peHUB Wire: Thursday, July 23, 2009

Is Mary Shapiro jealous of all the pub that Andrew Cuomo has been getting?

The SEC yesterday proposed new rules that would prohibit private equity funds (broadly speaking) from using placement agents, when trying to secure capital from public pension systems. This is basically the federalization of what’s been going on in New York, and is equally misguided (albeit well-intentioned).

“Placement agents” didn’t cause the pay-for-play scandal in New York. Corrupt public pension officials did. All the scummy fixers in the world can’t make a dent in an honest retirement system. That’s why it’s pay-for-play, rather than just pay.

Legitimate placement agents play an invaluable role in the capital-raising process, particularly for smaller firms. Banning them in this way will diminish the ability of new firms to secure commitments from the market’s l! argest (and often dumbest) investors. As such, it also will further diminish the number of new firms.

If you’re going to institute a ban, why not begin by: (A) Banning non-registered placement agents; and (B) More closely monitoring those who apply for registration? It’s like saying that an intersection is too dangerous, so the solution is to shut it down rather than install traffic lights.

There are some good pieces of the SEC proposal — particularly the part banning political contributions — but the headline premise is flawed. Luckily, these are just proposed rules, and a 60-day comment period will commence once the official proposal is published (it’s just a statement from Shapiro at this point). I’m told that something similar was proposed back in 1999, but that it imploded. If common sense prevails, we’ll see flames again.

*** Yesterday we reported that Matrix Partners was nearing final closes on two funds: M! atrix Partners IX with a $450m target, and Matrix Special Opportunitie s Fund, with a $150m target. The first one is just the latest iteration of the firm’s traditional venture capital strategy, but we knew very little about the second.

So I spoke with a Matrix limited partner, who says that the special ops fund is for anything outside of the general fund’s investment strategy. For example, Matrix may want to buy back into some of its former portfolio companies (think Accel Partners with StumbleUpon).

Special ops will invest separately from Matrix IX, although the two fund-raising processes were stapled (i.e., can’t do one without the other). Really speaks to Matrix’s strong rep among LPs, because stapling is a frowned-upon practice that is rarely tolerated anymore.

*** As I was famished at around 4pm PT yesterday afternoon, I realized that West Coast conferences should have early dinners (or at least snacks) on the first day for East Coast attendees (since most fly in that day). Jus! t a thought… Of course, I also could have used a Dunkin’ Donuts iced coffee when I woke up at 3:45am, but that would be a bit presumptuous…

Top Three

Apax Partners has agreed to acquire Bankrate Inc. (Nasdaq: RATE), operator of Bankrate.com and other personal finance websites, for $571 million. Bankrate stockholders would receive $28.50 per share, which represents a 15.8% premium over Tuesday’s closing price. Bankrate was advised by Allen & Co.

Amazon.com has agreed to buy online shoe retailer Zappos.com for $927 million, mostly in stock. Zappos has raised over $49 million in VC funding, from Sequoia Capital, Draper Richards, Venture Frogs and Millennium Technology Ventures.

Jeffrey Goldstein, a managing director with Hellman & Friedman, will be nominated to be the U.S. Treasury Department’s undersecretary for domestic finance.

VC Deals

iControl Networks Inc., a Palo Alto, Caif.-based provider of broadband home management solutions, has raised $23 million in Series C funding. New backers include ADT Security Services (unit of Tyco), Cisco, Comcast Interactive Capital and GE Security. Return backers include Charles River Ventures, Intel Capital and the Kleiner Perkins iFund.

TxVia Inc., a New York-based provider of prepaid card processing technology, has $15.5 million in Series C funding. Bain Capital Ventures led the round, and was joined by New York City Investment Fund and return backers Espirito Santo Ventures, Village Ventures and High Peaks Venture Partners. The company has ! now raised over $25 million.

Itz Cash Card Ltd., an Indian pre-paid card company, has raised $10.32 million in second-round funding. Lightspeed Venture Partners led the round, and was joined by return backers Matrix Partners India and Intel Capital.

Just Dial, an India-based provider of telephone and online search services, has raised $8.2 million from Sequoia Capital India.

5min, a New York-based syndication platform for online instructional video! s, has raised $7.5 million in Series B funding. Globespan Capital Partners led the round, and was joined by return backer Spark Capital.

Bubble Motion, a Mountain View, Calif.-based provider of voice messaging solutions, has raised $6 million in new VC funding. Palomar Ventures was joined by return backers Sequoia Capital and Comcast Interactive Capital.

OPEN Sports Network, a Ft. Lauderdale, Fla.-based sports website, has raised $4 million in new VC funding from existing angel investors. It also sold a 20% equity stake to FoxSports.com, as part of a $20 million strategic partnership.

RPX Corp., a San Francisco-based defensive patent aggregator, has raised an undisclosed amount of Series B funding. Index Ventures led the round, and was joined by return backers Charles River Ventures and Kleiner Perkins Caufield & Byers.

Elluminate Inc., a Calgary, Alberta-based provider of solutions for real-time online learning and collaboration, has secured an undisclosed amount of venture debt funding from MMV Financial.

Buyouts Deals

Integra Telecom Inc., a Portland, Ore.-based CLEC, has agreed to a debt restructuring that would give its lenders an undisclosed equity stake. This would mean dilution for existing shareholders Warburg Pincus, Nautic Partners, BA Capital Investors, Boston Ventures and GE Equity.

Procter & Gamble reportedly is shopping its prescription drug business, in a deal that could be worth $3 billion. Interested suitors include! Cerberus Capital Management and specialty drugmaker Warner Chilcott.

Vista Equity Partners has completed its $160 million take-private acquisition of SumTotal Systems Inc., a Mountain View, Calif.-based provider of talent development software. SumTotal stockholders received $4.85 per share.

PE Exits

Circadence Corp. has acquired the intellectual property portfolio of Iptivia Inc., a New York-based provider of IP service assurance solutions to enterprises and service providers. No financial terms were disclosed. Iptivia had raised a $6.54 million Series A round from Paladin Capital Management and OmniCapital Group.

GlaxoSmithKline has completed its acquisition on Stiefel Laboratories Inc., a Coral Gables, Fla.-based skincare pharmaceutical company that had been partially owned by The Blackstone Group. The $3.6 billion a! cquisition included $2.9 billion in cash, up to $300 million in cash earn-out payments and the assumption of $400 million in net debt. Blackstone had acquired an 18% stake for $484 million in August 2007.

Razorsight Corp., a Fairfax, Va.-based provider of on-demand financial business intelligence for communications service providers, has acquired SingleTusk, a provider of transaction, usage and profitability analytics software. No financial terms were disclosed. Razorsight has raised over $20 million in VC funding from Sierra Ventures.

Yahoo has acquired Xoopit, a San Francisco-based social email company. Xoopit had raised around $6.5 mi! llion in VC funding, from Accel Partners, Foundation Capital and indiv idual angels. No financial terms were disclosed for the sale, although All Things D puts the pricetag at approximately $20 million.

PE-Backed M&A

Ladder Capital Finance, a New York-based specialty finance company focused on the commercial real estate industry, agreed to acquire Florida community bank FirstCity Bank of Commerce. The purchase price is $8.15 per share, although the total is unknown because FirstCity is private. Ladder Capital was formed last last year with approximately $1 billion in equity and debt capital, co-led by GI Partners and Towerbrook Capital Partners. It recently filed for a $400 million IPO.

Physicians Interactive LLC, a portfolio company of Perseus LLC, has acquired Skyscape Inc., a mobile and online provider of specialty medical information. No financial terms were disclosed.

Firms & Funds

Birch Hill Equity Partners, a Toronto-based private equity firm, has begun raising its fourth fund with a C$850 million target, according to LBO Wire. It closed its third fund with C$850 million in 2005. www.birchhillequity.ca

Imperial Capital Group, a Toronto-based mid-market buyout firm, has closed its fourth fund with C$126 million in capital commitments. The fund’s first deal was an acquisition of Schulman Associates IRB Inc., a Cincinnati-based institutional review board for life sciences research protocols and consent documents.

ING is seeking buyers for its private banking business in Asia and Europe, according to the Wall Street Journal.

SinoLatin Capital has launched has an advisory firm focused exclusively on cross-border transactions between China and Latin America. Two of the firm’s three founders, Rafael Valdez Mingramm and Erik Bethel, previously worked with Chinese private equity firm ChinaVest.

Human Resources

Don Mackenzie has left Polaris Venture Partners, where he has served for the past two years as chief financial officer. He previously was with Atlas Venture. No word yet on future plans.