peHUB Wire: Monday, June 28, 2010

I spent most of Friday blogging about the financial reform bill, even though the bill itself was kept under lock and key until this morning. Apparently it was senior skip day at the Congressional printshop, or maybe Kinko’s was overbooked.

But the bill is now available, which means that we know the final Volcker Rule language.

As expected, banks will continue to be allowed to invest in third-party private equity funds, so long as: (1) The commitment does not represent more than 3% of the bank’s Tier I capital; and (2) The commitment does not represent more than 3% of the fund’s total capitalization.

More interesting, however, are the rules related to the sponsorship of in-house funds. The original Volcker language would have prohibited such activities outright, but the conference bill allows such vehicles with several conditions:

1. The 3% provisions, as stated above in regards to third-party funds.

2. Bank-sponsored funds would not be allowed to use bank brands in their name. In other words, no more Goldman Sachs Capital Partners (now taking suggestions for new names)

3. Bank employees would not be allowed to invest in the fund, unless they are directly working on the fund. That is a very significant restriction, given how banks often use employee contribution to boost PE fund coffers and tout PE fund access as a de facto benefit for employees.

It also is worth noting that banks will have a minimum of two years, and possibly up to five years to divest existing PE fund positions that exceed the 3% thresholds.

*** All of the above might be academic, given that Sen. Scott Brown was threatening over the weekend to vote against the bill…

*** Fuel cell maker Bloom Energy is seeking $50 million, in what it’s telling prospective investors will be their last chance to buy in before an IPO.

Existing shareholder Northgate Capital is somehow involved, although I’m not certain if it’s as lead investor or as quasi-placement agent (or both). No word on if other insiders plan to return pro rata.

Bloom is a fascinating company, because it generates deep divisions among cleantech investors.

Proponents consider Bloom to be the energy industry’s Google, a revolutionary company that will become ubiquitous. They talk about $20 billion as a floor for the post-IPO valuation– which I hear is slated for late next year– with $40 billion being within the realm of possibility.

“Just wait until they get big contracts outside of California,” says one such Bloomer. “Particularly fromthe U.S. government, which really wants to get off the grid… [The government] views Bloom as a way to insulate itself from certain types of terrorist attacks.”

Skeptics, however, argue that Bloom boxes are economically uncompetitive without government subsidies, which will eventually run out. Even ifthe company fixes that problem with its next-generation boxes — whichBloomers say it will do– the whole “grid” issue is really more about swapping grids than losing them, sincethe fuel cell boxesrely on natural gas.

“I’m glad this is in my anti-portfolio,” says an East Coast venture capitalist, who adds that Bloom marketed its previous funding round as its “final pre-IPO round.”

As for me, no judgment yet — particularly because I’ve heard some conflicting info on potential new Bloom contracts. But I figured you’d want to know it’s out in market…

Top Three

Sun Capital Partners has acquired substantially all of the assets of Pace American, a Chicago-based manufacturer of enclosed cargo and utility trailers to the U.S. and Canadian market. No financial terms were disclosed for the deal, which was transacted via an Article 9 auction.

NYU announced Monday that it plansto create a $20 million venture fund to commercialize select technologies that it develops and to provide seed funding for startups. The first set of investments are expected in 2011. Frank Rimalovski was named the fund’s managing director.

Summit Partners has made a minority investment in Acturis Ltd., a London-based provider of insurance technology services. Financial terms were not disclosed. Summit provides private equity and venture capital to companies.

VC Deals

Envirogen Technologies Inc., a Kingwood, Texas-based provider of water filtration solutions, has secured $50 million in financing from an undisclosed “provider of alternative investment capital.”

Smart Balloon, the parent company of casual game developer site HeyZap, has secured $2.5 million of a $3 million funding round. Company directors include Albert Wegner of Union Square Ventures and Naval Ravikant. Here is how HeyZap describes its business: Heyzap enables game developers to distribute their social games outside of social networki! ng sites and onto the wider web while not only retaining the game’s social functions and features, but also connecting the user’s many social graphs.

Pixable has received $2.1 million in funding from Highland Capital, according to an SEC filing. Pixable, of New York, makes easy to print photo books and calendars. Highland Capital,a venture capital firm, targets sectors including consumer, healthcare as well as information and communications technology.

The Slater Technology Fund said Monday that it has committed seed funding to Mnemosyne Pharmaceuticals Inc. Financial terms were not disclosed. Mnemosyn! e, of Providence, R.I., aims to develop small molecule therapeutics to treat schizophrenia and other cognitive and neuropsychiatric disorders. Slater is a state-backed VC fund that targets ventures based and committed to Rhode Island.

HitFix, an entertainment journalism online resource, has raised $1.6 million in second-round funding led by Tech Coast Angels.

Buyouts Deals

Olympus Medical Systems has agreed to buy Spiration, a medical device company based in Redmond, Wash. Financial terms were not disclosed. Spiration has received more than $94 million in funding from investors including Olympus, New Enterprise Associates, New Leaf Venture Partners (Sprout Group), InterWest Partners, Investor Growth Capital and Three Arch Partners. Olympus Medical is owned by Olympus Corp.

Gryphon Investors has completed a dividend recap of portfolio company, Intelligrated, an automated materials handling company based in Cincinnati, a source said. The $80 milion dividend is roughly one-and-a-half times the money Gryphon invested a year before to support Intelligrated’s buy of FKI Logistek in 2009,the personsaid. Gryphon, of San Francisco, invests in middle market companies.

Personna American Safety Razor, a portfolio company of Lion Capital, may file for bankruptcy later this week, with a plan to sell to UBS.

YRC Worldwide Inc. (Nasdaq: YRCW) has agreed to sell part of its logistics business to Austin Ventures, for $37 million. The newly-independent company will focus on international freight forwarding, customs brokerage, transportation management, truckload services and dedicated warehouse and fulfillment services.

The Stratus Group has invested in Unnafibras, a Brazillian producer of polyester fibers made from recycle PET. The Stratus Group targets Brazilian mid-sized companies.

PE-Backed IPOs

Camelot Information Systems Inc., a Beijing-based provider of enterprise application services and financial industry IT services in China, has filed for a $250 million IPO. It plans to trade on the NYSE under ticker symbol CIS, with Barclays Capital and Goldman Sachs (Asia) serving as co-lead underwriters. Citigroup Venture Capital holds a 29% pre-IPO stake.

Fitness First, a UK gym operator owned by BC Partners, reportedly is planning a $1.8 million flotation in Hong Kong, Singapore or Shanghai.

Qlik Technologies Inc., a Radnor, Penn.-based provider of business analytics software, has set its IPO terms to 11.2 million shares being offered at between $8.50 and $9.50 a piece. It would have an initial market cap of approximately $712 million, were it to price at the high end of its range. Shareholders include Accel Partners (26.7% pre-IPO stake), Jerusalem Venture Partners (25.4%) and Stiftelsen Industrifonden (10.1%).

Scottish Resources Group, a British coal miner backed by Parkburn and Palmaris Capital, is planning to raise upwards of £200 million via a London floatation.

Tesla Motors, a San Carlos, Calif.-based maker of electric vehicles, has increased the number of shares being offered in its IPO from 11.1 million to 13.3 million. It still plans to sell the shares at between $14 and $16 a piece, and would have an initial market cap of approximately $1.5 billion, were it to price at the high end of its range. Tesla has raised over $220 million in VC funding from firms like Draper Fisher Jurvetson, Daimler AG and VantagePoint Venture Partners.

PE Exits

Gilead Sciences Inc. (Nasdaq: GILD) has agreed to acquire CGI Pharmaceuticals Inc., a Branford, Conn.-based drug developer focused on small molecule chemistry and kinase biology. The deal is valued at $120 million, the majority of which is an up-front cash payment.

Graphite Capital is planning to sell tire wholesaler and retailer Micheldever Tyre Services for around £200 million.

AAC Capital is planning top sell auto body filler company U-Pol for between £120 million and £130 million.

Firms & Funds

GIMV and Dexia SA are launching a second Benelux infrastructure fund, and already has secured 80 million in commitments.

New Horizon Capital, a Japanese private equity firm, plans to raise up to 50 billion yen ($560 million) for a second fund for investments in small and medium-sized firms.

Rong Qin plans to raise more than 5 billion yuan ($736 million) in the next two years to invest in Chinese companies undergoing technology upgrades and the commercial property sector.

Avista Capital Partners has opened an office in London, which will be staffed by three former team members of DLJ Merchant Banking Partners. This is Avista’s first European office. The team members are: Newton Aguiar, Allen Yurko and Kunal Pandit.