peHUB Wire: Tuesday, October 13, 2009

This is Erin filling in for Dan while he’s traveling to Buyouts Texas.

Airborne Puts Drama Behind It With (Brand) New Owners

Airborne Health caused its first private equity owners a bit of a headache, but that didn’t stop the nutritional supplement company from taking another dose of buyout money.

The company today sold a controlling interest to GF Capital Management, a buyout firm based in New York. The deal included a co-investment from a new fundless buyout firm called Stockton Road Capital and small equity contributions from senior management.

Stockton Road Capital was founded six months ago by Joe Rhodes, a former partner with Charterhouse Capital. At Charterhouse, Rhodes led the firm’s consumer products investments, including a deal for nutritional products company Amerifit Nutrition. Airborne Health is Stockton Road Capital’s first deal. Rhodes said he plans to continue to seek co-investment deals, using capital from a network of investors. He founded the company six months ago and said he would entertain the idea of raising a proper fund in an improved fundraising environment.

Sawaya Segalas advised the seller, the company’s founder Victoria Knight-McDowell.

You may remember Knight-McDowell, a former second grade teacher, who launched a dig at Summit Partners a year ago through an ad campaign dissing the firm’s management of the company.

I consider her move a cheap shot, not because I’m a private equity apologist, but because the company’s troubles stemmed from lawsuits based on false claims and bad evidence that were most likely made while she still owned the company (before she earned a nice chunk of cash selling it to Summit Partners). Summit may well have been partly responsible for the company’s struggles as well. Especially for its poorly rated debt after the firm took one of those dreaded dividend recaps. But keep in mind Knight-McDowell was on the board and a minority shareholder during Summit’s ownership, too. Either way, why broadcast it to consumers? Wasn’t the company’s class action lawsuit enough bad press for one year?

GF Capital and Stockton Road Capital hope to move past that, stressing that the company has returned to growth in the past year and remains one of the best-selling products in the “cough-cold category.” The firms brought in Martha (Marti) A. Morfitt to run the company. Morfitt is the former CEO of CNS, Inc., another health products company which Sawaya Segalas advised in a sale. Under Morfitt’s leadership, the company will invest in marketing and development of new products. “The business has worked with the government to bring its marketing in line with regulations, and is in a nice growth trajectory now,” said Rhodes.

GF Capital raised its first fund in 2007 and received a $15 million investment from New Mexico Educational Retirement Board.

Top Three

Apax Partners has shaken up its management team, according to the Wall Street Journal. Alex Fortescue, head of the firm’s European retail team, left the firm. Michael Grabiner, partner at the firm, retired. CEO Martin Halusa is expected to be re-elected this year as head of the firm for the next four years before he heads to retirement.

The Canadian Pension Plan Investment Board has asked fellow investors in PAI Partners to reject the buyout house’s plan to slash its fund in half as inadequate. PAI last month proposed shrinking its fifth buyout fund by half to 2.7 billion euros following a boardroom coup which saw chairman Dominique Megret and his right-hand man Bertrand Meunier leave the company.

Capmark Financial Group Inc., the commercial real estate company created through a 2006 leveraged buyout of certain GMAC assets, is preparing to file for bankruptcy possibly by the end of next week, according to Reuters. Kohlberg Kravis Roberts & Co, Goldman Sachs Group and Five Mile Capital, which bought Capmark in March 2006 for $1.5 billion in cash plus more than $7 billion in debt at the peak of the housing market, will not receive payment through the bankruptcy.

VC Deals

Deezer, a Paris-based digital music company, has raised €6.5 million in new VC funding. Backers include AGF Private Equity and CM-CIC Capital Prive.

Transactiv, an Ohio-based developer of an online commerce platform, closed a $1.2 million Series A round of financing with Blue Chip Venture Capital, CincyTech, Neyer Holdings, Queen City Angels, and participation from Cincinnati, Ohio-based private investors.

PharmaDiagnostics NV, a Brussels-based developer of screening technology has raised EUR 2.5 million ($3.7 million) in a second round of funding from Capital-E and an undisclosed group of investors.

Ariana Pharma, a drug discovery and development services business, will receive EUR 1 million ($1.5 million) from France’s innovation agency, OSEO, as part of the IMAkinib program. IMAkinib is a collaborative program to develop biomarkers for oncology.

Pathology, Inc., a Torrance, Calif.-based pathology and diagnostic testing services, received an undisclosed Series A investment led by ABS Capital Partners. England & Company acted as the exclusive adviser to the investor group. ORIX Venture Finance LLC provided venture debt to the Company.

Buyouts Deals

India’s United Spirits, is set to sell new shares worth about $300-350 million to institutions to help cut its debt, after efforts to sell a stake to private equity firms and Diageo failed.

Advent International, agreed to acquire a majority stake in GFKL Financial Services AG, a debt collection business based in Germany, from a consortium of institutional investors for an undisclosed price. Advent will also participate in a capital increase.

Environmental Capital Partners has acquired a majority stake in Cascade Drilling LP, a provider of environmental drilling services for water and soil assessment, monitoring and remediation purposes on the West Coast. No pricing terms were disclosed. PNC Business Credit arranged the leveraged financing, while Cascade was advised by Morgan Stanley.

Wilton Holdings Inc, one of the largest makers of equipment for decorating food, said its creditors had withdrawn the involuntary Chapter 11 petition filed against the company in July. Wilton, which is backed by private equity firm GTCR Golder Rauner, reached an agreement with its largest creditors, under which affiliates of private equity firm TowerBrook Capital Partners and Deutsche Bank Trust Co Americas will be the new majority owners of the company.

Avalon Group Limited, a priavte equity firm based in New York, has agreed to acquire a majority stake in Domestic Energy Corporation, a Honeoye, N.Y.-based OTC-listed oil and gas exploration company.

PE Exits

Sun Capital Partners has sold K.K. Tarami, a Japan-based maker of fruit and fruit-flavored gelatin cups, to a private equity subsidiary of Mitsubishi UFJ Lease & Finance Company Ltd. No financial terms were disclosed. Sun acquired Tarami in April 2007, as its first-ever Japanese acquisition.

China National Offshore Oil Corp is in talks with Ghana National Petroleum Corp to bid for a Kosmos Energy’s stake in a West African oil discovery, the Wall Street Journal reported on Monday. Kosmos Energy is backed by Blackstone Group and Warburg Pincus. .

PE-Backed M&A

Fulcrum Ventures, an Atlanta-based venture firm, led the $16.1 million recapitalization and spin-out of EnduraCare Acute Care Services from parent company EnduraCare Therapy Management. EACS is a national provider of therapy services to acute care hospitals, outpatient clinics and physician practices.

PE-Backed IPOs

RailAmerica Inc, which owns and operates short line and regional freight railroads in North America, priced shares for $15 each in its initial public offering, falling short of expectations, but the company sold 1 million shares more than expected. RailAmerica is owned by Fortress Investment Group LLC.

Human Resources

Zhu Wei, a senior managing director of CVC Capital Partners, has resigned from the private equity firm to join Asia-focused bank Standard Chartered.

David Pommerening has joined law firm Baker Botts as a partner in the firm’s Washington D.C. office, where he will lead the office’s corporate transactions practice. He previously was a partner with O’Melveny & Myers LLP.

Owen Wilson has joined Palamon Capital Partners, a European mid-market private equity firm, as a Vice President. Wilson was previously at a director of Candover’s London office.

General Atlantic LLC, a growth equity firm based in Greenwich, Conn., promoted Adrianna Ma to managing director and Jing Hong to principal. Ms. Ma is based in New York and leads GA’s global Energy and Resources sector. Ms. Hong is a senior professional in the firm’s Beijing office and focuses on investments in China.