peHUB Wire: Monday, May 24, 2010

The sun is shining, the beloved Celtics are cruising and I’m trying not to be too annoyed by what happened between 11:15 and 11:30 last night. In other words, it’s time for some Monday Mouth-Off:

First up are some responses to Friday’s column, about what happens if/when carried interest tax law is changed:

Matthew begins: “You wrote that ‘investors have told me that they’ve held board-level meetings to examine the tax implications about selling a company this year as opposed to next year.’ I don’t doubt it, but this could open a wave of litigation. It’s one thing for a board to include tax considerations when making decisions that are in the best interests all shareholders (like the increase in across-the-board capital gains rates). It’s quite another, however, if certain board member! s are making decisions out of self-interest (like the carried interest tax change). If general partners sell companies prematurely in order to reduce their own tax burdens, then it would be a major breach of fiduciary duty to its limited partners.”

Charlie: Those voting for this bill will not need to “pivot,” as you suggest. Their compromise may not satisfy your never-ending, naive need for consistency, but the message to voters back home will simply be that taxes were raised on rich people.”

Robert: “You have taken into account the rise in the capital gains tax but not the rise in the personal tax rate from 35% to 39.5%. This would result in tax on carried interest going from 20% to 29.75% or approximately a 50% increase over the new capital gains tax rate.”

Vince: It sounds like the workaround could be a fundless sponsor VC model. That can work in certain circumstances (and I think it does), but it would be very difficult industry! -wide due to LP allocation realities. Plus, if it did work, I’d think that Congress would find a way to snuff it out.”

*** Next up is Byrne, commenting on those “odd lot” secondary valuations of companies like Twitter and Facebook: “A private company whose shares start trading *should* have a higher price: It’s easier to sell, and the company has more fundraising flexibility. Plus more transparency/disclosure. Comparing VC rounds to secondary transactions is highly misleading. It’s like pointing out that Google trades at a big premium to its IPO price, and suggesting that this means it’s overvalued.” Quick note: Byrne was referring to pricing/availability – not underlying financials — when he wrote “more transparency/disclosure.”

*** Jeff: “You still hating on Doc Rivers?”

No Jeff, I’m not. My whole problem with Doc was that he was unable to settle on consistent rotations. The twelfth man suddenly became the sixth man, and the seventh man suddenly registered a DNP. He finally lost his sub-lust in 2008, reca! ptured a bit of it during the regular season but is now down to a tight eight. That said, it was kind of a shame that Scal was stuck in a suit for the fourth quarter on Saturday night. I was sitting above the Celts tunnel, saw him go in with around five minutes to play, and thought he somehow might come running out with a cape or something…

Top Three

THL Partners has agreed to sell a majority stake in food supplier Michael Foods to GS Capital Partners for $1.7 billion. THL, which acquired the company in 2003, will retain a 20% ownership position.

Affinion Group Holdings Inc., a Norwalk, Conn.-based provider of integrated marketing and loyalty solutions, has filed for a $400 million IPO. No underwriters were listed. Apollo Management acquired Affinion in October 2005 from Cendant Corp. for approximately $1.83 billion. It had tried to take the company public once before, but pulled the offering in 2007.

Barclays Private Equity is set to spin out as an independent firm this summer, according to Reuters. The move will precede a new fundraising drive.

VC Deals

NormOxys Inc., a Wellesley, Mass.-based developer of drugsthat enhance the body’s ability to deliver oxygen to diseased tissues, has raised $17.5 million in Series B funding. Care Capital led the round, and was joined by return backer Index Ventures. The company previously raised $12.5 million.

Guardian Analytics Inc., a developer of predictive analytics-based fraud prevention software, has raised $9 million in Series C funding. Sutter Hill Ventures led the round, and was joined by return backer Foundation Capital.

Zend Technologies, a Cupertino, Calif.-based provider of software for developing and deploying PHP applications, has raised $9 million in new VC funding. Greylock Partners led the round, and was joined by fellow return backers Azure Capital Partners, Index Ventures, Intel Capital, SAP Ventures and WaldenVC.

Gammadata, a Stockholm-based applied physics company, has raised SEK 29.5 million ($3.74m) from I! nnovationsKapital.

Biomedical Structures LLC, a Warwick, R.I.-based developer of biomaterials and textiles used in orthopedics, reconstructive surgery and tissue engineering, has raised an undisclosed amount of equity funding from Ampersand Ventures.

Taykey, an Israel-based provider of online advertising solutions, has raised an undisclosed amount of VC funding from Sequoia Capital.

Buyouts Deals

Advantage Partners and TPG Capital are among the remaining bidders for Anabuki Construction Inc., a Japanese apartment developer that failed last year with around $1.6 billion in debt. Nikko Cordial Securities is managing the process.

Berggruen Holdings, a private equity vehicle of billionaire Nicolas Berggruen, has offered to buy insolvent German department store chain Karstad. The only other bid is from European buyout firm Triton.

The Blackstone Group may invest $500 million, as part of a group that has offered to help General Growth Properties exit bankruptcy. Existing consortium members include Pershing Square Capital Management and Fairhome Capital Management.

HealthScope (ASX: HSP), an Australian hospital operator, said it would open its books to private equity suitors.

LDC has sponsored a £15 million management buyout of UK luggage maker Antler from Barclays Private Equity. No financial terms were disclosed.

Morgan Stanley Private Equity has formed a strategic partnership with Bill Mitchell, former chairman and CEO of Arrow Electronics, toform an ITservices provider focused on serving small and medium sized businesses (SMBs). The newplatform will be created via investments and/or acquisitions.

Warburg Pincus has agreed to inve! st $138 million into Sterling Financial Corp. (Nasdaq: STSA), as part ofthe bank holding company’s recapitalization. THL Partners previously had agreed to invest $175 million, but will adjust its investment to match that of Warburg Pincus.

PE Exits

Google has received FTC approval for its $750 million acquisition of AdMob.

The Halifax Group has sold its majority equity stake in Taylor Companies LLC, a for-hire crude oil logistics company, to Gibson Energy ULC for an undisclosed amount.

Lexmark International Inc. (NYSE: LXK) has agreed to acquire Perceptive Software, a Shawnee, Kan.-based maker of enterprise content management softwar! e for around $280 million in cash. Perceptive generated $84 million in 2009 revenue, and has raised over $20 million in VC funding from Morgan Stanley Venture Partners and Peninsula Ventures.

MEMC Electronic Materials Inc. (NYSE: WFR) has agreed to acquire Solaicx Inc., a Santa Clara, Calif.-based maker of silicon wafers for photovoltaic panels. The deal is valued at $66 million in cash, plus up to another $10 million based on incoming investment. Solaix has raised over $50 million in VC funding from D.E. Shaw, Applied Ventures, Big Sky Ventures, Firsthand Capital Management, Labrador Ventures and Greenhouse Capital Partners.

Human Resources

Mark Degner has joined Liquid Realty Partners as director of acquisitions. He previously was an executive director with Morgan Stanley.