peHUB Wire: Thursday, October 29, 2009

A few more items from Tuesday’s cleantech conference:

• Most panelists believed some sort of climate bill would pass this year, although not much agreement on its contents (concerns that divisive healthcare debate is setting the stage for divisive energy debate). Also heard a few comments about how something like a Green Bank would make renewable energy companies more competitive with oil & gas, which already receive massive federal subsisidies.

• An audience member asked what one thing Obama could do to support cleantech. Rob Day of Black Coral Capital answered that he should form an investment matching program modeled after OPIC.

• It’s been suggested that cleantech is the next Internet, vis-a-vis VC returns (think it was John Doerr who first uttered it). Wonder if the statement is correct, but in reverse. VCs made lots of money early on the Internet, and then took massive losses. VCs investing in cleantech may take their losses first, and profit later.

*** Pay-to-Play: In 2007, CalPERS invested $600 million for around a 9% stake in Apollo Global Management (some reports had it at 10%). ARVCO served as placement agent, but records indicate that it received far more than its standard 1% fee. A disclosure document reveals that Apollo paid ARVCO $13.2 million for this particular deal, which works out to approximately 2.2 percent.

Also worth nothing that ARVCO’s commission percentages with Apollo did not decrease over time, as is often the case with placement agents (since a follow-on commitment is typically easier to get than a first-time commitment).

Finally, CalPERS refuses to publicly reveal the carrying value of its investment in Apollo’s management company. It also holds back valuation info on similar investments with Carlyle Group and Silver Lake Partners. It shouldn’t.

*** Recently finished reading Josh Kosman’s upcoming book, called The Buyout of America. Will post a review to pe! HUB later today. Basic thesis is that leveraged buyouts are likely to cause an economic maelstrom on the level of the housing bubble burst. I dissent. Sort of.

*** Accel-KKR, which yesterday agreed to buy KANA Software, does not receive LP commitments from either Accel Partners nor KKR (although some individual partners at each firm do invest). The primary operational relationship is that Accel-KKR has folks from each namesake on its advisory board (although not Henry Kravis, despite what Accel-KKR’s website says — he was replaced by Herald Chin).

Kind of interesting evolutionary story, in that Accel-KKR was originally formed to help merge online and offline businesses (back when such separations were common). It’s since morphed into a mid-market tech buyout shop. At the same time, its namesakes have evolved as well: Accel Partners now supplements its early-stage investing with a growth practice, while KKR has become a regular player at tech auctions.

*** Erin had a nice post yesterday on the uncertainty surrounding Edgeview Partners, the mid-market boutique consultancy CIT acquired in mid-2007. Includes this quote from Edgeview co-founder Drew Quartapella: “A big part of doing the deal was getting CIT’s leveraged loan relationships married to Edgeview’s private equity relationships. That part of the equation hasn’t been there for quite awhile.”

Top Three

Myer, Australia’s largest department store chain, raised A$2.2 billion in an IPO that priced at the low end of its expected range. Reuters reports that Myer backers TPG Capital and Blum Capital sold their entire stakes in the offering.

GSI Commerce Inc. (Nasdaq: GSIC) has agreed to acquire Retail Convergence Inc., a Boston-based operator of private sale site and discount e-commerce site The deal is valued at up to $350 million, including a $180 million up-front payment (50% in cash), and an earn-out of up to $170 million. Retail Convergence had raised a $25 million ! Series A round in April 2008, from Breakaway Ventures, New England Development, Mugar Investments and General Catalyst Partners.

Greenhill & Co. has agreed to sell its merchant banking business to the unit’s senior management, in order to focus on its advisory business. Greenhill will retain its fund placement unit.

VC Deals

Virdante Pharmaceuticals, a Cambridge, Mass.-based developer of technology to increase the anti-inflammatory potency of plasma-derived intravenous immune globulin, hasexpanded its Series A funding to$47.75 million. Thomas, McNerney & Partners led the new tranche, and was joined byOsage Partners and return backers Clarus Ventures, Venrock, MedImmune Ventures and Biogen Idec New Ventures.

Nabriva Therapeutics, a Vienna, Austra-based developer of antibiotics for treating resistant pathogens, has raised €15 million in new VC funding. Return backers includeNomura Phase 4 Ventures, HBM Partners, Wellcome Trust, GLS Ventures, and Novartis Venture Fund. The company has now raised a total of €57.4 million since 2006.

Activaero GmbH, a Germandeveloper ofcontrolled breathingdevices for inhaled therapeutic agents, has raised €10.7 million in Series A funding. BioMedPartners led the round, and was joined by VI Partners, Abalis Finance AG and Vesalius Biocapital. MedVenture Partners served as placement agent.

ScanScout Inc., a Cambridge, Mass.-based developer of software for inserting contextual advertising into Internet video, has raised new Series B funding from EDB Investments of Singapore. This closes out an $8.5 million Series B round. Other company backers include Catalyst Partners, First Round Capital, Time Warnerand Ron Conway.

Nodality Inc. of South San Francisco has secured $3.5 mi llion of a $10 million funding round, according to a regulatory filing. Past backers have included Kleiner Perkins Caufield & Byers, Maverick Capital and TPG Biotech Partners. According to the TPG website, Nodality focuses on “personal diagnostics targeting cell-signaling pathway “nodes” detected in well defined cellular sub-populations from individual patients.”

CorNova Inc., a Burlington, Mass.-based coronary stent maker, has raised $3 million in new VC funding, according to a regulatory filing. Past backers have included Siemens Venture Capital, CardioTech International Inc. and Implant Sciences Corp.

SnapLogic, a San Mateo, Calif.-based provider of a data integration platform, has raised $2.3 million in Series A funding. Backers include Andreessen Horowitz, Maples Investments, Naval Ravikant (Epinions co-founder) and ! Brian McClendon (Google VP of engineering).

Godengo, an Emeryville, Calif.-based provider of a Web publishing solution for local and regional magazines, has raised around $2.16 million in new funding, according to a regulatory filing. No investor information was disclosed.

Mytrus, a stealth-mode provider of clinical trials for pharmaceutical customers, has secured $1 million of a $3 million funding round, according to a regulatory filing. No investor information was disclosed by the Mill Valley, Calif.-based company.

Buyouts Deals

American Securities hascompleted its $38 per share tender offer forGenTek Inc. (Nasdaq: GETI), a Parsippany, N.J.-based maker of inorganic chemical products and valve actuation systems and components for automotive and heavy-duty engines. The acquisition is expected to close shortly, at a total value of approximately $673 million (including $262m of assumed debt and liabilities).

Bridgepoint Capital is one of three bidders left in the auction for German web hosting company Strato, which is being sold by Freenet AG for between €300 million and €400 million. Deutsche Telekom and Freenet shareholder United Internet AG are the other suitors.

Coachman Industries Inc. (OTC BB: COHM), an El! khart, Ind.-based home construction company,has raised $20 million in debt financing from an affiliate of H.I.G Capital. The deal includes $10 million of convertible debt funded at closing and a $10 million revolving line of credit.

ComVest Group has been completed its $81 million acquisition of Cynergy Data LLC, a payments processor that filed for Chapter 11 bankruptcy protection earlier this fall.

CVC Capital Partners is among a number of private equity firms interested in buying UK discount retailer Matalan, which could be valued at upwards of £1.5 billion. Other private equity suitors include TPG Capital, Cinven and Advent International.!

EQT Partners has agreed to acquire Bulgarian cable television companies Eurocom and CableTel, at a combined enterprise value of more than €200 million. It plans to merge the companies and invest additional capital, alongside current CableTel shareholder Ron Finley.

Monomoy Capital Partners has acquired the assets and operations of Nypro Chihuahua, a 100,000 square foot plastic molding facility located in the largest industrial corridor near the border between the United States and Mexico. No financial terms were disclosed. Nypro Chihuahua will operate as part of Fortis Plastics LLC, an acquisition platform formed by Monomoy in 2007, via acquisitions from Leggett & Platt and Atlantis Plastics.

PE-Backed IPOs

Fortinet Inc., a Sunnyvale, Calif.-based network security provider, has set its IPO terms to 12 million common shares being offered at between $9 and $11 per share. It would have an initial market cap of approximately $708 million, were it to price at the high end of its range.The company plans to trade on the Nasdaq under ticker symbol FTNT, with Morgan Stanley, J.P. Morgan and Deutsche Bank Securities serving as co-lead underwriters. Fortinet has raised around $83 million in VC funding since 2002, from firms like Redpoint Ventures (15.2%) and Meritech Capital Partners (10.8%), Acorn Campus Ventures, DCM, Defta Partners and WI Harper Group. Last year the company earned $7.4 million on $211.8 million of revenue.

PE-Backed M&A

Smarterville Inc., a provider of supplemental educational content like Hooked on Phonics, has acquired selected operating and brand assets of Educational Resources Inc. and Sunburst TechnologyCorp. No financial terms were disclosed. Smarterville is a portfolio company of Sterling Partners.


GPX International Tire Corp., a Malden, Mass.-based off-road tire maker, has filed for Chapter 11 bankruptcy protection. The company blamed anti-dumping penalties levied by the U.S. Commerce Department, against GPX’s Chinese manufacturing facility. Sterling Investment Partners had acquired a minority equity stake in GPX four years ago for just over $40 million.

Firms & Funds

Black Opal Equity has launched as a Jersey City, N.J.-based private equity firm focused on U.S. middle-market businesses in the infrastructure, essential service and government sectors. Managing partner Matthew Day previously focused on infrastructure and essential services investments with Macquarie.

Celtic Therapeutics, a private equity firm formed to acquire and invest in a diversified portfolio of 10 to 15 novel therapeutic product candidates, has received a $100 million investment commitment from PPD Inc. (Nasdaq: PPDI).

Human Resources

Franklin Myers has joined Paine & Partners as an operating advisor, with a focus on energy investment opportunities. He is a former advisor and senior executive with Cameron International Corp.