peHUB Wire: Tuesday, December 8, 2009

A few notes before I hop a plane to NYC, to meet with my boss’ new boss…

*** It’s special election day here in Massachusetts, which means that we’re just hours away from learning if private equity will place one of its own in the U.S. Senate (yes, it’s just the party primaries, but did I mention this was Massachusetts?).

I won’t disclose my personal vote, but would like to tardily announce that peHUB officially endorses Steve Pagliuca. Not because he is or isn’t the most qualified candidate, but because his private equity pedigree could provide plenty of grist for future columns.

For example, how would Pagliuca vote when the latest carried interest tax bill (introduced yesterday) comes to the floor? He’s seemed disinclined to support such a thing, but perhaps he’s hedging his bets for a return to Bain Capital…

This is clearly a self-serving endorsement, following in the wake of past support for candidates like Mitt Romney, Ne! d Lamont and Mark Warner. But it is an endorsement nonetheless, so get out of your chair and head to the polls. My future depends on it.

*** The aforementioned carried interest provision is part of new language introduced yesterday by Charlie Rangel. The bill itself actually seems a bit contradictory on the carried interest issue, but the Private Equity Council quickly came out with a condemnation. It read, in part:

“Raising taxes on growth investments by private equity, real estate and many other partnerships just doesn’t make sense — particularly in this time of fragile economic recovery and continuing joblessness. By more than doubling the tax rate, the carried interest proposal will discourage investment; deprive many American businesses of the capital they need to survive and grow; and jeopardize critical job creation opportunities.”

I continue to challenge PEC – and others opposed to a change in carried interest tax treatment – to find me private equity investors who will stop investing because their taxes get raised in this manner. Not just a spare ideologue or angel, but real institutional players. Unless proven otherwisa, this doomsday scenario of PE pros rushing to the exits is a red herring.

As I’ve written before, there is virtually no other legitimate argument in favor of treating carried interest as a capital gain, so long as the original investment came from a third party. It’s a fee for services. Period.

Perhaps it’s a long-term service, but so is building a mansion. Guess what type of taxes the contractors pay?

*** VentureWire today reports on how Canopy Financial’s founders once created a VC firm called Spear Ventures. This was actually first pointed out by a peHUB commenter two weeks ago, but I regretfully forgot to mention it here. Apologies. Still waiting for the Canopy civil complaints, and what it may or may not say about Granite Global Ventures (which has remained silent).

*** Speaking of VentureWire: It seems that the Murdoch Men have banned me and my staff from receiving the Dow Jones products that compete with peHUB Wire. We had been paying for them, before they cut us off without explanation or refund early last week (now told pro rata refund is on its way).

They offered me an “embargo” option yesterday, in which we could receive the products so long as we honored a six-hour embargo on any information included within. I initi! ally agreed, assuming the embargo would only relate to proprietary info (i.e., scoops) – but then learned that it would include all information. In other words, if they reported on a deal publicly disclosed (via press release, SEC filing, etc.), then we’d be in violation of the agreement were we to also publish/discuss the deal. Suffice to say, we did not accept such a ridiculous arrangement.

I briefly considered removing all Dow Jones subscribers from the Wire distribution list (there are more than 70 of them), but then remembered that part of my job is to help you do your job better. If your job happens to include working for short-sighted nincompoops, you should not be discriminated against.

*** Personal note/plea: My cat has been diagnosed with squamous cell carcinoma, a particularly nasty disease for which there seems to be no remedy (save for stopgap surgery that simply seems cruel). Does anyone out there know something that neither I nor my vet! does?

Top Three

Apax Partners has agreed to buy a majority stake in UK medical courier Marken, at an enterprise value of £975 million. Apax beat out rival bidder Hellman & Friedman.

TPI Composites Inc., a Scottsdale, Ariz.-based provider of wind turbine blades to Mitsubishi Power Systems and General Electric, has raised $26 million in Series B-1 funding. Element Partners led the round, and was joined by return backers Landmark Partners, NGP Energy Technology Partners, Angeleno Group and GE Capital. The company raised a $20 million B-1 round earlier this year.

Language Line Services, a Monterey, Calif.-based provider of on-demand language interpretation services, has filed for a $400 million IPO. It plans to trade on the Nasdaq, with Morgan Stanley, Credit Suisse and BoA Merrill Lynch serving as co-lead underwriters. The company reports $227 million in revenue for the nine months ending Sept. 30, and a $44 million net loss. Language Line is controlled by private equity firm ABRY Partners.

VC Deals

Ideeli Inc., a New York-based operator of an invite-only sample sale shopping site, has raised $20 million in Series B funding. StarVest Partners and Constellation Growth Capital were joined by return backer Kodiak Venture Partners. Ideeli previously raised around $3 million inthe second part of a $7 million Series Around at a post-money valuation of $17 million.

Zogenix Inc., a San Diego-based drug company focused on pain management and CNS disorders, has raised $20 million in new Series B funding from Chicago Growth Partners. This brings the round total to $71 million, with other investors including Clarus Ventures, Domain Associates,Scale Venture Partners, Thomas, McNerney & Partners, Oxford Finance Corp. and Abingworth Management.

Therasis Inc., a New York-based oncology drug discovery startup, has raised $12 million in Series A funding from Tilocor Life Science.

WellAware Systems, a Charlottesville, Va.-based maker of wellness monitoring solutions for senior care providers, has raised $7.5 million in new VC funding from Valhalla Partners and .406 Ventures.

Tonchidot Corp., maker of an app that that enables camera-attached mobile devices to access hypertagged social, informational and entertainment services over the Internet, has raised $4 million in Series A funding. DCM le! d the round, and was joined by return backer Itochu Technology Partner s.

Agilence Inc., a Camden, N.J.-based provider of loss prevention solutions, has raised $2 million in VC funding. Backers include Granite Ventures, Schneider Electric Ventures and NextStage Capital.

The Michigan Pre-Seed Capital Fund has funded four new companies with a total of $924,000. The companies are: Mandy & Pandy (Chinese language learning for kids), Algal Scientific (nutrient removal for municipal and industrial wastewater), Axenic Dental (disposable high-speed dental drills) and RealBio Technology (3D cell culture tool).

Sequans, a France-based provider of fixed and mobile WiMAX semiconductor solutions, has raised an undisclosed amount of new VC funding co-led by Alcatel-Lucent and Motorola Ventures. Clipperton Finance served ! as placement agent. Sequans previously raised over $60 million from fi rms like Swisscom, Reliance Technology Ventures, CapDecisif, i-Source Gestion, Kennet Venture Partners, Motorola Ventures, SGAM Private Equity, Add Partners and Vision Capital.

Enerkem Technologies Inc., a Montreal-based provider of synthetic gass and other alternative fuels, has been selected by the U.S. Department of Energy to receive $50 million for the construction and operation of its waste-to-biofuels facility to be located in Pontotoc, Mississippi. Enerkem has raised VC funding from Rho Ventures, Braemar Energy Ventures and BDR Capital.

Buyouts Deals

Apax Partners, The Carlyle Group and KKR reportedly are among those interested in buying ICICI Group’s 27% stake in Indian IT firm 3i Infotech.

Cameron Holdings and Bush O’Donnell Capital Partners have acquired Henderson Enterprises Inc., a maker of heavy-duty truck equipment used chiefly by municipal customers for snow removal and ice control. No financial terms were disclosed.

CapMan has agreed to sell its 67% stake in Inflight Service Intressenter AB, a Sweden-based retail travel company, to Triton. No financial terms were disclosed. Inflight was acquired by CapMan in 2005, and reported 2008 net sales of approximately €152 mil! lion.

Cosmos Capital has withdrawn its offer for Canadian advertising company Cossette Inc., four months after its initial bid was rejected. Cosmos had been engaged in a bidding war with Mill Road Capital, whose latest offer for Cossette was worth approximately C$135.3 million.

IkaSystems Corp., a Southborough, Mass.-based provider enterprise-level, Web-based technologies for the healthcare payer market, has raised an undisclosed amount of funding from Providence Equity Partners.

Oakley Capital In vestments has acquired a 51% stake in Verivox Holdings Ltd., an online consumer price comparison business for energy and telecom services. Oakley bought 49% of Verivox from Independent News and Media PLC for €16 million, and a further 2% interest from the company’s founders.

Six Flags Inc., a bankrupt theme park operator, can keep its exclusive right to file its bankruptcy reorganization plan, according to a U.S. Bankruptcy Court judge. The ruling was in response to objections by from a group of noteholders – led by Avenue Capital — that sought to offer their own plan.

Stahl International, a Dutch maker of specialty coatings, has secured 100% support from its lenders for a debt-for-equity restructuring proposal. The deal would lead to nearly a 40% redu! ction of Stahl’s €360 million debt, with existing sponsor Wendel SA investing another €60 million to increase its equity stake to 92 percent.

Sverica International has acquired Career Quest Learning Centers Inc., a post-secondary education company with campuses in Lansing and Jackson, Michigan. No financial terms were disclosed.

PE-Backed IPOs

The Carlyle Group could make a $4 billion profit on the Hong Kong IPO of China Pacific Insurance (Group) Co Ltd. — a return of more than six times its investment.

Concord Medical Services, a Beijing-based network of radiotherapy and diagnostic imaging centers in China, has set its proposed IPO terms to 12 million American depository shares being offered at between $9.50 and $11.50 per share. It plans to trade on the NYSE under ticker symbol CCM, with J.P. Morgan, Morgan Stanley and CICC serving as co-lead underwriters. Company shareholders include The Carlyle Group (via Carlyle Asia Growth Partners) and Starr Investments.

Film Department Holdings, a West Hollywood, Calif.-based motion picture finance and production company, has set its IPO terms to $7.08 million common shares being offered at between $12 and $14 per share. It plans to trade on the Nasdaq under ticker symbol TFD, with Girard Securities serving as lead underwriter. Shareholders include Silver Haze Partners.

Gartmore, a UK-based fund manager, has had its proposed IPO fully covered, according to Reuters. The flotation is expected to raise around £400 million, and would result in majority shareholder Hellman & Friedman holding a minority position.

PE-Backed M&A

Buyers Protection Group Inc., an Atlanta-based real estate services firm, has completed its purchase of two businesses from LandAmerica Financial Group Inc. No financial terms were disclosed for the deal, which included equity participation from The Stephens Group.

Cell Biosciences, a Palo Alto, Calif.-based provider of nanoproteomic analysis systems to life science researchers, has acquired Protein Forest, a Lexington, Mass.-based provider of sample ! preparation technology for proteomic analysis and biomarker discovery. No financial terms were disclosed. Cell Biosciences has raised around $60 million in VC funding from firms like The Wellcome Trust, Domain Associates, Latterell Venture Partners, Novo A/S, Mitsui Ventures, Royal Bank of Canada and The Vertical Group. Protein Forest had raised around $27 million from Boston Millennia Partners, Flybridge Capital Partners, Novo AS, PureTech Venturesand S.R. One Ltd.

Firms & Funds

Fort Washington Investment Advisors has agreed to acquire the investment advisory business of the Sena Group. The deal is expected to bring nearly $1 billion in new assets into Fort Washington’s wealth management group, which currently has aroun! d $31 billion in assets under management.

PAI Partners investors have approved a 50% fund size cut for the UK-based firm’s current vehicle, bringing it down to €2.7 billion.

Human Resources

Braemar Energy Ventures has promoted Scott DePasquale to partner. He joined the firm this past March as a principal and executive-in-residence, after having served as senior VP of GE Energy Financial Services.

Mel Deane has been named CEO of quick-serve restaurant chain Church’s Chicken, a portfolio company of Friedman, Fleischer & Lowe. Deane has worked for several FFL companies, most recently as CEO of Discovery Foods.

Neel Kashkari, a former Goldman Sachs banker who ran the government’s $700 billion Troubled Asset Relief Program (TARP), has been tapped to head PIMCO’s new investment initiatives.