Greetings from the home office, where I’m stationed after a 36-hour sojourn to Quebec City. Bunch of notes:
*** Big news of the conference was that OMERS, the C$43 billion Canadian pension system, will no longer make investments in private equity funds. Instead, it will focus exclusively on direct investing, including buyouts, venture capital, real estate and infrastructure.
I’m told that folks up north have been whispering about the strategy shift for months, but that OMERS officials hadn’t announced it in public until the Quebec City Conference.
Why is this so important? Because OMERS has a 40% commitment to what it calls private markets. In other words, it makes David Swensen look downright shy. Of that 40%, OMERS so far has gotten to around 90% exposure to directs, with the other 10% being legacy LP commitments that it will wind down over time. No plans to sell on the secondary market, but the GP! s have been told not to expect follow-on fund commitments.
*** One of my jobs yesterday was to interview Henry Kravis, following his keynote speech. Plenty friendly (to me), despite his fearsome reputation.
A couple takeaways: First, I asked Kravis to justify the transaction, etc. fees taken by PE firms like KKR, in line with what we’ve discussed here over the past few months. His response was to tick off a list of services KKR provides portfolio companies, including the number of staffers that each service requires (50 employees at KKR’s portfolio management group Capstone, for example).
Quick rebuttal: KKR’s management fees should be able to cover all of those service expenses. It has over $30 billion worth of active funds (I know, a bunch of that is already drawn down), and approximately 400 employees as of its S-1 filing in June 2007. If we assume that KKR is drawing 2% management fees on just half of its fund capital, the math works out to around $75,000 per employee. And that does not, of course, include carry (you know, the thing on which PE pros are supposed to make their fortunes).
Second, I asked Kravis about the trend toward regulati! ng private equity, and if groups like the Private Equity Council need to expand their membership to get added clout. He replied that while groups like PEC can raise awareness and lobby for certain issues, PE firms themselves need to forge relationships with folks on Capitol Hill. In other words, it’s not a business that can adequately outsourced.
*** I’ve seen at least a dozen “what happened?” speeches in the past year, but none so thoughtful and entertaining as the one given yesterday by Glenn Hutchins of Silver Lake Partners. Really hope there’s video of it somewhere (will ask the conference organizers). Also enhanced by his use of Adobe Flash instead of Powerpoint.
*** Among certain VCs, “Friendster” is code for a company that at one time was considered a can’t miss game-changer, but which turned out to be a dud. Most commonly used when questioning the future of Twitter.
*** Quiz Time: We all know that Stanford University is trying to sell a bunch of PE/VC positions on the secondary market, but one of its offerings is particularly surprising. Not only is this fund a 2009 commitment (i.e., after liquidity troubles were evident), but it was a tough allocation to get. Can you name it?
*** Six different people in Quebec said something like: “Oh, you work for Thomson Reuters. I know [CEO] Tom Glocer. Great guy. What’s it like working for him?” Always amused when anyone thinks I’m high enough up the TR foodchain that Glocer would even know who I am, let alone have me as a direct report.
*** Perspective: Our flight back to Boston was delayed last night, so a group of VCs, buyout pros and LPs headed over to the airport bar at around 8pm. On one side of the lounge were large picture windows, and we heard commotion below. Shouting. Cheerng. Clapping.
It was a large group of Canadian soldiers returning from what we assumed was Afghanistan. Balloons. Hugging. Crying.
I can’t speak for those standing and staring next to me, but my feeling was one of smallness. And a stark reminder that there are far greater challenges than the ones we had spent our day discussing.
Top Three
Quidsi Inc., the Montclair, N.J.-based parent company of Diapers.com, has raised $30 million in Series E funding. New Enterprise Associates led the round, and was joined by return backers Accel Partners, Bessemer Venture Partners and MentorTech Ventures.
TEAK Midstream LLC, a Dallas, Texas-based midstream energy startup, has raised $100 million in private equity funding from Natural Gas Partners. TEAK was launched by Crosstex Energy co-founders Chris Aulds and James Wales.
Corinthian Colleges Inc. (Nasdaq: COCO) has agreed to buy career college operator Heald College for $395 million in cash. Heald is minority-owned by Summit Partners, and operates nine campuses in Northern California, Hawaii and Oregon.
VC Deals
GlycoMimetics, a Gaithersburg, Md.-based developer of glycobiology-based therapies, has raised $38 million in third-round funding. Genzyme Ventures was joined by return backers New Enterprise Associates, The Novartis Venture Fund, Anthem Capital and Alliance Technology Ventures. The company previously raised around $25 million.
Tarsa Therapeutics Inc. has raised $24 million in Series A funding. MVM Life Science Partners led the round, and was joined by Quaker BioVentures and Novo AS. In related news, Unigene Laboratories Inc. (OTCBB: UGNE) has licensed its Phase III oral calcitonin program to Tarsa, in exchange for a 25% ownership position.
Tower! Cloud Inc., a St. Petersburg, Fla.-based provider of backhaul services to wireless carriers, has raised $20 million in new VC funding.Return backers El Dorado Ventures and Sutter Hill Ventures were joined by a new investor group led by telecom entrepreneur Cam Lanier.
Canesta Inc., a Sunnyvale, Calif.-based provider of mass-marked 3D image sensors, has raised $16 million in fifth-round funding. Quanta Computing (TW: 2382) and SMSC (Nasdaq: SMSC) were joined by return backers Carlyle Growth Partners, Hotung Venture Group and Venrock. Canesta previously raised around $73 million.
Vertos Medical Inc., an Aliso Viejo, Calif.-based developer of minimally-invasivedevices for lumbar spine decompression, has raised $15.5 million in Series D funding. Onset Ventures led the round, and was joined by return backers CHL Medical Part ners, Foundation Medical Partners, Aweida Venture Partners and DFJ Mercury. The company previously raised around $17 million.
RedSeal Systems Inc., a San Mateo, Calif.-based provider of security posture management software, has raised $12 million. OVP Venture Partners led the round, and was joined by return backers Venrock, Jafco Ventures, Sutter Hill Ventures and Leapfrog Ventures. The company has now raised more than $43 million in total VC funding.
Synageva BioPharma Corp., a Waltham, Mass.-based developer of protein therapeutics, has raised $12 million in new sixth-round funding, bringing the round total to $45 million. New Leaf Venture Partnersjoined existing backersHunt BioVentures, Yasuda Enterprise Development, Baker Brothers Investments, Tul! lis Dickerson and Four Partners. The company has now raised around $95 million.
Copanion Inc., an Andover-based provider of, has raised $10.2 million in Series B funding co-led by return backers Commonwealth Capital Ventures and Pilot House Ventures. The company previously raised $9 million.
REvolution Computing, a Palo Alto, Calif.-based provider of software and support for the open-source “R” statistical computing language, has raised $9 million in new VC funding from Intel Capital and Northbridge Venture Partners.
RiseSmart, a San Jose, Calif.-based provider of online outplacement and job s earch services, has raised $4.6 million in new Series A funding. Storm Ventures led the round, and was joined by Norwest Venture Partners. The company previously raised $4.25 million from Norwest and individual angels.
HealthGuru Media, a New York-based health website for 18-40 year-olds, has raised $3.2 million in Series C funding. Castile Ventures led the round, and was joined by return backer Village Ventures.
Computime Inc., a St. Louis-based provider of electronic signature fulfillment and support services, has raised $2 million from Advantage Capital Partners.
Chango, a Toronto-based online advertising solution, has raised C$750,000 in Series A funding. iNovia Capital led the round, and was joined by Extreme Venture Partners.
Buyouts Deals
Aurora Capital Group has completed its purchase of Porex from HLTH Corp. (Nasdaq: HLTH). The dealwas valued at $142 million, including $74.5 million in cash payable at closing and $67.5 million in senior secured debt. Porex makes porous plastic products and components used in healthcare, industrial and consumer applications.
Colony Capital and Colony Financial (NYSE: CLNY) have originated a $206 million maximum principal senior secured term loan facility to William Lyon Homes.
US Liner Co., a Cranberry Township, Penn.-based maker of thermoplastic composite solutions, has received a minority equity investment from Sverica International. No financial terms were disclosed.
PE-Backed IPOs
AGA Medical Holdings Inc., a Plymouth, Minn.-based maker of medical devices the treatment of structural heart defects and vascular diseases, raised $199.4 million in its IPO. The company priced 13.75 million shares at $14.50 per share, which was below both the original $19-$21 range and revised $15-$16 range. It will trade on the Nasdaq under ticker symbol AGAM, with BoA Merrill Lynch serving as lead underwriter. Welsh Carson Anderson & Stowe acquired a majority stake AGA Medical via a 2005 equity recap.
Ancestry.com, a Provo, Utah-based online resource for family history, has set its IPO terms to 7.41 million common shares being offered at between $12.50 and $14.50 per share. It would have an initial market cap of approximately $614 million, were it to price at the high end of its range. The IPO is expected t! o price on November 4. Shareholders include Spectrum Equity Investors (67%), Crosslink Capital (6.2%)and W Capital Partners (6.1%).A predecessor company had raised around $50 million in VC funding between 1998 and 1999, but none of those backers are listed as existing shareholders.
Freedom Group Inc., a Madison, N.C.-based rifle maker, has filed for a $200 million IPO. No underwriter information was disclosed. The company is owned by Cerberus Capital Management.
Generac Holdings Inc., a Waukesha, Wis.-based maker of standby and portable generators, has filed for a $300 million IPO. It plans to trade on the NYSE under ticker symbol GNRC, with J.P. Morgan and Goldman Sachs serving as co-lead underwriters. CCMP Capital and Unitas Capital bought Generac for approximately $2 billion in la te 2006. www.generac.com
HealthPort Inc., an Alpharetta, Ga.-based provider of healthcare IT solutions to hospitals and health systems, has set its IPO terms to six million common shares being offered at between $14 and $16 per share. It would have an initial market cap of approximately $360 million, were it to price at the high end of its range. HealthPort is owned by ABRY Partners. www.healthport.com
PE-Backed M&A
Hanley Truck Line LLC, a provider of truckload transportation in the Pacific Northwest, has acquired the operating assets of Washington-based Puget Sound Truck Lines Inc. and Oregon-based Nickel Plate Express Inc. No pricing terms were disclosed for the acquisition, which was financed by Hanley Truck management and existing equity sponsor Evergreen Pacific Partners.
Human Resources
Kai-Ching Lin has joined Houlihan Lokey as a managing director, focused on the valuation of complex securities. Lin previously was a managing director in the financial engineering practice of Duff & Phelps.
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