peHUB Wire: Tuesday, September 22, 2009

Having trouble raising that next fund? Then perhaps it’s time you hit the airwaves, with a radio ad asking listeners to invest. Maybe you could even come up with a clever jingle…

I know what you’re thinking: “That’s illegal solicitation, and the SEC would be on us before the thirtieth second.”

And I’d normally agree with you, save for an unusual item in yesterday’s Commercial Mortgage Backed Alert. It describes a firm called Wilshire Finance Partners, which next month will run radio ads for a $100 million-targeted fund that would originate bridge loans on commercial properties in California. The trade pub writes:

“Fund operators normally are prohibited from publicly advertising their vehicles. But under California securities regulations, fund operators can do so if marketing campaigns are limited to California investors.”

Now this obviously raises lots of questions. What if the radio signal bleeds into a neighboring state? What if a New York resident is vacationing in California, and hears the ad? What if Wilshire advertises on a station that streams its content online, so that it can be heard worldwide? What if this California-only regulation is a loophole never intended for a firm like Wilshire?

I don’t yet have answers to any of the above, and can’t quite imagine a semi-successful firm turning to Top 40 listeners for its next fund commitment. But if you’re among the walking dead and are willing to create some sort of Golden State vehicle, this might be your last best hope.

*** A labor union is criticizing KKR for stripping too much value out of Dollar General, as part of the retailer’s proposed IPO. No, not the SEIU (that’s so 2008), but rather the International Brotherhood of Teamsters.

The Teamsters last week sent a letter to KKR, expressing concerns over the dividend and fees that KKR and fellow shareholder Goldman Sachs will pay themselves via the IPO. The letter also raises issues such as Dollar General’s ability to repay its debt (in light of expansion plans and the company’s perceived counter-cyclicality), executive compensation, board structure and possible regulatory risks related to OSHA compliance.

I spoke with a couple union execs yesterday, who said this is an investment issue rather than a labor issue. After all, it isn’t like Teamsters are manning the cash registers (quite the image).

More specifically, most Teamster pension funds invest a majority of their assets in public equities – an! d the parent group wants to warn those sub-investment managers of possible pitfalls to investing in the Dollar General IPO, in particular, and private equity-backed IPOs in general (which the Teamsters correctly sense are increasing in volume). I asked if this is the beginning of a prolonged campaign, but they honestly didn’t seem to have decided yet. For now, they seem content to see what happens with Dollar General.

A KKR spokesman declined comment, of course, due to SEC restrictions related to Dollar General. He did say, however, that his firm has received the letter and is reviewing it. You can read the letter in peHUB’s FileRoom.

*** Publishing Note: Erin will be putting together tomorrow’s issue, as I’ll be on a panel up in New Hampshire (part of a Village Ventures event). No need to change your email filters, as the Wire will still look like it’s coming from me. I’ll be back in the home office on Thursday.

Top Three

Serious Materials LLC, a Sunnyvale, Calif.-based provider of green building materials, has raised $60 million in Series C funding. Mesirow Financial Capital led the round, and was joined by New Enterprise Associates, Foundation Capital, Navitas Capital, Rustic Canyon, Enertech Capital, Cheyenne, and Saints Capital. The company previously raised around $52 million.

Palladium Equity Partners has acquired Capital Contractors Inc., a Melville, N.Y.-based based provider of janitorial and facilities maintenance services. No financial terms were disclosed, exept that Palladium provided both equity and debt.

Inverness Medical Innovations Inc. (NYSE: IMA) has agreed to acquire Free & Clear Inc., a Seattle-based provider of health risk services. The deal includes a $100 million up-front cash payment and up to $30 million in earn-outs based on 2010 revenue. Free & Clear has raised around $19 million in VC funding since 2003, from firms like Kaiser Permanente Ventures, Polaris Venture Partners and Three Arch Partners.

VC Deals

Micell Technologies, a Raleigh, N.C.-baseddeveloper of interventional cardiology systems, has raised $15 million in private equity funding from St.Jude Medical Inc. It had previously raised VC funding from Invemed Catalyst Fund and the GE Pension Plan.

Chelsio Communications Inc., a Sunnyvale, Calif.-based provider of 10-gigabit Ethernet unified wire solutions, has secured $9.3 million in sixth-round VC funding, according to a regulatory filing. The company is planning to raise upwards of $16 million. Chelsiopreviously raised around $84 million from firms like Investor Growth Capital,New Enterprise Associates, INVESCO Private Capital, LSI Logic Corporation, Hotung Capital Management, Abacus Capital Group, Pacesetter Capital Group and Horizon Ventures.

The Rub! icon Project, a Los Angeles-based provider of an Internet advertising platform, has raised $9 million in Series C funding. Peacock Equity Fund led the round, and was joined by return backers Clearstone Venture Partners and Mayfield Fund. The company previously raised $33 million in equity and debt funding.

Vuclip, a Milpitas, Calif.-based provider of mobile video search and delivery solutions, has raised $6 million in Series B funding. Jafco Ventures led the round, and was joined by return backer New Enterprise Associates.

Sungevity, a Berkeley, Calif.-based online sales company for residential solar service, has raised $6 million in new VC funding led by Greener Capital., a Middleton, Wis.-based online platform for connecting manufacturers and consumers in the packaged goods market, has secured just over $4 million of a $6 million second round of VC funding, according to a regulatory filing. The company previously raised $4.3 million from firms like Kegonsa Capital Partners and DaneVest Tech Fund.

Sloning BioTechnology GmbH, a Munich, Germany-based provider of combinatorial gene libraries, has raised an undisclosed amount of new VC funding. Return backers include HBM BioVentures, LBBW Venture, DEWB and KfW.

AirHop Communications, a San Diego-based provider of systems software that enables the deployment of 4G wireless networks, has raised $1 million from “a syndicate of wireless industry luminaries.” Read more…

Buyouts Deals

Cardinal Health (NYSE: CAH) is looking to sell Martindale Pharmaceuticals, the UK’s leading maker of methadone, for approximately £150 million. Morgan Stanley is managing the process, with suitors reportedly including CBPE, LDC, Silverfleet, AAC Capital and Exponent Private Equity.

Galen Partners has acquired and merged twoproviders of medical imaging equipment: Barrington Medical Imaging LLC and Echoserve Inc. TheGolden, Colo.-basedparent company is called Medical Imaging Holdings Inc. No financial terms were disclosed.

Ingrain Inc., a Houston-based provider of digital rock physics analysis for! the oilfield market, has raised an undisclosed amount of growth equity funding from TPH Partners, a mid-market private equity affiliate of Tudor, Pickering, Holt & Co. This is Ingrain’s third investment from TPH. VentureWire reports that the total round is $15 million, including co-investors like Energy Ventures, Shoaibi Group, Klaveness Invest AS, Kommunal Landspensjonskasse and Stanford University.

Wananchi Group Holdings, a provider of pay television and broadband services in Kenya and Tanzania, has raised $25 million from Emerging Capital Partners.

PE-Backed IPOs

A123 Systems, a Watertown, Mass.-based maker of lithium-ion batteries, hasincreased its IPO pricing range to between $10 and $11.50 per share, compared to an initial range ofbetween $8.50 and $9.50 per share. It still plans to offer 25.68 million common shares, and price later this week. The company would have an initial market cap of approximately $1.11 billion, were it to price at the high end of its range. A123 has raised over $300 million in VC funding, from firms like North Bridge Ventures Partners, General Electric, Qualcomm, Motorola, Procter & Gamble, Alliance Capital, Sequoia Capital, CMEA Capital, FA Technology Ventures, OnPoint, Carruth Management and MIT.

BC Partners reportedly plans to float part of German chemicals distributor Brenntag in the first half of 2010. The deal would be worth approximately €1.5 billion, with ! BC Partners retaining a 50% interest. BC bought Brenntag in 2006 for more than €3 billion.

Education Management Corp., a Pittsburgh-based provider of post-secondary education, has set its IPO terms to 20 million common shares being offered at between $18 and $20 per share. The company would have an initial market cap of approximately $2.79 billion, were it to price at the high end of its range. Education Management plans to trade on the Nasdaq under ticker symbol EDMC, with Goldman Sachs serving as lead underwriter. Company shareholders include Providence Equity Partners, GS Capital Partners and Leeds Equity Partners. It originally filed to go public in late 2007.

PE Exits

The Blackstone Group and Lion Capital have received a binding offer for soft-drink maker Orangina Schweppes. The bidder is Japanese brewer Suntory. No financial terms were disclosed, although it’s believed that the Suntory offer is larger than the $2.6 billion that Blackstone and Lion originally paid to acquire Orangina Schweppes.

Onex Corp. plans to sell 11 million subordinate voting shares in contract electronics manufacturer Celestica Inc. (TSX: CLS), for C$113.3 million. Onex would still retain 18.9 million shares following the offering, which is being lead-underwritten by CIBC World Markets.

Firms & Funds

CDH Investments has secured $750 million for its fourth private equity fund focused on growth-stage companies in China. The total target is $1.4 billion.

Human Resources

Boeing (NYSE: BA) has named Andrew Ward as chief investment officer of its $65 billion pension system. He previously was managing director of investment strategy and asset allocation. Former Boeing CIO Mark Schmid left in June to become CIO of the University of Chicago.

Alexandra Jung has joined Oak Hill Advisors as co-head of the firm’s European business. She previously was a managing director with Greywolf Capital Management.