peHUB Wire: Tuesday, February 16, 2010

Sequoia Capital’s Heritage program has had more stops and starts than a game of Mother May I. Now it seems to be taking another giant step forward.

For the uninitiated, Sequoia Heritage is an outsourced investment management platform for college endowments and other small institutions. Private equities, private equities, fixed income, absolute returns and real estate. Kind of like a baby Makena Capital.

Actually, the Makena ties go deeper than just investment strategy. The original leader of Sequoia Heritage was Eric Upin, former chief investment officer for Stanford University’s endowment. The founder of Makena is Mike McCaffrey, former CEO of Stanford Management Co. And just to circle back around, Upin left Sequoia early last year to join McCaffrey at Makena.

Got all that?

At the time, it appeared that Heritage would unravel before it ever had really begun. Hedge fund/public equities chief Michael Beckwith also resigned, the group f! ailed to secure clients and I kept hearing that Sequoia was helping to find new work for private equity chief Dan Feder (formerly with Princeton’s endowment).

Fast forward to the present, and Sequoia Heritage is back up and running. Feder is an “advisor,” but a recent regulatory filing indicates three active Heritage principals:

• Keith Johnson, chief investment officer, a former Stanford public equities manager who originally came over with Eric Upin in early 2008;

• Jeff Bramel, managing director, a former principal with Oak Hill Investment Management who joined Sequoia last fall; and

• Irwin Gross, managing director, a venture capitalist who joined Sequoia in late 2008 after nearly five years as a partner with Worldview Technology Partners.

Sequoia Heritage also is recruiting a real estate chief, according to an online job posting that reads, in part:

“The Sequoia Capital Heritage Fund is organized as a team of generalists, each of whom offers specific expertise to the portfolio investment dialogue. We are seeking a Managing Director, Real Assets who will lead manager selection and oversight of the real estate and natural resources component of the portfolio, representing approximately 20-25% of the Fund. He/she is expected to collaboratively craft the Real Assets portfolio strategy and to source, evaluate, and recommend top-performing managers globally but to also be an informed participant in the other asset class discussions in the portfolio.

As a senior member and co-founding partner of the investment team, this individual will be expected to contribute to the formulation and execution of investment and asset allocation strategy for the Fund which will consist of a global portfolio of investments in public equity, fixed income, absolute return, real assets and private equity.”

The regulatory filing, dated last Thursday, does not indicate a target capitalization for Sequoia Heritage’s debut fund. It also does not report any secured commitments, although I’ve been told that Sequoia staffers may have already begun using Heritage to invest personal capital. Kind of like an in-house beta…

*** Last week, I asked you to vote on where we should hold the next peHUB Shindig. More than 550 of you voted, and Boston just edged out San Francisco for the win (25%-23%). That means my goal is to do Boston in late March, and probably San Francisco just before Buyouts West in Mid-April. Per usual, let me know if your firm is interested in sponsoring.

*** Speaking of San Francisco: I’ll be in the Bay Area for about 36 hours, beginning tomorrow afternoon. Plan to moderate a couple of panels at The Future of Funding event. That means tomorrow’s Wire will be written from 30,000 feet, WiFi willing…

In Memoriam

Edd Hendee, a vice president of acquisitions with Starwood Capital Group, died on Saturday after a skiing accident at Stratton Mountain in Vermont. Our deepest condolences to his family, friends and colleagues.

Starwood Capital CEO Barry Sternlicht wrote the following, in an email sent out yesterday morning:

“We at Starwood are mourning his enormous loss. We cannot comprehend the depth of the loss to his wife, Claudine, and three young children. I hired Edd straight out of business school and he had the dubious honor of working closely with me for nearly a year… As the years have gone by, I took tremendous pride in his growing accomplishments, his expanding and beautiful family, and his wonderful team spirit as he mentored our younger talent and served as a role model for any firm. We were lucky he chose us for the time he had. The laughter, the stress and the experiences we shared as we traveled the world together, I will never forget.”

Funeral and memorial services are currently being planned, and we will provide information once it is available. Rest in peace Edd.

Top Three

Aozora Bank and Shinsei Bank have called off a merger that would have created Japan’s sixth-largest bank. Aozora is majority-owned by Cerberus Capital Management, while Shinsei is around one-third owned by J.C. Flowers & Co.

IBM has acquired Intelliden Inc., a Menlo Park, Calif.-based provider of standards-based network automation solutions. No financial terms were disclosed. Intelliden has raised around $68.5 million in total VC funding since its 2000 inception, from firms like 3i Group, GGV Capital, Matrix Partners, TELUS Ventures and Westbury Partners.

Express, a Columbus, Ohio-based retail apparel brand and retailer, has filed for a $200 million IPO. It plans to trade under ticker symbol EXPR, with Goldman Sachs and BoA Merrill Lynch serving as co-lead underwriters. The company reports around $1.74 billion in net sales for the first 39 weeks of 2009 (through Oct 31), compared to $1.23 billion for the same period in 2008. Its net income for the 2009 period was around $29 million, compared to a $1.89 million loss the previous year. Golden Gate Capital acquired a 67% interest in Express in July 2007, for $548 million. The seller was Limited Brands Inc. (NYSE: LTD), which remains an Express shareholder.

VC Deals

Viewfinity, a Waltham, Mass.-based provider of systems and privilege management via cloud computing, has raised $9.1 million in Series B funding. Backers include Giza Venture Capital, JK&B Capital and Longworth Venture Partners.

Cozi Group Inc., a Seattle-based provider of a free online service to help families simplify and organize their daily lives, has secured $5 million of a $6.5 million VC funding round, according to a regulatory filing. The company previously raised over $8 million, from groups that include Gannett Co. and Benaroya Capital Co.

IdeaPaint, a Cambridge, Mass.-base! d maker of dry-erase paint solutions, has raised $3.3 million in second-round funding. Todd Krasnow, a former Staples executive who now serves as a marketing domain expert for Highland Consumer Fund, participated as an individual angel. IdeaPaint previously raised $5 million from Breakaway Ventures.

Layar BV, a Dutch augmented reality startup, has raised €2.5 million in Series A funding from Prime Technology Ventures and Sunstone Capital.

TagMan, a provider of one-tag/pixel solutions for online campaign tracking, has raised $1.3 million in first-round funding. The round was co-led by Cambridge Angels and the London Business School E100. TagMan has offices in London and New Yor! k.

ProVision Communications, a UK-based developer of wireless HDTV technology, has raised £1 million in new VC funding led by return backer The YFM Group (managed by South West Ventures Fund).

Buyouts Deals

Ratiopharm this week is expected to narrow its field of bidders to one or two. EQT Partners is the only remaining private equity firm, while strategic suitors include Teva and Pfizer. The German generic drugmaker has been shopped with a €2.3 billion price-tag.

Gala Coral lenders have proposed to invest £175 million into the troubled UK gaming company, as part of a debt restructuring. Gala Coral is currently owned by Candover, Cinven and Permira.

Integron, a knowledge process outsourcing company, has sold a minority ownership stake to Actis for ! $50 million. Also investing an undisclosed amount is Integron’s majority shareholder, Ayala Corp.

MBF Healthcare Partners has agreed to invest up to $50 million into Simply Healthcare Plans of Florida Inc., a Coral Gables, Fla.-based HMO.

Terra Firma Capital Partners proposed breaking up EMI Group three months ago, according to a document filed as part of an EMI-related court case between Terra Firma and Citigroup. Citi rejected the proposal.

PE-Backed IPOs

Chesapeake Midstream Partners has filed for a $345 million IPO. It plans to trade on the NYSE under ticker symbol CHM, with Citi and Morgan Stanley serving as co-lead underwriters.The Oklahoma City-based company was formed in 2008 as a 50/50 joint venture between Chesapeake Energy Corp. (NYSE: CHK) and Global Infrastructure Partners. As part of the deal, GIP paid Chesapeake $588 million.

PE-Backed M&A

NeuroTherm, a Wilmington, Mass.-based medical device maker focused on interventional pain, has acquired certain assets of neurodiagnostic accessory maker Technomed Europe. No financial terms were disclosed. NeuroTherm is a portfolio company of The Cortec Group.

US LBM Holdings, a portfolio company of BlackEagle Partners, has agreed to acquire the operations of Edward Hines Lumber Co., a Chicago-based supplier of lumber and building materials. No financial terms were disclosed.

PE Exits

Apax Partners plans to sell five million shares of common stock in Rue21 (Nasdaq: RUE), a Warrendale, Penn.-based youth clothing retailer, via a secondary public offering. Apax would still hold nine million shares following the offering, which represents more than a 37% ownership stake. Rue21 went public last November at $19 per share, and closed trading yesterday at $27.93 per share. Apax did not sell any shares in the IPO.

Firms & Funds

Chrysalix Energy Venture Capital plans to hold a final close on $150 million for its third fund by the end of March, according to VentureWire.

MAMA Sustainable Incubation AG, a new greentech incubator based in Berlin, Germany, has received a strategic investment from 3M. No financial terms were disclosed.

RLH Equity Partners has agreed to partner with Jim Morley to seek portfolio company acquisitions in the consumer durables space. Morley and RLH previously worked together on both Igloo Products and Enviroworks.

TVM Capital has launched a! Shari’a-compliant growth equity fund focused on healthcare companies in the MENA region. It already has $40 million in founding commitments from Saudi Health Investment Co. (SHIC), the International Finance Corporation (IFC) and GE Healthcare. The fund is led by managing director Marios Fotiadis, who previously was a general partner with TVM in Munich and Boston. Other investment pros include Youssef Haidar, formerly managing director with Unifund Capital.

Human Resources

Bruce Pasternack has joined Venrock as an operating partner, with a focus on the venture firm’s energy portfolio. He previously was a principal with CMEA Capital.

Monitor Clipper Partners has made four promotions: Tom Perkins to operating partner, Samer Ezzeddine and David Sheffer to vice president and Jennifer DuBois to fund accounting manager.