peHUB Wire: Thursday, April 2, 2009

Very busy news morning, with 28 items culled, compiled and contracted into bite-sized morsels below. As such, just time for a few very quick hits:

*** Nothing Shocking: Buyout fund-raising fell off a cliff last quarter, according to preliminary data from Thomson Reuters (official numbers come later this month). Forty funds managed to secure just $17.24 billion in Q1, compared to 117 funds raising $99.71 billion during the same period in 2008. For the long division-challenged, that represents decreases of 65.81% and 82.71%, respectively. Go here to get more fancy math and a downloadable spreadsheet.

*** The hits just keep coming for Apollo Management, which is now being sued for allegedly concealing problems at Linens ‘n Things. The plaintiff is fellow private equity firm Levine Leichtman Capital Partners, which operates a leveraged loan fund that held around $43.5 million of senior secured notes in the now-bankrupt retailer. We’ve posted some excerpts and the entire complaint (for those with a really slow day).

*** Markdown Madness: I keep hearing what a wonderful time it is to be a distressed fund, although those legacy investments are a real bear. For example, take a look at the latest marks from MatlinPatterson, though Q4 2008 (no comment from firm, natch):

• Fund I (2001): Down 49% quarter-over-quarter. IRR at 15% (1.62x).

• Fund II (2003): Down 16% quarter-over-quarter. IRR now at -12% (0.84x).

• Fund III (2007): Down 39% quarter-over-quarter. IRR now at -48% (0.61x).

*** April Fool: Yesterday, a “trusted” LP source emailed to say that a big-name buyout firm was planning to cut its latest fund’s size by 50%, so long as it could get LP approval of fee alterations. I dutifully emailed one of the firm’s senior execs, who called me back about five seconds later to categorically deny the story. Being generally skeptical of what PE firm execs tell me, I pressed him a bit on it. No budging. And why should he have? My source was apparently having a good laugh at my expense. I’ve got 365 days to devise payback.

*** Some new jobs posted at the peHUB Career Board.

*** More than a dozen readers have expressed interest in joining the peHUB team for Field of Dreams, the softball at Fenway event that benefits ABCD in Boston. I’m hoping for a few more, so that we could try fielding a full roster. Again, it works out to a bit less than $700 per person. If you are interested – not a commitment, don’t worry – please let me know by the end of this week.

Top Three

Fidelity National Information Services Inc. (NYSE: FIS) has agreed to acquire Metavante Technologies Inc. (NYSE: MV) for approximately $2.94 billion in stock. The merger would create the world’s largest provider of integrated payment and financial processing services. Under terms of the agreement, Metavante shareholders would receive 1.35 shares of Fidelity stock per share of Metavante stock. Warburg Pincus, which is Metavante’s largest shareholder with a 25% stake, would own around 11% of the merged company. In addition, THL Partners has agreed to make an undisclosed equity investment in Fidelity, to help facilitate the merger. LBO Wire puts the THL contribution at approximately $200 million, which is in addition to an earlier $225 million commitment.

RedBrick Health, a Minneapolis-based provider of personal health financing and management solutions, has raised $15 million in Series C funding. Kleiner Perkins Caufield & Byers led the round, and was joined by return backers Highland Capital Partners, Versant Ventures and Fidelity Ventures. The company had previously raised $30 million.

The Blackstone Group is looking to raise up to $3 billion for a “rescue fund” that would provide financing to companies that are on the verge of bankruptcy, according to The New York Post.

VC Deals

CeraPedics Inc., a Lakewood, Colo.-based developer of products for the orthopedic bone substitutes market, has raised $15 million in second-round funding, according to a regulatory filing. NGN Capital was joined by return backer OrbiMed Advisors. The company previously around around $14.5 million.

D2S (f.k.a. Direct2Silicon), a San Jose, Calif.–based provider of software that enables direct write e-beam lithography for production of system-on-a-chip ICs, has raised $9 million in Series B funding. peHUB had previously reported on the round, based on a regulatory filing. Benchmark Capital and DAG Ventures co-led the round, and were joined by Advantest Corp. and Cadence Design Systems Inc.

TubeMogul, an Emeryville, Calif.-based, has raised provider of online video distribution and analytics, has raised $3 million in Series A funding from Trinity Ventures.

Altea Therapeutics has signed a deal with Eli Lilly and Amylin Pharmaceuticals to develop and commercialize a daily trans-dermal patch delivering exenatide. The patch would use Alteo trans-dermal delivery technology. Under terms of the deal, Atlanta-based Altea will receive an upfront license payment, an equity investment and up to $46 million in milestone payments. Altea previously raised around $56 million in VC funding from Domain Associates, Venrock, vSpring Capital, Aperture Venture Partners, KBC Private Equity, Rockport Venture Partners and Quilvest Private Equity.

Buyout Deals

Acorn Growth Cos. has acquired Integrated Composites Inc., a Marina, Calif.–based maker of composite aircraft components and structures. No financial terms were disclosed, except that Peninsula Capital provided mezzanine financing.

Clearview Capital has acquired a majority stake in Woodridge, Ill.-based EN Engineering, from Epstein and Nicor Energy Ventures. The deal was valued at $35 million, including a $3 million earn-out.

High Road Capital Partners has acquired Accentus Inc., an Ottawa-based provider of outsourced medical transcription and editing services in Canada. No pricing terms were disclosed for the transaction, which included senior debt from Bank of Montreal and subordinated debt from Bank of Montreal Capital Corp.

BeaconRidge Corp., an Ottawa–based provider of design and manufacturing services for electronic products, has raised US$11.2 million in private equity funding from EdgeStone Capital Partners. It also has secured another US$39.8 million in debt financing.

PE-Backed IPOs

Bridgepoint Education, a San Diego-based provider of online and in-class education services, has set its IPO terms to 13.5 million common shares being offered at between $14 and $16 per share. The company would be valued at approximately $835 million, were it to price at the high end of its offering range. Bridgepoint plans to price in mid-April, and trade on the NYSE under ticker symbol BPI. Credit Suisse and J.P. Morgan are serving as co-lead underwriters. Warburg Pincus currently holds an 89.5% ownership position in Bridgepoint.

PE-Backed M&A

American Capital has combined three portfolio companies within its Financial Services Group, in order to form a diversified commercial finance holding company called Core Financial Group. The three companies are: Core Business Credit, an asset-based lender; Velocity Financial Group, a venture debt finance and mid-market equipment leasing company; and Oceana Media Finance, a film finance company. No financial terms were disclosed.

Boomerang Media a New York-based acquisition platform focused on entertainment copyrights and related media IP, has acquired the core business of Entertainment Rights (LSE: ERT), the company behind children’s programs like He-Man and Casper the friendly Ghost. No financial terms were disclosed. Boomerang was formed last year by GTCR, which committed an initial $200 million.

Bounty Group Ltd., a portfolio company of Barclays Private Equity, has agreed to buy the UK business of Kaboose Inc. (TSX: KAB), a family-focused media company. The deal is valued at approximately £54 million, including around £10 million in assumed debt. In a related deal, Kaboose is selling its North American assets to Disney Online for approximately $23.3 million.

Hertz Global Holdings (NYSE: HTZ) has won a bankruptcy auction for the assets of Advantage Rent-A-Car, with a $30.3 million bid. The closest competitor was Enterprise Rent-a-Car, with a $19 million offer. Hertz shareholders include The Carlyle Group and Clayton, Dubilier & Rice.

Hunter Defense Technologies Inc., a Solon, Ohio-based maker of solutions for the military and homeland security markets, has acquired Vertigo Inc., a Lake Elsinore, Calif.-based maker of engineering solutions for the aerospace, defense and tech markets. No financial terms were disclosed. Metalmark Capital bought Hunter Defense in 2007 from Behrman Capital for $350 million.

Imprivata Inc., a Lexington, Mass.-based developer of identity management software, has acquired the assets of IdentiPHI, including its SAFsolution product line and biometric patents. Imprivata has raised over $45 million in VC funding from firms like General Catalyst Partners, Highland Capital Partners, Polaris Venture Partners and SAP Ventures.

Physicians Interactive LLC, a Libertyville, Ill.-based provider of digital sales and marketing solutions, has acquired MedManage Systems Inc., a Bothell, Wash.-based provider of online drug sampling solutions. No financial terms were disclosed. Physicians Interactive is owned by Perseus LLC. MedManage has raised over $45 million in VC funding since 2000, from firms like Lilly Ventures, Prism VentureWorks, QuestMark Partners and Versant Ventures.

Tri-County Petroleum Inc., a portfolio company of KRG Capital Partners, has acquired Loos & Dilworth Inc., a supplier of passenger car motor oils in the Philadelphia and Baltimore areas.

PE-Backed Bankruptcy

Thornburg Mortgage Inc. (OTC BB: THMR), a Santa Fe-based provider of “jumbo mortgage loans, said that it will file for Chapter 11 bankruptcy protection and go out of business. Last March, Thornburg received a $1.35 billion rescue package from MatlinPatterson Global Advisors, which has since surrendered all of its Thornburg common stock – 120.8 million shares – without receiving compensation.

Union Subcontractors Inc., an Edina, Minn.-based installer of residential and commercial products, has filed for Chapter 11 bankruptcy protection. In a statement, the company said that it has agreed on a debt-for-100% equity swap with its lenders. Such a deal would wipe out Wind Point Partners, which bought Union Subcontractors in 2004.

Firms & Funds

ConJoin Group LLC has launched as a turnaround advisory for investment firms with struggling portfolio companies. It is being sponsored by $9.5 million from Jefferson Partners, whose co-founder David Folk is one of ConJoin’s two principals. The other is Richard Garnick, current chairman and CEO of Avotus Corp.

Gulf + Eastern Advisors has launched to provide corporate restructuring, turnaround and M&A advisory services. It is led by Peter Schweinfurth, who previously was an executive with Avenue Capital. He also has held positions with Perry Strategic Capital and Kelso & Company.

Human Resources

David Bradley has agreed to join The Blackstone Group as a senior managing director in its corporate advisory group, and as head of its global chemicals practice. He is the former global head of chemicals at UBS, and will officially join Blackstone at the end of June.

Art Collins Jr. has joined Oak Hill Capital Partners as a senior advisor. He is the former chairman and CEO of Medtronic Inc., from which he retired last September.

Kamil Salame has joined CVC Capital Partners as a partner and U.S. head of the firm’s financial institutions group. He previously was a partner with DLJ Merchant Banking Partners.

Swiss Re said yesterday that it plans to cut approximately 10% of its 11,560 global workforce.