peHUB Wire: Wednesday, December 9, 2009

No column today, as a film of my Tuesday would be titled: Planes, Cabs and Sidewalks. But before moving onto the links, I wanted to do two things related to yesterday’s column:

First, a huge thanks for the outpouring of support and information related to my cat. It has nothing to do with private equity, yet your response was overwhelming. He’s currently resting semi-comfortably besides my keyboard – as he’s done while hundreds of these morning missives have been penned – quite possibly for the last time (he had a rough night). J and I are still hoping and trying for the best…

Second, and back on topic, I also received lots of emails related to the carried interest tax issue. So here is a small sampling:

Mike: “Obviously we view the proposed carried interest tax ideologically – I think taxes are bad, you prefer progressive tax systems (‘soak the rich’ – hell, why not just eat them?). Also, economically I think it’s self evident that at least at! the margin (and at the margin with what economics is all about!) you reduce risk-taking when you tax it. To argue that large firms will continue to do what they do is an elasticity argument – they are less ‘price sensitive’ in a sense. But we know that when you tax something you get less of it.”

Dave: “I agree with you.Carried interest should be taxed as ordinary income, period.It’s an incentive bonus based on quantifiable metrics.How is that any different from management incentives aligned with profitability?If PE pros want the preferential tax treatment they are welcome to shell out their own hard earned, already taxed money and join the LP pool.End of argument…checkmate.”

Amy: “Carried interest is based on a profit (i.e. gain in value). I strongly disagree that it is a fee for services…that’s what a management fee is.”

Brooke: “I’m sure if the US star ted taxing our income no one will want to work, right?What, we already do? Oh well. They are just embarrassing themselves, glad to see you challenging them.”

Top Three

Francisco Partners has agreed to acquire QuadraMed Corp. (Nasdaq: QDHC), a provider of healthcare IT services, for approximately $126 million in cash. Wells Fargo Foothill and Silicon Valley Bank have committed debt financing, although the deal does not include a financing condition.

Lion Capital reportedly is in talks to sell Salem, Ore.-based potato chip-maker Kettle Foods for around $700 million. Possible suitors include Frito-Lay and Snyder’s of Hanover.

Steve Pagliuca, a managing director with Bain Capital, lost his bid to become the Democratic Party nominee for U.S. Senate in Massachusetts. He placed fourth, with 12% of the votes.

VC Deals

Coveo, a Quebec City-based provider of enterprise search solutions, has raised C$8.2 million in Series B funding. BDC Venture Capital led the round, and was joined by return backers Propulsion Ventures SEC, The Solidarity Fund QFL and company chairman Louis Têtu.

Epizyme Inc., a Cambridge, Mass.-based biopharma company focused on the application of epigenetics, has raised $8 million in new Series B funding from New Enterprise Associates. This brings the round total to $40 million, including an earlier close led by Bay City Capital. The initial tranche also included Amgen Ventures, Astellas Venture Partners, MPM Capital and Kleiner Perkins Caufield and Byers. The company has now raised $54 million in total VC funding.

Palisade Systems, a Des Moi! nes, Iowa-based provider of data loss prevention solutions for SMEs, has raised $2.6 million in new VC funding. Backers include DeWaay Investment Partners, Cedar Valley Venture Fund and Principal Life Insurance Company.

Transaction Wireless, a San Diego-based provider of a mobile infrastructure and commerce platform, has raised $2 million in Series B funding from return backers Mission Ventures and Okapi Ventures.

EVOFEM, a La Jolla, Calif.-based maker of feminine hygiene products, has raise! d $25 million from an undisclosed European private equity firm.

Plumchoice, a Billerica, Mass.-based provider of remote technology support services to the home and small business markets, has raised $10 million in bank financing from Silicon ! Valley Bank. It previously raised over $14 million in equity funding led by Edison Venture Fund.

Buyouts Deals

EQT Partners this week is expected to announce an agreement to acquire German academic publisher Springer Science and Business Media, from current owners Candover and Cinven. The deal would value Springer’s equity at between €100 million and €150 million, plus the assumption of 2.2 billion in debt.

Metalmark Capital is in talks to acquire a stake in Airborne Systems, a Pennsauken, N.J.-based maker of military and cargo parachutes, according to Dow Jones.

Talbots Inc. (NYSE: TLB) announced an acquisition and refinancing plan that would reduce debt by around $300 million via its purchase by special acquisition company BPW Acquisition Corp. Additional financing would come from GE Capital via a $200 million senior secured revolving credit facility. The moves would end Talbots’ 21-year relationship with majority owner Aeon Co.

Tele Columbus creditors reportedly plan to take over the company’s indebted parent to try and recoup some of their investment. The German cable provider’s creditors include Alcentra, York Capital, Golden Tree and the Bank of Ireland.

PE-Backed IPOs

Crimson Exploration Inc., a Houston, Texas-based natural gas and crude oil company, has set its stock offering terms to 18 million shares being sold at between $6 and $8 per share. The company currently trades on the OTC bulletin board, but plans to list on the Nasdaq. Barclays Capital and Credit Suisse are serving as co-lead underwriters. Crimson is majority-owned by Oaktree Capital Management.

PE-Backed M&A

Voyager Learning Co. (OTC BB: VLCY), an educational publisher for the K-12 market, has completed its merger with Cambium Learning Inc., a provider of education services to at-risk and special student populations.The deal results in Cambium sponsor Veronis Suhler Stevenson holding a majority stake in the combined public company, with Voyager stockholders receiving approximately $194 million worth of cash and/or stock in Cambium.

PE Exits

Compuware Corp. (Nasdaq: CPWR) has completed its acquisition of Gomez Inc., a Lexington, Mass.-based provider of web experience management services, for $295 million in cash. Gomez had been in registration for an $80.5 million IPO. It raised over $66 million in VC funding between 1999 and 2004, with current shareholders including Dolphin Equity Partners (36.6% pre-IPO stake), AdAstra (19.9%), Doughty Hanson & Co. (17.3%) and ABS Ventures (8.9%).

Roper Industries Inc. (NYSE: ROP) has acquired Verathon Inc., a Bothell, Wash.-based provider of medical devices and services like a noninvasive bladder-scan device. No financial terms were disclosed. Verathon has raised nearly $16 million, from firms like DW Healthcare Partners.

The Wicks Group of Cos. has completed its $170 million cash sale of career education company Penn Foster Education Group Inc. to The Princeton Review Inc. (Nasdaq: REVU).

PE-Backed Busts

The Walking Co., a footwear retailer owned by Kayne Anderson, has filed for Chapter 11 bankruptcy protection. The company also said it would seek approval to begin store closing sales at 90 of its 210 locations.

Imara Corp. (f.k.a. Lion Cells), a Woodside, Calif.-based developer of lithium ion battery technologies, has ceased operations. The company had raised arouned $18 million in VC funding from firms like Battery Ventures and Nth Power.

Firms & Funds

Catalyst Venture Partners of the UK has formed a European/Asian partnership with iAxil, a Singapore-based venture accelerator arm of Ascendas. The effort”will support and assist both European-based companies wishing to access the Asian market, and Asian-based companies seeking to penetrate European markets.”

CCB International, an I-banking arm of China Construction Bank, is planning to launch a $1 billion private equity fund in Hong Kong.

CITIC Securities, China’s largest listed brokerage, next week will close its first private equity fund with around 9 billion yuan ($1.3b) in capital commitments.

Human Resources

Natural Gas Partners has promoted Craig Glick from principal to managing director and counsel. He joned the firm in 2008, after having been a managing director with NGP Midstream & Resources and a co-founder of Kosmos Energy Holdings.

Eran Broshy has joined Providence Equity Partners as a senior advisor. He previously was CEO of InVentive Health.