peHUB Wire: Monday, July 26, 2010

The sun is shining, the beloved BoSox are floundering and financial reform may have inadvertently given private equity firms a new way to own banks. In other words, it’s time for Monday Mouth-Off.

Most of the email last week related to an item about venture capitalist Mike Moritz, who is helping to fund a ballot initiative that would require public employees to fund more of their benefits. Specifically, I wrote:

“Several years ago, Sequoia was the first prominent VC firm to stop accepting money from public pensions – including the University of California – due to more transparent disclosure policies. Kind of, ummm, interesting that Moritz wants to dictate policy to the same pensions he previously refused to generate investment returns for.”

Tom kicks it off: “I am – and this is a strange position to find myself in – writing in defense of Mike Moritz, specifically on his pension / health care proposal. The fact that Sequoia hasn’t taken public money, and appears to have an implicit or explicit policy against doing so in the future, makes Moritz one of the only people in the asset management business who could make a proposal like this without being accused of looking to line his own pockets (larger employee contributions could be argued to lead to higher asset levels in the funds, which would potentially lead to higher allocations to funds). Anyone remotely close to public pensions knows that what Moritz is proposing is merely a first step to fix what is a major public finance problem. On the asset management side – folks who have lots of exposure to just these funds – Moritz is the only one who can speak up. I applaud him for doing so.”

Philip: “Not ‘interesting’ at a! ll. Like some other venture firms, Sequoia is very concerned with privacy. It does not want full disclosure to the public, and has good reason given concerns about the disclosure of info related to underlying portfolio companies.” [Reply: No public pensions in the U.S. have ever, to my knowledge, released underlying portfolio data for VC funds. In fact, it has been specifically prohibited in several states, including California. The transparency Sequoia avoided related mostly to overall fund performance].

Jan: “I both agree and disagree with Mike Moritz on this matter. Agree that public employees must be willing to share the burden their obligations are putting on California. Disagree with his firm refusing to help alleviate the problem by allowing public pensions to serve as limited partners in Sequoia funds.”

*** Larry on Freescale: “Please remember that ‘break-even’ on a mega-buyout can be a misnomer. The general partner g! enerates fee income for the years that a company like Freescale is in its portfolio. The limited partners, meanwhile, pay those fees. The only thing ‘break-even’ what you get when you subtract the LP payments from the GP earnings.”

*** Eric: “Blackstone’s new fund is obviously huge, but is less huge than its last one. Is that an indication that PE bifurcation – or trifurcation – is weakening? And, if so, is it a good or a bad thing for returns? It means there would be more competition for buyside sponsor-to-sponsor deals, but also more competition for the original purchase.”

*** Terry: “Whenever you (or anyone else) discuss venture capital, there always seems to be an aside about how median performance has been terrible over the past ten years. It’s irrelevant. LPs don’t buy venture capital indexes, even if they’re in large fund-of-funds. They buy a specific portfolio of GPs, and many of those portfolios are doing just fine.”

Top Three

Apollo Management reportedly plans to form its own bank, based on a provision in the financial reform bill passed last week. It will be called Ares, and led by a former Countrywide Financial team.

Accel-KKR has agreed to sell iTradeNetwork Inc., aPleasanton, Calif.-based provider of supply chain and business intelligence solutions to the food industry, to Roper Industries Inc. (NYSE: ROP). The deal is valued at $525 million in cash.

Bank of America said that it will lay off approximately 30 employees in its private equity business. Ten of the employees, including strategic fund investment chief Jason Cipriani, will form a Charlotte office for Sterling Stamos. BoA corporate investments chief Travis Hain will take another 20 employees to form his own private equity firm.

VC Deals

Cerenis Therapeutics, a French developer of drugs to boost “good” HDL cholesterol, has raised €40 million in new VC funding. Fund for Strategic Investment led the round, and was joined by return backers Sofinnova Partners, HealthCap, Alta Partners, TVM Capital, EDF Ventures, OrbiMed and DAIWA Corporate Investment.

AxioMed Spine Corp., a Garfield Heights, Ohio-based spinal orthopedics company, has raised $14.5 million in a tranched-out VC funding round from firms like Thomas, McNerney & Partners.

Zilliant Inc., an Austin, Texas-based provider of price optimization and management software, has raisedover $13 million in new VC funding, according to a regulatory filing. It previously raised $44 million since 1999, fromLiberty Mutual, Aust! in Ventures, Cardinal Venture Capital, Trellis Partners and JPMorgan Partners.

Convoke Systems, a San Francisco-based provider of software for the debt collection and recovery market, has raised $5.5 million in Series B funding co-led by Flybridge Capital Partners and QED Investors.

Zattikka, a London-based interactive gaming startup, has raised $5.5 million in VC funding. Notion Capital led the round, and was joined by individual angels like Harald Ludwig.

Tri-O-Gen Group, a Dutch developer of organic rankine cycle units, has raised €4.5 million in VC fundingled byYellow & Blue Investment Management., a London-based pay-to-play auction site, has raised £4 million in Series A funding from Atomico Ventures.

SynapSense Corp., a Folsom, Calif.-based provider of wireless energy efficiency solutions for data centers, has raised an undisclosed amount of funding from GE Capital. The company previously raised $20 million from Robert Bosch Venture Capital, Emerald Technology Ventures, Sequoia Capital, American River Ventures, Nth Power and DFJ Frontier.

Buyouts Deals

Advent International and Bain Capital have entered exclusive talks to acquire payment processing group WorldPay from RBS.

Clorox Co. (NYSE: CLX) has received more than a dozen preliminary bids for its STOP and Armor All auto care brands, according to Bloomberg. Suitors include The Blackstone Group, Castle Harlan and Golden Gate Capital.

Graphite Capital has sponsored a 45 million pound management buyout of Teaching Personnel, a UK-based provider of teachers and support staff to schools. The seller was RJD Partners.

Lion Capital reportedly has offered to buy French convenience-! food company Picard Surgeles from BC Partners, at an enterprise value of approximately €1.5 billion euros.

Thoma Bravo and Teachers’ Private Capital have completed their take-private acquisition of IT security company SonicWall Inc. The $11.50 per share deal valued SonicWall at around $717 million.

Virgin Active, the UK health and fitness chain controlled by Virgin Group, has met with several private equity firms about a sale that could be worth over $1.5 billion. The company also continues to consider a public floatation.

PE-Backed IPOs

China Kanghui Holdings, a Chinese maker of orthopedic implants, has filed for a $75 million IPO. It plans to trade on the NYSE under ticker symbol KH, with Morgan Stanley and Piper Jaffray serving as co-lead underwriters. Shareholders include IDG-Accel (21.5% pre-IPO stake), SIG China Investments (18.4%), TDF Capital (12.4%) and CDH Venture Capital (9%).

LPL Financial, aU.S.brokerage, reported that its Q2 profits fell by half and its brokerage force shrunk. The company is in registration for a $600 million IPO, and Is controlled by Hellman & Friedman and TPG Capital.

RealPage Inc., a Carrolton, Texas-based provider of online property management systems for the multi-family housing market, said that it plans to sell 13.5 million! shares in its IPO. No pricing range was disclosed. The company previously filed to raise $150 million, with Credit Suisse and Deutsche Bank Securities serving as co-lead underwriters. The companyhas raised over $40 million in VC funding since 2003, from Apax Partners (26.4% pre-IPO stake), Advance Capital Partners (6.9%), Camden Partners (4.7%) and Leeds Equity Partners.

PE-Backed M&A

Alliance Boots, a UK-based retail pharmacy group owned by KKR, has acquired Turkish drugs wholesaler Hedef Alliance. No financial terms were disclosed.

American Standard Brands, a portfolio company of Sun Capital Pa! rtners, has acquired Safety Tubs LLC, a maker of walk-in bathtubs for those with limited mobility. No financial terms were disclosed. Safety Tubs was represented on the deal by Cross Keys Capital.

Axela Inc., a Toronto-based provider of DNA, RNA and protein analysis, has acquired local rivalXceed Molecular. No financial terms were disclosed. Axela is backed by VenGrowth Private Equity Partners.

Glam Media, a female-focused online advertising network, has acquired AdPortal, a provider ofadvertising technology for publishers. No financial terms were disclosed. Glam Media has raised around $150 million in VC funding, from Aeris Capital, Burda Digital Holding, Mizuho Capital, Draper Fisher Jurvetson, Accel Partners! , DAG Ventures, Information Capital and WaldenVC.

Imagine Communications Group, a pan-European communications provider, has acquired the Ireland operations of Clearwire. No financial terms were disclosed, except that Clearwire will receive a minority shareholding and the right to nominate an Imagine board member. Other Imagine shareholders include DFJ Esprit and NTR.

Vision Solutions Inc., a portfolio company of private equity firm Thoma Bravo, has completed its acquisition of recovery software provider Double-Take Software Inc. The deal was valued at $242 million in cash, or $10.55 per share (21% premium to closing price on last day of trading before Double-Take said it was considering alternatives).

PE Exits

The Carlyle Group has agreed to sell Kbrok, Taiwan’s largest cable TV operator, to the controlling shareholder of Taiwan Mobile, for about $1.25 billion.

NanoGram Corp., a Milpitas, Calif.-based maker of core process technology for the manufacture of nanostructured materials for optical, electronic and energy applications, has been acquired by an undisclosed third party. The deal was revealed in an SEC filing by former parent companty NeoPhotonics, which is in registration for an IPO. NanoGram has raised more than $50 million in VC funding from ATA Ventures, Bay Partners, Harris & Harris, Institutional Venture Partners, Nth Power, Rockport Capital Par! tners, SBV Venture Partners,Technology Partners, Global Cleantech Capital, Masdar Clean Tech Fund, Mitsui Ventures, Nagase & Co., Nanostart AG, TEL Venture Capital and Yasuda Enterprise Development.

Firms & Funds

Emerging Capital Partners has closed its third African fund with over $613 million in capital commitments.

Human Resources

Karl Beinkampen has joined Wilshire Associates as chief investment officer of Wilshire Private Markets. He previously was with Morgan Stanley as managing director of the Alternative Investment Partners group.