peHUB Wire: Tuesday, June 30, 2009

Bain Capital is offering investors the chance to reduce their commitments to a $1.8 billion co-investment fund, as we first reported yesterday at peHUB. Each limited partner would be allowed to cut back by up to 50%, assuming that a majority of investors ratify an amendment to the original fund documents (which they almost certainly will). LPs also would have the option to increase their commitments by acquiring someone else’s discarded position (which they almost certainly will not).

Bain closed the co-investment fund in late 2007, as a sidecar to what became an $11.5 billion general fund (Bain Capital Fund X). The idea was that it would be used for North American deals in which Bain’s equity check exceeded $650 million, with the general and co-invest funds to split the remainder 50/50. It also could theoretically be used for deals out of Bain’s European and Asian funds, although the initial waterfall for those vehicles flowed into Bain Capital Fund X.

Sinc! e the co-investment fund was raised, however, it has only been tapped twice: First for the $17.9 billion buyout of Clear Channel Communications in July 2008, and then for the $3.5 billion buyout of The Weather Channel in September 2008 (using a combined $100m from the co-invest fund). All of Bain’s subsequent deals have been too small to trigger to co-invest, including last week’s $418 million infusion into Chinese electrical appliance maker GOME.

Bain does not charge management fees on uncalled capital in the co-invest fund, but expect many limited partners to jump at the chance to dump part of an unfunded commitment. If each LP takes full advantage of the offer, it would reduce the co-investment fund’s size to just $900 million. Still sizable, but nowhere near the $5 billion Bain originally planned to raise (although, at the time, it had only been targeting $10b for the general fund, rather than $11.5b).

To be clear, I’m not saying Bain’s move is born of al! truism. At the same time, however, I’m also not saying that it is bein g done to either curry favor with LPs or to guarantee commitments to a future fund (an argument many of you keep making in emails and at peHUB, vis-à-vis fund size cuts in general). Instead, I’m saying that Bain has looked at current market conditions, and made both a logical and responsible decision. And I commend them for doing so, when so many others are not.

Top Three

Candover Investments (LSE: CDI) says that it has ended talks with potential acquirers, and that it should meet key debt covenants thanks to cost reductions and asset disposals.

CloudSwitch, a Waltham, Mass.-based cloud computing startup, has raised $8 million in Series B funding. Commonwealth Capital Ventures led the round, and was joined by return backers Atlas Venture and Matrix Partners (which incubated CloudSwitch last year). CloudSwitch also named former SolidWorks CEO John McEleney as its new president and CEO.

The Carlyle Group has closed its fourth Asian growth capital fund with $1.04 billion in capital commitments.

VC Deals

RES Software, an Amsterdam-based provider of user workspace management software, has raised $12.5 million in VC funding from Updata Partners.

Gyros AB, a Swedish provider of automated micro-immunoassays for therapeutic protein development, has raised SEK 80 million ($10.42m) in new VC funding. SLS Invest led the round, and now holds an 88% equity stake in the company.

RainDance Technologies Inc., a Guilford, Conn.-based nanotech company that is developing a platform for droplet-based microfluidics, has secured $6 million of a $12 million Series C round, according to a regulatory filing. Existing shareholders include Mohr Davidow Ventures, Pequot Capital (via Acadia Wood Partners) and JDS Capital. www.raindancetechno!

High Gear Media, aPalo Alto, Calif.-based publisher of automotive digital media,has raised $5.5 million in Series B funding. DAG Ventures led the round, and was joined yb return backers Accel Partners and Greylock Partners. The company previously raised a $6.5 million Series A round in November 2007.

Simage, a Chicago-based custom TV network for bars and restaurants, has raised $1.4 million in first-round funding. Backers include Horizon Investment Partners and individual angels like Tony Brummel (founder and CEO of Victory Records).

Buyouts Deals

Avenue Capital Group and DDJ Capital Management have received bankruptcy court approval for their acquisition of Milacron Inc., a plastics processing and industrial fluids company. Bayside Capital, an affiliate of H.I.G. Capital,had acquired a 29% stake in Milacron in 2007.

Court Square Capital Partners has completed its acquisition of Wyle Holdings Inc. from Littlejohn & Co. for an undisclosed amount. Wyle is an El Segundo, Calif.-based provider of engineering, professional and information technology services to military and civilian government agencies. It was acquired by Littlejohn in 2003, and currently generates approximately $800 million in annual revenue and has more than 3,800 employees.

Extended Stay received bankruptcy court approval to access $86 million in cash, in order to make mortgage payments and to pay the company managing its hotels. The Spartanburg, S! .C.-based chain is a portfolio company of Lightstone Holdings.

First Data Corp. and Bank of America announced a joint venture to offer electronic payment serves to merchants. First Data is a portfolio company of KKR.

JEN Partners and Real Estate Capital Partners have agreed to acquire substantially all the tax credit equity business of MMA FInancial, an Municipal Mortgage & Equity LLC (OTC: MMAB). The deal is valued at approximately $31 million.

OpenGate Capital has agreed to acquire Gabriel North America, a provider of shock absorbers and strut assemblies, from ArvinMeritor (NYSE: ARM). No financial terms were discl osed.

PE-Backed M&A

Aozora Bank and Shinsei Bank tomorrow are expected to announce plans to merge by late next year. The merger would create 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.

GridPoint Inc., an Arlington, Va.-based smart-grid company, has acquired Lixar’s Ottawa-based energy management business. No financial terms were disclosed. GridPoint has raised around $220 million in total VC funding, from firms like Goldman Sachs, New Enterprise Associates, Susquehanna Private Equity, Perella Weinberg Partners and Robeco.

PE Exits

Ontex, a Belgian maker of diapers and wet wipes, said media reports that owner Candover was forcing a sale are untrue.

Firms & Funds

Ares Capital Corp. plans to raise around $250 million for a debt fund that would invest in newly-originated and secondary senior secured debt.

CDC Group has committed $50 million to African Capital Alliance’s third private equity fund, which will make control and non-control investments into mid-sized companies in Nigeria and other West African and Gulf of Guinea nations.

Greentech Capital Advisors has launched as an investment bank focused on the alternative energy and cleantech sectors. Its founder is Jeff McDermott, former joint global head of I-banking at UBS.

Human Resources

Philip Levinson has joined The Blackstone Group, where he will oversee capital-raising and other operations across the Asia-Pacific region. He previously was with RREEF, a unit of Deutsche Asset Management.

Kevin Nee has joined Wilshire Associates as president of its private markets group. He previously was a managing director with BlackRock Inc.