisco Growth Fund.

Buyouts Deals

Apollo Management reportedly has approached British bookmaker and bingo group Gala Coral with a rescue proposal. The deal would involve Apollo paying 250 million for half of Gala Coral, with the money being used to repay the company’s senior lenders. The remaining 50% interest would go to Gala Coral’s junior lenders.

General Atlantic and KKR have completed their $1.65 billion acquisition of the TASC consulting unit of defense contractor Northrop Grumman (NYSE: NOC).

Bridgepoint has received at least seven private equity bids for Pets at Home, a UK pet retailer that is expected to generate at least £700 million. Bidders include Apax Partners, Bain Capital, Black! stone, Charterhouse, Cinven, KKR and TPGCapital.

Eagle Energy, a Tulsa, Okla.-based upstream oil and gas company, has raised an undisclosed amount of private equity funding from The Riverstone/Carlyle Global Energy and Power Funds.

Kansas Venture Capital has acquired the former AAIPharma bioanalytical division from ZeeCRO Inc. No financial terms were disclosed.

Motorola Inc. reportedly has received interest ! from several private equity firms for its set-box unit, which had $10. 1 billion in 2008 sales. Suitors include Bain Capital, Blackstone Group, KKR, Silver Lake Partners and TPG Capital.

Rock Gate Partners has acquired Walpar Inc., a Birmingham, Ala.-based maker of highway signage structures. No financial terms were disclosed. Peninsula Capital Partners provided mezzanine financing and an equity co-invest, while Wachovia Bank provided senior debt.

PE-Backed IPOs

Meru Networks Inc., a Sunnyvale, Calif.-based developer of wireless infrastructure solutions, has filed for an $86.25 million IPO. It plans to trade on the NYSE under ticker symbol MERU, with BoA Merrill Lynch serving as lead underwriter. The company reports $31.8 million in revenue for the first nine months of 2009, with a net loss of $9.43 million. The company has raised over $160 million in VC funding since 2002, from Clearstone Venture Partners (21% pre-IPO position), Vision Capital (19.1%), NeoCarta Ventures (18.5%), BlueStream Ventures (16.4%), The D. E. Shaw Group (15.6%), Tenaya Capital (10.1%), Evercore Partners and Monitor Ventures.

Solyndra Inc., a Fremont, Calif.-based provider of solar energy systems for commercial rooftops, has filed for a $300 million IPO. Goldman Sachs and Morgan Stanley are serving as co-lead underwriters. The company has raised over $500 million in VC funding, from firms like Argonaut Ventures (35.74%), U.S. Venture Partners (10.19%), RockPort Capital Partners (7.5%), CMEA Ventures (6.81%) and Redpoint Ventures (5.94%).

Travelport, a travel services provider owned by The Blackstone Group, reportedly is prepping a $2 billion IPO, which would be listed on the London Stock Exchange.

PE-Backed M&A

Crispy Gamer, a New York-based provider of online editorial content for gamers, has acquired GamerDNA, a Cambridge, Mass.-based social media site for online gamers. No financial terms were disclosed. Crispy Gamer has raised$8.25 million from Constellation Ventures and company founders. GamerDNA Inc. has raised more than $3 millionled byFlybridge Capital

Defense Venture Group, a portfolio company of J.F. Lehman & Co., has acquired the run-flat tire business of Drive Dynamics, for an undisclosed amount.

Durata Therapeutics Inc., an antibiotic development platform recently formed by five venture capital firms, has acquired Vicuron Pharmaceuticals, developer of an antibiotic drug candidate called dalbavancin, from Pfizer. No financial terms were disclosed. Durata’s backers are New Leaf Venture Partners,Domain Associates, Aisling Capital, Sofinnova Venturesand Canaan Partners.

Etsy Inc., a New York-based online marketplace for buying and selling handmade products, has acquired ad platform operator Adtuitive Inc. No financial terms were disclosed for the deal, which was disclosed on Etsy’s blog. Etsy has raised over $30 million, from firms like Accel Partners and Union Square Ventures.

Gulf Marine Maintenance and Offshore Service Co. (GMMOS), a UAE-based provider of marine services to the offshore oil & gas industry, said that its chartering division has acquired five offshore support vessels. The purchase was financed by a recently-secured $100 million ! term loan facility from Standard Chartered Bank, Abu Dhabi Commercial Bank, Credit Suisse and Deutsche Bank. GMMOS is backed by Abraaj Capital and Waha Capital.

Rave Cinemas LLC, a newly-formed acquisition platform backed by TowerBrook Capital Partners and Lambert Media Group, has agreed to buy the business operations and select real estate assets of up to 35 movie theaters from National Amusements Inc. No financial terms were disclosed. It also has acquired four theaters from Rave Reviews Cinemas, a portfolio company of Boston Ventures.

Zipcar Inc., a Cambridge, Mass.-based car sharing service, has acquired a minority stake in Spanish car-sharing company Catalunya Carsharing (aka Avancar). No financial terms were disclosed, except that ZipCar has an option to increase its ownership percentage. ZipCar has raised over $38 million in VC funding, from firms likeGreylock Partners, Benchmark Capital and Globespan Capital Partners.

PE-Backed Bankruptcies

Citadel Broadcasting Corp. has filed for bankruptcy protection, and said that it has reached a restructuring deal with more than 60% of its senior lenders. Forstmann Little & Co. owns 28.7% of the radio broadcaster’s shares, according to the filing.

Heartland Publications LLC, a community newspaper publisher with 50 titles, has filed for Chapter 11 bankruptcy protection. The company was formed in 2004 by The Wicks Group and Wachovia Capital Partners, with a focus on the Southern U.S. It reports around $134.3 million in total assets and around $166.2 million in total liabilities.

Firms & Funds

Allianz said it is in talks to sell its AGF Private Equity unit to IDI.

Gene Taylor, former Bank of America vice chairman, reportedly has raised $550 million for a fund that would invest in troubled U.S. banks. The fund is called North American Financial Holdings. Taylor is being backed by Crestview Partners, which was one of the firms that supported Taylor on a failed bid to acquire Florida’s First Southern Bancorp earlier this year.

SV Life Sciences has secured around $400 million in capital commitments for its fifth healthcare-focused VC fund. LBO Wire first ! reported the news, which has been independently confirmed by peHUB.

Tennenbaum Capital Partners has held a $454 million final close on its first fund focused on debtor-in-possession (DIP) financing.

Human Resources

Faye Pairman has joined U.S. Venture Partners as an executive-in-residence. She is the former president and CEO of onetime USVP portfolio company 3ware Inc., which was acquired by Applied Micro Circuits.

Sanjay Patel has agreed to join Apollo Management as head of international private equity, according to Dow Jones. He previously was co-head of European private equity and junior debt investing at Goldman Sachs.