peHUB Wire: Wednesday, December 16, 2009

Kohlberg Capital Corp., a publicly-traded business development company, has filed an 8-K that includes a major dig at Deloitte & Touche LLP.

It said that Deloitte gave an unqualified opinion on Kohlberg’s financial statements for the 2008 fiscal year, but that the accounting firm later conducted an internal inspection process “of the methodology and procedures used to prepare the valuations” under FAS 157. As a result, Deloitte requested supplemental information. Kohlberg says it is cooperating, but that Duff & Phelps has determined that the original information was sufficient.

The implication, of course, is that Deloitte didn’t know what it was doing, vis-à-vis FAS 157. I can’t say whether or not the implication is legit, because neither Kohlberg nor Deloitte will comment on the situation, or explain what supplemental information was requested. Odd situation, and must be causing some nervousness at other publicly-traded BDCs that relied ! of Deloitte for loan portfolio or valuation audits.

*** Three thoughts on Stanford’s canceled secondary sale, which was first reported by the WSJ and then later confirmed by Stanford in a press release.

1. WSJ reported that Stanford received bids of between 80-85 cents on the dollar, but a secondary market source tells me that such offers were only for a sliver of what Stanford was offering. In other words, lightly-discounted bids were only for the crème of Stanford’s crop.

2. The cancellation indicates that secondary firms will soon kick themselves for not budging more on price over the past 18 months. Many sellers didn’t blink when being strangled by their denominator effect, and now that their situation has improved…

3. Despite what I just wrote, don’t assume that the Stanford situation is indicative of the larger secondary market. The Stanford sale was unusual for a variety of reasons, including the desired JV structure and size limits placed on the available buyer universe.

*** Elevation Partners is denying a Fortune report that it is in the midst of raising its second fund. Kevin Albert, head of investor relations for elevation, tells me that a new fundraising is “likely sometime next year,” but that stories of a current effort seem to have been incorrectly extrapolated from last month’s hiring of ex-eBay executive Rajiv Dutta.

*** Kevin Delbridge is planning to transition out of his senior managing director role with HarbourVest Partners, where he has worked for more than 20 years. He will remain with the firm in a part-time capacity, as a senior advisor.

The move comes several months after Delbridge was named chairman of his alma matter, Western New England College. “It’s not a fulltime job, but it’s at least a serious part-time job,” Delbridge says of! the chairmanship. “I know some people would have just said that they are fulltime [at HarbourVest] and worked fewer hours, but I just can’t operate that way.”

Delbridge’s transition becomes effective on January 1, and his LP advisory board positions will be filled by other HarbourVest staffers. “I’m still interested in private equity, and part-time senior advisor could mean 25% or 75% of my time. I just don’t know yet,” he adds.

*** David Walrod has quietly joined Bridgescale Partners as a venture partner. He actually did so back in April, but the tech-focused growth equity firm never announced the move (and I haven’t seen it elsewhere).

The last time we heard from Walrod was in June 2007, when he stepped down as a Palo Alto-based general partner with Oak Investment Partners. He had been with Oak for eight years, and continues to sit on the boards of Oak portfolio companies NextG Networks and Lumasense Technologies.

Top Three

Zynga, a San Francisco-based developer of social games like FarmVille, has $180 million in new funding. Digital Sky Technologies of Russia led the round, and was joined by Andreessen Horowitz, Tiger Global and return backer Institutional Venture Partners. Zynga previously raised around $60 million from IVP, Kleiner Perkins Caufield & Byers, Union Square Ventures, Foundry Group and Avalon Ventures.

China Pacific Insurance, the third-largest life insurer in China, raised $3.1 billion in a Hong Kong IPO. The company was already listed in Shanghai, and is partially owned by The Carlyle Group.

Neuberger Berman said that its private equity secondaries team has acquired a portfolio of 21 private equity investments from a European family office. The deal was valued at approximately $200 million.

VC Deals

SmartDrive Systems Inc., a San Diego-based provider of driver risk management systems and services, has raised $25 million in fifth-round funding co-led by return backersNew Enterprise Associates and Oak Investment Partners. SmartDrive previously raised over $50 million from NEA, Oak, Revolution Ventures, the Founders Fund and Western Technology Investments.

Afferent Pharmaceuticals, a Palo Alto, Calif.-based developer of drugs for chronic pain, has raised $23 million in Series A funding. Third Rock Ventures and Pappas Ventures co-led the round, and were joined by Domain Associates and New Leaf Venture Partners. In related news, Afferent has licensed a chronic pain program from Roche.

Kobo Inc., a developer of ! mobile eBook applications, has raised $16 million from Borders Group Inc. (NYSE: BGP), as part of its spinout from Toronto-based Indigo Books & Music. The investment is part of a commercial partnership whereby Borders will brand and stock Kobo’s eBook stores.

QD Vision, a Watertown, Mass.-based developer of nanotech-based products for solid state lighting and displays, has raised $10 million in fourth-round funding. Return backers include North Bridge Venture Partners, Highland Capital Partners and In-Q-Tel.

EnOcean GmbH, a German wireless sensor company, has raised €8 million in fourth-round funding. SET Venture Partners and the Kathrein group were joined by return backers Atmos, BayTech Venture Capital, Emerald Technology Ventures, Siemens Technology Accelerator, Siemens Venture Capital and Wellington Partners.

Swype, a Seattle-based developer of text input technology, has raised $5.6 million in Series B funding. Nokia Growth Partners and Samsung Ventures were joined by return backer Benaroya Capital.

Emo Labs, a Waltham, Mass.-based developer of transparent loudspeaker systems, has secured $1.5 million of a $2.67 million funding round, according to a regulatory filing. Backers include Polaris Venture Partners and the Venture Capital Fund of New England.

Savara Pharma! ceuticals, an Austin, Texas-based developer of inhalation drug delivery solutions, has closed its Series A round in excess of its $1.4 million target. No investor information was disclosed.

SunRun, a San Francisco-based provider of residential solar electricity, has secured an additional commitment of tax equity from a subsidiary of U.S. Bancorp that is part of the financing needed to develop $90 million in residential solar installations in 2010. The company previously raised $30 million from Accel Partners, Foundation Capital, Parker Weil (Merrill Lynch) and Greg Avis (Summit Partners).

Buyouts Deals

Ames Taping Tools, a Duluth, Ga.-based maker of automatic taping and finishing tools, announced plans to file for bankruptcy protection, as part of a prepackaged reorganization. Under terms of the deal, Ames assets will be sold to existing company backers Aurora Capital Group, GSC Group and Saybrook Corporate Opportunity Fund.

The Carlyle Group reportedly may pay around $250 million for a 60% stake in CVC Turismo, Brazil’s largest tourism agency. CVC is majority-owned by entrepreneur Guilherme Paulus.

Fraser Papers has requested bankruptcy court approval to sell its specialty papers business to Brookfield Asset Management for $185 million.

Chuck Greenberg, a Pittsburgh sports attorney, has been named lead bidder to buy the Texas Rangers baseball club from Tom Hicks. Greenberg still must finalize the dea! l and receive approvals from both league owners and Hicks’ creditors.

Milestone Partners has completed its acquisition of Mariner Finance LLC from First Mariner Bancorp (NasdaqGM: FMAR). No financial terms were disclosed. Mariner Finance is a Baltimore-based provider of medium-term installment loans, related credit insurance and ancillary products to near-prime borrowers.

Philadelphia Newspapers LLC is asking a bankruptcy judge to bar the company’s creditors from using their secured debt in a takeover bid, arguing that such a move would discourage cash bidders.

RLJ Equity Partners and Spell Capital Partners have acquired an unspecified ownership interest in LAI Internatio! nal, a Scottsdale, Ariz.-based maker of precision engineered components for industries like power generation, aerospace, defense and healthcare. No finacial terms were disclosed.

Sterling Partners and CPP Pension Plan haveincreased their offerto acquire Canadian logistics services provider Livingston International Income Fund (TSX: LIV),from C$8 per share to C$9.50 per share. The totaldeal value is now around C$273 million. Sterling would hold a 60% stake following the transaction, with CPP holding the remainder.

PE-Backed IPOs

Cobalt International Energy LP, a Houston,Texas-based oil and gas exploration and production company that focuses on the Deepwater Gulf of Mexico, raised around $850.5 million in its IPO. The company priced 63 million common shares at $13.50 per share, compared to an expected $15-$17 offering range. It will trade on the NYSE under ticker symbol CIE, while Credit Suisse, Goldman Sachs and JP Morgan served as co-lead underwriters. The company raised $350 million from First Reserve Corp. in late 2007, which followed earlier commitments from Goldman Sachs, Carlyle/Riverstone, KERN Partners and company management.

Team Health Holdings LLC, a Knoxville, Tenn.-based provider of outsourced healthcare professional staffing and administrative services to hospitals and other healthcare providers, raised around $159.6 million in its IPO. The compan! y sold 13.3 million shares at $12 per share, compared to original plans to sell 20 million shares at between $14 and $16 per share. Lead underwriters included BoA Merrill Lynch, Goldman Sachs, Barclays Capital and Citi. The Blackstone Group held over a 90% pre-IPO interest in Team Health.

PE-Backed M&A

Knowledge Networks, a Menlo Park, Calif.-based provider research to media and advertising companies, has acquired Caduceus Marketing Research, a Mt. Arlington, N.J.-based provider of market research services to pharmaceutical manufacturers. No financial terms were disclosed. Knowledge Networks has raised an undisclosed amount of VC funding from Alloy Ventures, Maveron, Meritech Capital Partners, Oak Hill Venture Partners and Oak Investment Partners.

Silence Therapeutics PLC (AIM: SLN) has agreed to merge with Intradigm Corp., a Palo Alto, Calif.-based developer of RNAi therapeutics. Intradigm previously raised around $42 million in VC funding from firms like Alta Partners, Frazier Healthcare, Lilly Ventures, Roche Finance and Astellas Venture. Those firms nowhold a 36.6% stake in the combined company, and agreed to invest £5 million in new! capital.

PE Exits

Ellie Mae has acquired Mavent Inc., an Irvine, Calif.-based provider of automated compliance solutions for the mortgage industry. No financial terms were disclosed. Mavent had raised around $21 million in VC funding since its 2000 inception from backers like FTV Capital.

IBM has agreed to acquire Lombardi Software, an Austin, Texas-based developer of business process management software. No financial terms were disclosed. Lombardi has raised around $78 million in VC funding, from firms likeAustin Ventures, InterWestPartners and Palomar Ventures.

The Niels! en Company, a New York-based media company whose shareholders include Blackstone Group and KKR, has agreed to sell its theater ticket sales data unit (Nielsen EDI) to Rentrak Corp. (Nasdaq: RENT). The deal reportdly is valued at $15 million in cash.

Rambus Inc. (Nasdaq: RMBS) has agreed to buy the technology and IP parents of Global Lighting Technologies Inc., a Brecksville, Ohio-based maker of backlighting modules for flat panel display devices, for $26 million. GLT raised a $25 million funding round in 2000, from firms like Warburg Pincus and Baring Private Equity Partners.

Thomson Reuters (NYSE: TRI) has completed its acquisition of Sabrix Inc., a San Ramon, Calif.-based provider of transaction tax mana! gement software. No financial terms were disclosed. Sabrix has raised around $40 million in VC funding since 2000, from firms like Trinity Ventures, Mohr Davidow Ventures, GKM Ventures and VSP Capital.

Firms & Funds

Earth Capital Partners has held a first close on its debut renewable energy infrastructure fund, which will support solar, biogas and biomass projects in Europe, the Middle East and North Africa. The total fund target is €750 million, although ECP did not give a figure for the first close.

Human Resources

Mike Franks has joined First Republic Bank as a managing director in the firm’s Silicon Valley office. He previously was with Silicon Valley Bank as a managing director and direct or private equity services.

Steven Gold has joined Alvarez & Marsal as a Chicago-based managing director. He previously was an operating partner at Stone Tower Capital and chief supply chain officer for PepsiCo.

Robert Bertagna has joined Macquarie as head of its U.S. industrials investment banking group. He previously was co-head of industrials for Barclays.

Riveron Consulting, a financial consulting firm serving private equity funds, named Chaitan Fahnestock managing director of the firm’s newly opened Chicago office.