peHUB Wire: Wednesday, February 17, 2010

Greetings from 35,000 feet, as I’m aboard a Virgin America flight from Boston to San Francisco. A few notes to kick off our collective morning:

*** Fallbrook Technologies yesterday filed for a $50 million IPO, although I can’t for the life of me figure out why. The company has decreasing revenue, increasing losses and is looking for the type of equity infusion that its existing VC backers should be able to provide. If it weren’t for Vringo, Fallbrook would be in pole position for this year’s “WTF IPO?!?!” prize (which involves being slapped silly by a dead fish).

On the plus side, Fallbrook reminded me that it’s been more than a month since I’d looked at the VC-backed IPO pipeline. There are eleven additions to the list and two subtractions (both Ironwood Pharma and Quinstreet priced). That brings the curren! t total to 37, representing more than $4.25 billion in targeted raise.

*** Come next Friday, it will have been six months since the FDIC ratified new rules governing private equity investment in banks. But as Erin reported last week at peHUB, the agency has not yet committed to the six-month review it had originally promised.

“No decisions have been made to this point,” an FDIC spokesman told her.

If the spokesman is correct, then there is something rotten on F Street. Or at least something horribly disorganized.

The purpose of the new regulations was to spur PE investment in banks, while simultaneously providing stricter requirements on participating firms. A tightrope to be sure, but one that I actually felt the FDIC did a decent job of walking. I also suggested t! hat the rules were not so strict as to preclude future PE investments.

But, six months later, we can’t find a single deal that has fallen under the new regulatory umbrella. Not one. Maybe it’s a larger credit issue. Maybe PE firms are down on the bank sector. Maybe the flow of failed bank opportunities has slowed. But maybe, just maybe, the new rules are to blame.

Again, I don’t think the rules were too strict. But evidence is evidence, and the FDIC should at least conduct a review. You know, the one they said they were going to conduct six months ago.

Top Three

Oak Hill Capital Partners has agreed to sell New York-based drug store chain Duane Reade to Walgreen Co. (NYSE: WAG), for $1.075 billion. Oak Hill bought Duane Reade for $700 million in 2004, and later provided $125 million in equity recap funding.

BC Partners has acquired a 65.5% stake in Spotless Group, a French maker of cleaning products, from AXA Private Equity for approximately €600 million.

2tor Inc., a New York provider of online degree programs, has raised $22 million in Series B funding. Highland Capital Partners led the round, and was joined by return backers Redpoint Ventures, City Light Capital and Novak Biddle Venture Partners.Signal Hill Capital Group served as placement agent. 2tor previously raised $10 million.

VC Deals

Eleven Biotherapeutics, a Cambridge, Mass.-based developer of protein-based therapeutics, has raised $35 million in Series A funding. Flagship Ventures and Third Rock Ventures co-led the round.

TidalTV, a Baltimore-based provider of video advertising, optimization and yield management solution, has raised $16 million in Series B funding. Comcast Interactive Capital led the round, and was joined by return backers New Enterprise Associates and Valhalla Partners! . TidalTV previously raised $15 million.

Immune Targeting Systems, a UK-based developer of a universal flu vaccine, has raised £8.65 million in new VC funding. Backers include Novartis Venture Partners, HealthCap, Truffle Capital and London Technology Fund.

NABsys, a Providence, R.I.-based developer of solid-state DNA sequencing solutions, has raised $7 million in Series B funding. Stata Venture Partners led the round, and was joined by return backer Point Judith Capital. NABsys previously raised $4 million.

Consult A Doctor 24/7, a Miami, F! la.-based provider of telemedicine solutions, has raised $5 million in Series A funding. Morgenthau Venture Partners led the round, and was joined by New World Angels and Promociones Bursa.

Backupify, a Louisville, KY.-based online data backup and storage startup, has raised $900,000 in seed funding. First Round Capital led the round, and was joined by General Catalyst Partners, Betaworks, Chris Sacca, Jason Calacanis, Andy Swan and Bob Saunders. Charlie O’Donnell of First Round will join the Backupify board of directors.

ecoATM, a San Diego-based provider of automated systems for recycling consumer electronics, has raised an undisclosed amount of first-round funding led by Tao Venture Partners. Also participating was Coinstar founder Jens Molba, who has joined ecoATM’s board of directors.

PowerPlan Consultants Inc., an Atlanta-based maker of financial management software for asset-intensive industries, has raised an undisclosed amount of private equity funding from TPG Growth and JMI Equity.

Buyouts Deals

Advent International, Cinven and Permira have moved on to the second round of bidding for British sofa retailer DFS, which is being sold for upwards of £500 million.

Bruckmann, Rosser, Sherrill & Co. has completed its purchase of $25 million of convertible preferred stock in Ruth’s Hospitality Group Inc. (Nasdaq: RUTH), owner of several restaurant concepts including Ruth’s Chris Steak House. Proceeds will be used to pay down an existing credit facility.

Castle Harlan has completed its acquisition of a majority stake Pretium Packaging LLC, a Chesterfield, Mo.-based maker of specialty plastic containers for the food, pharma, personal-care and household markets. Company founder Keith Harbison retained a minority position. As part of the deal, Pretium Packaging acquired the parent of Novapak Corp. from Kirtland Capital Partners. The total transaction was valued at $200 million.

Monomoy Capital Partners has acquired Casual Living USA Inc., a Tampa, Fla.-based women’s apparel retailer. No financial terms were disclosed. Casual Living will become part of Boston Apparel Group, a Monomoy-sponsored platform that already includes the Chadwicks and metrostyle brands.

Nautic Partners has sponsored a recapitalization of Healthcare Payment Specialists LLC, a Ft. Worth, Texas-based provider of healthcare payment and reimbursement solutions. No financial terms were disclosed for the deal, which was done in partnership with company management.

Exclusive Resorts, a Denver-based luxury destination club, has raised $20 million in new funding led by majority owner, and AOL co-founder, Steve Case.

PE-Backed IPOs

Fallbrook Technologies Inc., a San Diego-based provider of technology for improving the performance and flexibility of transmissions for vehicles and equipment, has filed for a $50 million IPO. CIBC and Mackie Research Capital are serving as co-lead underwriters. The company reports $871,000 in revenue for the nine months ending Sept. 30, 2009, compared to $1.96 million during the same period in 2008. Its income loss for the 2009 period was $11.7 million. The company has raised around $24 million in VC funding from Robeco (24.1% pre-IPO stake) and NGEN Partners (23.7%).

PE-Backed M&A

Canon Communications LLC, a Los Angeles-based B2B publisher and event organizer, has acquired four media brands focused on the U.S. advanced design engineering sector, from Reed Business Information-US. No financial terms were disclosed. The brands are: Electronic Design News (EDN), Design News, Test & Measurement World and Packaging Digest. Canon is a portfolio company of Apprise Media, which in turn is controlled by Spectrum Equity Investors.

HDT Engineered Technologies, a portfolio company of Metalmark Capital, has acquired Nordic Air Inc., a Geneva, Ohio-based maker of air conditioning and ventilation equipment for industrial and military applications. No financial terms were disclosed.

InStar Services Group, a portfolio company of BlackEagle Partners, has acquired Horizon Restoration Inc., a Denver-based provider of disaster restoration services. No financial terms were disclosed.

PE Exits

EMI Group, the troubled music label owned by Terra Firma Capital Partners, has put its Abbey Road Studios up for sale.

Firms & Funds

RW Capital Partners, a new firm formed by former Lazard and GE Capital execs, is raising $50 million for a fund that would provide loans to small businesses. If successful, the fund could be eligible for a $100 million SBIC match.

Human Resource

Alexis Borisy, founder and former CEO of CombinatoRx, has joined Third Rock Ventures as an entrepreneur-in-residence.

Bob Deutsch has joined GCP Capital as a managing director. He previously was CEO of GCP portfolio company Ironshore Inc.