peHUB Wire: Tuesday, August 17, 2010

I understand why everyone hates Nazis. What I don’t get is why some so easily equate other hated things with Nazis.

For example, I hate peanut butter. Pretty sure, however, that I’ve never suggested that Skippy execs are culinary stormtroopers.

Yesterday’s hyperbloic example came from Blackstone Group boss Steven Schwarzman, who is pissed off by the D.C. debate over private equity tax policy. According to Newsweek’s Jonathan Alter, he said the following during a July meeting:

“It’s a war,” Schwarzman said of the struggle with the administration over increasing taxes on private-equity firms. “It’s like when Hitler invaded Poland in 1939.”

To state the obvious: No, it’s nothing like when Hitler invaded Poland in 1939. I could go into all the reasons why it’s different, but that would be like explaining why a birch tree is different than a water buffalo.

Schwarzman is among those who believe that Obama loathes Blackstone and its Wall Street bretheren. He thinks there should be a former CEO atop Commerce, and that there has been no real White House effort to understand the capital markets.

And he’s right to have been stunned when proposals emerged to tax the sale of partnership interests (a dumb idea, which tarred the justified attempt to treat carried interest as ordinary income). But this statement shows that Schwarzman is as tone deaf on these issues as are many of the people he’s criticizing.

*** I reported yesterday at peHUB on some executive changes Credit Suisse Asset Management, including the resignation of co-COO George Hornig. This follows several recent departures from DLJ Merchant Banking, fund placement co-head Charles Froeb bolting for TPG Capital and customized fund investment group co-head Michael Arpey leaving for The Carlyle Group.

But these moves really are just the tip of a much larger iceberg at CSAM. Multiple sources tell me that the group is in talks for major organizational changes, which could affect both the front and back-offices. The Volcker Rule has complicated matters a bit — would think most other banks could only play outsourced back-office admin at this points — but I’d expect resolution shortly.

*** Quiz Time: Can you name the notable venture capitalist who is trying to raise $1 billion for a hedge fund? Hint: He left his firm in early 2009.

*** Correction: Last Friday, I noted how venture capitalist Bob Metcalfe had tweeted that all five of his enertech portfolio companies are raising new funding rounds. But one of the ones I listed — based on Bob’s Polaris Venture Partners website bio — is actually out of business (SiCortex). So the fifth company is question probably is Sun Catalytix (not yet listed on firm’s website). Also, one of the listed five — Infinite Power Solutions — already got its money, as reported below in the VC Deals section.


*** In Memoriam: Edmund Shea, one of Silicon Valley’s venture capital pioneers, passed away last Friday at the age of 80.

The J.F. Shea & Co. co-founder invested in such companies as Activision, Adobe, Altera Corporation, Brocade, Compaq Computer, Genentech, Fabrinet, Affymax, America West Airlines, AES Corporation and Peet’s Coffee & Tea.

In lieu of flowers, the family asks that donations may be sent in Edmund’s name to the Peter Claver Scholarship at Loyola High School (1901 Venice Blvd. Los Angeles, CA 90006) or the Packard Center for ALS Research at Johns Hopkins.

Top Three

Pacific Biosciences, a Menlo Park, Calif.-based DNA gene sequencing company, has filed for a $200 million IPO. It plans to trade on the Nasdaq under ticker symbol PACB, with J.P. Morgan and Morgan Stanley serving as co-lead underwriters. The company reports a $63 million net loss for the first six months of 2001, on just over $1 million in revenue. Pacific Biosciences has raised over $460 million in VC funding, from Mohr Davidow Ventures (12.02%),Kleiner Perkins Caufield and Byers (9.66%), Maverick Capital (9.13%), Gen-Probe Inc. (8.57%), Alloy Ventures (6.89%), Blackstone Cleantech Venture Partners (6.3%), Deerfield Management (5.29%),Monsanto, the Wellcome Trust, Sutter Hill Ventures, Intel Capital, Morgan Stanley, Redmile Group, T. Rowe Price, AllianceBernstein, DAG Ventures andTeachers’ Private Capital.

Summit Materials, an acquisition platform in the building materials market, has made two acquisitions: Kilgore Paving and Maintenance LLC, an asphalt production and paving company, and the aggregates, ready-mix concrete and construction assets of Harper Companies. No financial terms were disclosed for either deal. Summit was formed last fall by The Blackstone Group, Silverhawk Capital Partners and former BHP Billiton CEO Charles Goodyear. It has up to $780 million in capital commitments.

Energy Capital Partners has raised $4.3 billion for its second fund, which will focus on fossil and renewable power generation, electric transmission and midstream gas.

VC Deals

Infinite Power Solutions Inc., a Littleton, Colo.-based maker of thin-film batteries, has raised $20 million in Series C funding. The company previously raised over $48 million. Generation Investment Management was joined by return backers D. E. Shaw Ventures, Polaris Venture Partners, Core Capital Partners and Applied Ventures.

Cardlytics Inc., an Atlanta-based provider of banking rewards solutions, has raised $18 million in new VC funding. ITC Holdings and Kinetic Ventures were joined by return backers Canaan Partners, Polaris Venture Partners and Total Technology Ventures. The company previously raised $8 million in equity and $4 million in venture debt financing.

Storage Appliance Corp. (a.k.a. Clickfree), a Toronto-based provider of automatic backup software, has raised US$15 million in Series C funding from Tandem Expansion Fund. The company has now raised over $30 million, including a $10 million Series B round led by Jefferson Partners.

C7 Data Centers Inc., a Salt Lake City-based provider of colocation, disaster recovery, and virtualization solutions, has raised $9 million in new equity and debt funding. Canopy Ventures led the overall round, with Zions First National Bank providing the debt.

CloudCrowd, a San Francisco-based company that crowd-sourcing online labor, has raised $5.1 million in first-round funding. Draper Fisher Jurvetson led the round, and was joined by company co-founder and CEO Alex Edelstein.

Precise Path Robotics, an Indianapolis-basedmaker of mobile robotic outdoor equipment, has raised $4.5 million in new VC funding. Backers include golf industry exec Charlie Staples.

Blade Dynamics Ltd., a UK-based maker of wind turbine blades, has raised an undisclosed amount of VC funding from Dow Ventures. It also sold a 25% ownership stake to American Semiconductor Corp. No financial terms of either investment were disclosed.

IGA Worldwide, a New York-based in-game advertising network, has raised “a significant investment round” led by T-Venture Funds. Return backers included Kreos Capital and Easton Capital. The company previously raised over $45 million from Kreos, Easton,Translink Capital, Presidio STX, ITOCHU Corp., Peacock Equity, KTB Ventures, Morgenthaler Ventures, Intel Capital and DN Capital.

Buyouts Deals

Goldman Sachs and Groupe Eurotunnel have added two groups — Universities Superannuation Scheme and Caisse des Dépôts et Consignation – to the bidding group for Britain’s only high-speed rail line.

Onex Corp. has offered to buy ResCare Inc. (Nasdaq: RSRC), a provider of homecare to the eldery and disabled, for around $370 million. The $12.60 per share offer represents a 24% premium to ResCare’s closing stock price last Friday.

Sentinel Capital Partners has acquired Engineered Controls International LLC, an Elon, N.C.-based provider of pressure regulators, valves and other control equipment for use with liquefied and compressed gases. No financial terms were disclosed.

PE-Backed IPOs

Nielsen, the world’s largest TV and consumer measurement company, has increased the amount it hopes to raise in its IPO from $1.75 billion to $2.01 billion. Backers include Carlyle Group, Blackstone Group, KKR, THL Partners, AlpInvest Partners and Hellman & Friedman.

PE-Backed M&A

Refresco Holding BV, a portfolio company of 3i Group, has agreed to acquire Soft Drinks International, a German maker of softdrinks and bottled waters. No financial terms were disclosed.

PE Exits

HP has agreed to buy Fortify Software Inc., a San Mateo, Calif.-based software security assurance company. No financial terms were disclosed. Fortify software had raised VC funding from DAG Ventures, Sigma Partners and Kleiner Perkins Caufield & Byers.

Unique Investment Corp. has agreed to sell portfolio company Diamond Wireless to Glentel Inc. (TSX: GLN), for around $50.5 million. Diamond Wireless is a Verizon Wireless retailer in the Western and Southern U.S. Harris Williams & Co. managed the sale process.