peHUB Wire: Thursday, October 22, 2009

And Rory Smith makes four. Yesterday, the co-founder of Nautic Partners became the latest PE pro to throw his hat into the electoral ring, announcing his plans to run for Rhode Island governor. The others are: Steve Pagliuca (Bain Capital – U.S. Senate from Massachusetts); Kip Kirkpatrick (Water Street Healthcare Partners – Illinois treasurer) and Allen Alley (Battery Ventures until 1996 – Oregon governor). The party split is even, as Smith and Alley are Republicans, while Pagliuca and Kirkpatrick are Democrats.

I hope to interview each of them within the next week, including a video spot I’m doing tomorrow with Pagliuca. Particularly interested to hear what each of them thinks about the spate of pending legislation and rules changes aimed at private equity and venture! capital.

Whatever you think of the specific proposals – fund registration, carried interest tax changes, placement agent bans, etc. – it is a bit odd that the PE asset class is getting so much scrutiny without causing any systemic troubles. Not saying that certain changes aren’t positive, but it does seem that you, dear readers, make for a soft target right now.

Per usual, I hope that each of the four gets elected. Not because I think each would be the best choice for their respective office, but because it will help me fill this column going forward. Four of the most selfish – and irresponsible – endorsements you could possibly hope for…

*** Dow Jones is reporting that Sequoia Capital is a small part of the consortium that has agreed to buy private bank First Republic from Bank of America, for more than $1 billion. Don’t quite know what to say, except that it’! s a bit unexpected. Not only because Sequoia doesn’t typically involve itself with buyout deals, but because it also isn’t known as a financial sector investor.

I’m sure Sequoia is aware that the VC world’s track record with big buyout clubs is not terribly positive. Examples include Battery Ventures with Freescale Semiconductor or Highland Capital Partners with Harrah’s. And then there is Index Ventures and Andreessen Horowitz partnering up with Silver Lake for Skype – a hairy deal that eBay said yesterday would close in Q4 despite all of its legal challenges.

Not saying the past is prologue here, just that the present is unusual.

*** Got my copy yesterday of The Buyout of America, a new tome from NY Post reporter Josh Kosman. Looks like a fast read – particularly compared to Sorkin’s opus – and will review shortly. I expect Erin will as well, which should be interesting since she used to work for Josh at MergerMarket.

*** Answer Key: Yesterday I asked you to identify one of th! e fund commitments that Stanford University wants to (partially) sell. I told you it was a 2009 commitment and a tough allocation to get. Three of you got it right: Andreessen Horowitz.

*** Hope to see some of you tonight at the 4th Annual New England Venture Charity Wine Party. The event is designed to help launch TUGG, a new nonprofit aimed at spreading social entrepreneurship in New England. More info at

Top Three

Bank of America (NYSE: BAC) has agreed to sell First Republic private bank to a group of private equity investors, including Colony Capital and General Atlantic. No financial terms were disclosed. Current First Republic management would continue to run the business.

XOJet Inc., a private aviation company sponsored by TPG Capital, has secured $470 million in new funding. This includes $100 million in equity and a $370 million debt facility. TPG and Abu Dhabi-based Aabar co-led the deal. Last year, XOJet secured $2.5 billion in new financing to expand its fleet and better compete with rival NetJets (including approx. $85 million in new equity).

Stanford Management Co., investment manager for the Stanford University endowment, confirmed that it is considering a secondary sale of up to $1 billion of its private equity portfolio (plus related unfunded portions, pro rata). As peHUB previously reported, Stanford does not plan to sell majority stakes in its partnerships, but rather minority positions that would enable it to maintain relationships with its general partners. Cogent Partners is managing the process, although is not identified by name in the Stanford statement.

VC Deals

Organic Motion, a New York-based provider of computer vision and motion capture systems, has raised$7.4 million in Series B funding led by Foundry Group.

Centice Corp., a Morrisville, N.C.-based developer of a pharmaceutical authentication sensor system, has raised $6.1 million in Series C funding. Fulcrum Financial Group was joined by return backers The Aurora Funds,S-Group Direct Investments Ltd. andInnovation Ventures. Centice previously raised around $18 million.

Dailymotion SA, a Paris-based video sharing website, today confirmed that it has raised €15 million in third-round funding led by French Sovereign Fund. The deal was first disclosed by company CEO Cedric Tournay in an interview with Dai! lymotion previously raised $43.5 million from Advent Venture Partners, AGF Private Equity, Atlas Venture and Partech International.

Buyouts Deals

Candover, Cinven and Permira are working on a debt restructuring deal for Gala Coral, a joint portfolio company that operates bingo parlors in Britain. Reuters reports that the deal would result in the private equity firms sharing control of Gala Coral with junior lenders led by Intermediate Capital Group and Park Square.

Energy Future Holdings (f.k.a. TXU) has extended the deadline for early offers in its debt exchange, from October 19 to October 23.

Global Infrastructure Partners has agreed to acquire London Gatwick Airport from BAA Airports Ltd., for approximately £1! .46 billion.

Vertex Capital Management has acquired skin care products maker Cosmedicine. No financial terms were disclosed. Cosmedicine will change its name to Costru Company LLC.

Vicente Capital Partners has made an equity investment in U.S. Dermatology Medical Management Inc., an Irvine, Calif.-basedprovider of healthcare services for skin cancer treatment and other medical dermatological conditions. No financial terms were disclosed.

PE-Backed IPOs

AGA Medical Holdings Inc. (Nasdaq: AGA) shares rise 0.7% in its first day of trading, after raising $199.4 million via an IPO at $14.50 per share. Welsh Carson Anderson & Stowe acquired a majority stake AGA Medical via a 2005 equity recap. The Plymouth, Minn.-based company makes medical devices for the treatment of structural heart defects and vascular diseases.

STR Holdings Inc., an Enfield, Conn.-based maker of solar power module encapsulants, has set its IPO terms to 12.3 million common shares being offered at between $13 and $15 per share. It would have an initial market cap of approximately $620 million, were it to price at the high end of its range. The company plans to trade on the NYSE under ticker symbol STRI, while Credit Suisse and Goldman Sachs serving as co-lead underwriters. DLJ Merchant Banking Part! ners is STR’s majority shareholder, while Northwestern Mutual Life Insurance Co. also is a major holder.

Bad News

Montagu Private Equity has signed a debt restructuring deal for portfolio company Linpac, which would wipe out Montagu’s position. Montagu acquired Linpac, a UK food packaging company, for £ 860 million in 2003. It recouped around 80% of its investment via a recap in 2007.

NTK Holdings Inc. (Nortek), a Providence, R.I.-based maker of ventilation, air conditioning and heating products, has filed for Chapter 11 bankruptcy protection. The move was expected, and is part of a restructuring agreement with its lenders. Nortek listed estimated assets of $1.65 billion and estimated liabilities of around $2.77 billion. THL Partners acquired NTK from Kelso & Co. in 2004, and held a 66.48% equity stake as of late 2007, when NTK canceled a proposed $690 million IPO.

Firms & Funds

Imperial Capital Group, a Los Angeles-based mid-market investment bank, has filed for a $150 million IPO.

Human Resources

Charlie Mamrak has joined Chicago-based private equity firm Linden LLC as an operating partner. He previously was CEO of PML Microbiologicals.

Michael Wolfe has rejoined Benchmark Capital as an entrepreneur-in-residence. His last Benchmark-backed company was Vontu, whichwas acquired by Symantec in 2007.