peHUB Wire: Wednesday, March 18, 2009

Yesterday’s big private equity news was that GS Capital Partners, the PE arm of Goldman Sachs, wants to reallocate half of its remaining dry powder toward stressed and distressed debt opportunities (mostly debt). There is around $9 billion left in the firm’s six fund – of an original $20 billion stash – so we’re talking real money here. A few quick thoughts:

• To me, this is Goldman’s way of saying that it wants to participate in Treasury’s public/private partnership plan. And it wants to participate on Day 1. Why else would it want to tap existing capital (a relatively fast process), rather than just go raise a dedicated distressed debt vehicle (a relatively long process)?

• Goldman is also saying something else: It disagrees with the PE titans who keep gushing that a plethora of fantastic buying opportunities are just around the corner. If Goldman thought that it could make huge money from LBOs over the next two years, it wouldn’t be looking to halve its LBO capital.

• Just because Goldman wants to do this doesn’t mean that it will be able to. It needs majority consent from its limited partners – many of whom will need serious convincing. Moreover, that 50% mark is particularly steep for GS Capital Partners. Approximately 40% of its capital comes from Goldman itself (employees, clients, etc.), but Erin learned yesterday that the fund documents preclude Goldman from voting on the proposed amendment.

*** The big M&A news today is that IBM is in talks to buy Sun Microsystems for at least $6.5 billion. Two quick items of relevance for this space: (1) This would represent an exit for KKR, which did a $700 million PIPE with Sun in January 2007. (2) This could have major ripple effects for technology VCs. On the downside, it would mean a reduction in the number of big strategic acquirers. On the upside, it would mean that lots of top Sun talent could leave to launch new startups.

*** Reasons you should check out peHUB throughout the day: At noon, we broke news that TA Associates is cutting the carry on its latest fund from 25% to 20 percent. Later in the afternoon, we were the first to report that Chris Hughes – a Facebook co-founder and the Obama campaign’s Web guru – has joined VC firm General Catalyst.

*** On that second item, I guess this means that some of the Facebook brainpower is returning to Boston (Hughes will split his time between GC’s Cambridge HQ and New York City). Given all the local moaning about the original loss, this is welcome news.

*** I spoke yesterday to a 2008 graduate of the Connecticut School of Broadcasting, who said that current students are not the only ones affected by the shutdown. “Part of the reason I went was because graduates get full use of the facilities [to make demo tapes, etc.] and of the career placement services. Now I don’t have either of those things, but I’ve still got the loans to pay back.”

*** Game Time: We’ve now got over 430 readers participating in our March Madness Extravaganza, which officially kicks off tomorrow afternoon. If you’ve been procrastinating, get the sign-up info here.

Top Three

Guy Hands has relinquished day-to-day control of UK buyout house Terra Firma, where he had been CEO. He will retain his chairmanship, and also will serve as chief investment officer.

The Chinese government has rejected Coca-Cola’s planned $2.4 billion acquisition of juice maker Huiyuan Juice, saying that the deal would have been bad for competition. The transaction would have been the largest ever of a Chinese company by a foreign rival. Warburg Pincus holds around a 7% stake in Huiyuan Juice.

ChaCha Search Inc., a Carmel, Ind.-based search startup, has raised $12 million in Series C funding. peHUB had previously reported that it had secured $11 million of a $30 million-targeted round, based on a r! egulatory filing. No new shareholders were disclosed. The company had previously raised around $14 million from Morton Meyerson, Bezos Expeditions, Rod Canion (founding CEO of Compaq) and Jack Gill (co-founder of Vanguard Ventures). It also had secured a $2 million grant from 21st Century Technology Fund. In related news, VentureWire reports that 25 of the company’s 81 employees were let go.

VC Deals

InstaMed, a Philadelphia–based provider of a healthcare payments network and platform, has raised $6 million in fourth-round funding. Osage Partners was joined by Ashby Point Capital and return backers like NJTC Venture Fund and U.S. Bank National Association.

CorAssist Cardiovascular Ltd., an Israel-based developer of therapeutics devices for diastolic heart failure (DHF), has raised $5.25 million in new VC funding. Aurem Ventures MKI led the round, and was joined by Ofer Hi-Tech Group, Yozma Management, Evergreen Venture Partners and Argonaut Ventures.

Apture Inc., a San Mateo, Calif.-based company that lets online publishers enhance their multimedia offerings, has raised $4.1 million in Series A funding led by Clearstone Venture Partners.

InflaRx, a Jena, Germany-based sepsis research hub, has raised an undisclosed amount of VC funding. Affentranger Associates led the round, and was joined by BM-T.

Buyout Deals

Aleris International Inc., a bankrupt maker of aluminum rolled products, will receive court approval for around $1 billion in DIP financing, in order to work out a deal with creditors. TPG Capital bought Aleris for $3.3 billion in 2006 (including assumption of $1.6b in debt).

Aquiline Capital Partners has invested an undisclosed amount in HedgeServ Holding LP, a hedge fund and fund-of-hedge fund administrator with offices in New York and Dublin, Ireland.

Fleetwood Enterprises Inc., a Riverside, Calif.-based maker of motor homes and military barracks, is in talks with Bank of America for bankruptcy financing and hopes to present a plan of reorganization as early as next week. The company went Chapter 11 last week. Major shareholders include Tennenbaum Capital Partners.

Thornburg Mortgage Inc. (OTC BB: THMR), a Santa Fe-based provider of “jumbo mortgage loans, said yesterday that it may file for Chapter 11 bankruptcy protection. Last March, Thornburg received a $1.35 billion rescue package from MatlinPatterson Global Advisors, which has since surrendered all of its Thornburg common stock – 120.8 million shares – without receiving compensation. PE-Backed M&A

Calyx Transportation Group Inc., a transportation and logistics company majority-owned by Wynnchurch Capital Partners, has made three acquisitions: Totalline Transport, Kreative Carriers Transportation & Logistics Services Inc. and Bransam Logistics Services Inc. No financial terms were disclosed. Each of the acquired companies will become separate operating subsidiaries of Calyx Transportation.

iSoftStone Information Service Corp., a Beijing-based provider of IT consulting and software services, has agreed to acquire both Shenzhen Sidaronghe Co. Ltd. and the services & outsourcing unit of MDCL-Frontline. No financial terms were disclosed for either transaction. iSoftStone has raised VC funding from AsiaVest Partners, Infotech Ventures, Mit! sui & Co. and Fidelity Asia Ventures.

Loving Care Agency Inc., a provider of pediatric nursing and home health aides, has acquired six homecare branches from Gentiva Health Services Inc. (Nasdaq: GTIV). No financial terms were disclosed for the deal, which includes branches in Arizona, Pennsylvania and Massachusetts. LCA sponsors MTS Health Investors and Oaktree Capital Management provided equity for the transaction, while BMO Capital Markets and Siemens Financial Services provided debt.

Recurrent Energy, an on-site solar panel developer based in San Francisco, has agreed to buy the solar project assets of Chicago-based UPC Energy Group. No financial terms were disclosed. Recurrent Energy has raised over $85 million from Hudson Clean Energy Partners, Mohr Davidow Ventures and JEM Partners.

Shari’s, an operator of 24-hour family dining restaurants, has acquired four Bakers Square locations in the San Francisco area, from Vicorp Restaurants Inc. No financial terms were disclosed. The restaurants will be rebranded over the next several! weeks. Circle Peak Capital led a buyout of Shari’s in 2005, while Vicorp is a Wind Point Partners portfolio company that filed for Chapter 11 bankruptcy protection last April.

Virtuos, a Beijing-based provider of videogame production services, has acquired Besides Sound Production, a Shanghai-based provider of audio production for videogames. No financial terms were disclosed. Virtuos is sponsored by Legend Capital.

Firms & Funds

C Change Investments and Korea Investments & Securities Co. have been selected to manage Korea’s Green Growth Fund, which is expected to be launched in June with an initial $130 million commitment from the South Korean government and third-party investors. The fund will invest in companies and projects throughout the world.

Vicente Capital Partners has raised $15 million in additional commitments for its debut growth equity fund, bringing the total to $165 million. New LPs include Credit Suisse and the State of Connecticut. Los Angeles-based Vicente will invest between $5 million and $15 million in companies that have between $2 million and $25 million in revenue and up to $5 million of EBITDA. Vicente was previously known as Kline Hawkes & Co., although Frank Kline is not part of the new effort. In related news, Vicente announced its first portfolio company: MedBridge Healthcare, a Greenville, S.C.-based provider of sleep diagnostic and respiratory therapy services.

Fund-Raising Updates: Wind Point, CIVC, Linden and TZP.

Human Resources

Frederick Frank and Mary Tanner have joined Peter J. Solomon & Co. as vice chairman and managing director, respectively. They will help launch and lead the firm’s global pharmaceutical and life sciences practice. Frank most recently served as vice chairman of Barclays Capital, while Tanner ran investment and advisory firm Life Sciences Partners.