peHUB Wire: Wednesday, August 19, 2009

As some of you know, my first real journalism job was helping to launch and manage a youth-focused community newspaper based in Roxbury, Mass., which qualifies as part of Boston’s inner city (both geographically and figuratively).

Small operation, which means a lot of my time was spent hustling for advertisers, which typically were local businesses. In all my conversations with these enterprising entrepreneurs, I never heard terms like “venture capital” or “growth capital.” I did, however, often hear the term “bank” with some sort of expletive preceding it.

The problem, of course, was on both sides of the proverbial coin: The inner city businesses had no idea how to access the private capital markets, and the private capital markets paid to attention to inner city businesses.

While I was sweating it out in Rox! bury (no air conditioning), an HBS professor named Michael Porter was addressing the issue from more comfortable environs (I’ve been in HBS offices – like meat lockers). He had done a lot of work around competitiveness and strategy, and wanted to apply his findings to the inner city. The result was something called the Initiative for a Competitive Inner City, a nonprofit aimed at promoting “economic prosperity in America’s inner cities through private sector engagement that leads to job, income and wealth creation for local residents.”

The group’s flagship national event is called Inner City Capital Connections, and takes place on November 18-19 in New York City. The idea is that ICIC puts out a call to inner city businesses, with the requirements that they be for-profit and have at least $2 million i! n annual revenue. ICIC then vets the applicants (with some help from B oA), and invites the crop’s cream to a one-day training seminar on things like elevator pitches, structuring term sheets, etc.

One month later (Nov 18-19), the applicants basically participate in a deal-flow circuit, pitching themselves to angels, VCs and growth-stage investors. Since 2005, participating companies have raised $144.3 million, including $54.2 million in equity capital and $90 million in debt capital.

The event is free to attend for institutional investors, and I really encourage you to participate (if it fits your investment thesis). One side of the coin has already stepped up, and now it’s waiting for you. Get all the details here.

*** I live-blogged yesterday’s KKR/KPE earnings call, which you can find a replay of here. Most newsworthy item was Henry Kravis saying that the merger received 98% approval from those who voted, a! nd that it is expected to close on October 1. In other words, things are still on track for a spring listing in New York.

Kravis also said that KKR had refinanced over $13 billion of debt at eight of its portfolio companies. Also worth noting that the analysts asking questions really seem to have little understanding of the private equity business model, particularly as it relates to funds and capital under management.

*** Still Waiting: Andrew Cuomo’s office has been kind of silent on the PE kickback scandal of late, but word is that it has nothing to do with Sheila Bair stealing his thunder. Instead, Cuomo is still working out a deal with Quadrangle Group, which wants nothing more than to put this issue behind them (a la Carlyle, etc.).

Unfortunately, it seems Cuomo’s parallel discussions with Steve Rattner are much less amenable, and th! e two parties (Quadrangle and its former leader) aren’t as easily sepa rated as one might think…

*** Self-Promotion Alert: I’ll be on CNBC this afternoon at 12:10pm ET, to discuss the burgeoning IPO market (plus Rosetta sinking like a Stone).

*** Self-Demotion Alert: Seems I’m no longer moderating the VC/PE panel at Advertising Week in New York. They claim to have offered the moderator spot to two people, and I accepted second (even though they thanked me for accepting and asked for my vitals). Of course I think the real reason might have to do with TR not ponying up for a sponsorship… Stay classy Advertising Week.

*** Random Promotion Alert: Buyouts and VCJ are holding a webinar for VC and PE firms on Sept. 23, titled Registration & The New Regulatory Regime. You can get more info here, and Wire readers can receive a 10% discount by adding the word Primack into the discount code box.

Top Three

SMART Business Advisory & Consulting LLC, a business advisory owned by Great Hill Partners, has agreed to merger with LECG Corp. (Nasdaq: XPERT). The deal includes the issuance of approximately $39.9 million worth of LECG shares, plus a $25 million investment commitment from Great Hill.

Guaranty Financial (NYSE: GFG) has received a buyout bid from a consortium that includes The Blackstone Group, The Carlyle Group, Oak Hill Capital, TPG Capital and former Golden State Bancorp CEO Gerald Ford.

Wanova Inc., a San Jose, Calif.-based developer of desktop virtualization software, has raised $13 million in Series A funding. Backers include Grey! lock Partners, Carmel Ventures and Opus Capital.

VC Deals

3VR Security Inc., a San Francisco-based provider of searchable surveillance solutions, has raised $12 million in Series D funding led byMenlo Ventures. The company previously raised over $30 million, from firms like DAG Ventures, Kleiner Perkins Caufield & Byers, In-Q-Tel and VantagePoint Venture Partners.

Advanced Inquiry Systems Inc., a Hillsboro, Ore.-based maker of wafer data sensing systems for semiconductor memory manufacturing, has raised $11 million in Series B funding. Return backers include OVP Venture Partners, TL Ventures, Intel Capital, Applied Ventures, KT Ventures and Northwest Ventures.

PaymentOne, a San Jose, Calif.-based online payment serv! ice provider, has raised $7 million in a round of Series B private equity and debt funding. AER Investments led the round.

ClearAccess, a Vancouver, Wash.-based provider of broadband device management and data services, has raised $6 million in Series B funding. Blade Ventures and Buerk Dale Victorco-led the round, and were joined by return backer DFJ Frontier.

Expresso Fitness, a Sunnyvale, Calif.-based provider of interactive cardio fitness systems, has raised $6 million in Series D funding. Return backers include Sierra Ventures, Physic Ventures and Enterprise Partners Venture Capital. The company had previously raised around $34 million, plus a $7 million working capital line from Silicon Valley Bank.

Polyvore Inc., an online user-generated fashion magazine, has raised $5.6 million in Series B funding. Matrix Partners led the round, and was joined by Benchmark Capital and Harrison Metal Capital.

Kolltan Pharmaceuticals Inc., a New Haven, Conn.-based developer of oncology therapeutics, has raised $5 million in new Series A funding. The round total is now $40 million. Backers include Purdue Pharma, HBM BioCapital and the Pritzker/Vlock family.

CoverItLive, a Toronto-based provider of live social event software, has received an undisclosed amount of minority equity funding from Demand Media, a Santa Monica, Calif.-based provider of distributed social media. Demand Media backers include 3i, Goldman Sachs, Generation Capital Partners, Oak Investment Pa! rtners and Spectrum Equity Investors.

Buyouts Deals

Apollo Management has prevailed in a six-month bankruptcy court battle to alter the terms of Pliant Corp.’s reorganization plan, which now will be put to a creditors’ vote.

CVC Capital Partners has lined up financing for its bid on Anheuser-Busch InBev’s Central and Eastern European assets, although the brewer has yet to formally accept the offer. CVC reportedly bid around €1.4 billion, including €700 million of debt. AB InBev had been seeking bids closer to €2 billion.

KKR is in talks with Japanese trading firm Itochu about making a bid for Bellsystem24, a Japanese telemarketer owned by Citigroup. The deal is expected to be worth approximately $1.5 billion, with Permira also expected to bid.

PE Exits

Ascend Media has sold its Allied Healthcare Group to Anthem Media Group and its Practice Builders unit to undisclosed buyer. No financial terms were disclosed for either sale.Ascend Media is currently controlled by its lenders, led by Wells Fargo. It previously was owned by CCMP Capital and Veronis Suhler Stevenson, until defaulting on its debt covenants earlier this year.

The Riverside Co. has sold The Hudson-Sharp Machine Co. to Thiele Technologies Inc. for an undisclosed amount. Hudson-Sharp ismakerplastic bag machinery, pouch making equipment and reclosable packaging solutions. It has offices in Green Bay, Wis. and Brussels, Belgium.

Travelocity Global has acquired TravelGuru, an Indian online travel portal. No financial terms were disclosed. TravelGuru had raised had raised $25 million in venture capital funding from Battery Ventures and Sequoia Capital India.

PE-Backed IPOs

AEI, a Cayman Islands-based owner and operator of energy infrastructure assets in emerging markets, has filed for raise $862.5 million via an IPO. The company plans to trade on the NYSE under ticker symbol AEI, with Goldman Sachs, Credit Suisse, Citi and JPMorgan serving as co-lead underwriters. The company had $3.7 billion in revenue for the six months ending June 30, which was a 19.6% drop from the same period last year. Major shareholders include affiliates of Ashmore Investment Management and Eton Park Capital.

Firms & Funds

Macquarie Group has formed a joint venture with China Everbright Ltd., to launch two China-focused infrastructure funds totaling $1.5 billion.

Macquarie Group has agreed to buy U.S. asset manager Delaware Investments from Lincoln Financial. The deal is valued at $428 million in cash.

Human Resources

Brookfield Asset Management hasadded five senior vice presidents to its group that manages private equity institutional relationships. The new hires are: Peter Thomson (UK/Middle East)former managing director in the PE funds group of Bear Stearns/JPMorgan; Robert von Herrmann (German-speaking countries),former managing director in the PE funds group of Bear Stearns/JPMorgan; Paul Tam (Asia), formerly a partner with Crane Capital/Bear/JPM; Alexander Apponyi (Scandanavia), formerly a partner with BerchWood Partners; and Scott White (deal execution), previously with Citi Alternative Investments.

Brad Cameron has joined Bank of America Merrill Lynch as head of its Canadian M&A team. He previously spent 17 years with RBC Capital Markets.

Metro-Goldwyn-Mayer Inc. has replaced its CEO with a three-person team that includes turnaround pro Stephen Cooper, MGM production boss Mary Parent and MGM CFO MGM has been trying to refinance its $3.7 billion of debt, much of which relates to a 2005 buyout by Providence Equity Partners, TPG Capital, DLJ Merchant Banking Partners, Quadrangle Group, Sony and Comcast.

Cliff Monlux has been named president and managing board member of The University Funds, a new VC firm focused on commercializing academic research. Monlux previously was with Ramp Equity Partners.

Stuart Strauss and Richard Horowitzhave joined D! echert LLP as partners in the firm’s financial services group . They both will work out of New York, and previously were partners with Clifford Chance LLP.