peHUB Wire: Wednesday, September 23, 2009

In recent weeks we’ve seen some major private equity cheerleading from the likes of buyout giants David Rubenstein and, today, Glenn Hutchins. Regardless of whether that translates to a mega-buyout revival, things seem to be picking up in the middle market, at least according to the number of M&A leads that have come across the peHUB tipline.

Yesterday we caught wind of two auctions in the works (we’re still firming up details on a few others): Tom Ford International and Cliffstar Corporation. While both companies are in the consumer products sector, they couldn’t be more different in terms of market positioning.

Tom Ford is a New York-based luxury apparel maker. That a luxury brand would enter the market seeking financing is a sign of either optimism or foolishness. Luxury apparel brands have been battered by the recession as consumers trade down for less extravagantly-priced clothing. Time magazine reported that luxury department store sales are down 25% to 30% on average from their peak in early 2008.

Tom Ford entered the market within the past two weeks seeking a $50 million or greater investment, sources said. Credit Suisse is managing the process. The capital would be used to expand the company’s line into women’s apparel, as Tom Ford currently offers meanswear, eyewear, beauty, fragrances, and men’s and women’s accessories.

Meanwhile Cliffstar Corp. offers private label juices, an area that has gained market share as consumers have traded down to cheaper store-brand products. In the past year, private label makers have grabbed market share from pricier branded products. Unit share grew 1.2 points to 22.8 percent, while dollar share inched up 0.7 points to 17.6 percent, according to a recent Information Resources report cited by Reuters.

Cliffstar is working with Morgan Stanley to sell itself, our sources said. The company has been widely shopped and is expected to take first round bids within the first week. The company’s revenues are roughly $700 million, two of the sources said.

***Just wondering… Speaking of M&A action, it’s been months since we’ve heard any updates on the auction for Sara Lee’s household and personal care products divisions. The company didn’t provide any update at an analyst meeting earlier this month, and market chatter suggests the process has cooled. You might remember that back in June it was reported that the consumer goods company had shut out buyout firms (KKR and Blackstone, specifically) from the auction process. Could the company be reconsidering its ban? Would any buyout firms even be interested?

***In other news, Allied Capital, the struggling business development corp., continues, as announced, to sell assets to pay for the expensive private debt restructuring it announced weeks ago. That may be related to the news we learned yesterday: Rob Long, the head of Asset Management for the firm, has left the company. Long joined Allied in 2002 after serving as managing director and head of investment banking at C.D. Unterberg and holding management roles at Bank of America, Nomura Securities and CS First Boston. The company’s asset management business includes AllBridge Financial, Calder Capital Partners, and Callidus Capital Corp.

***The last time venture fundraising was this low was Q3 of 1996. Will 2010 look like the second half of the 1990s, or the first half of the 1980s? Take our one-question survey here.

Top Three

Blackstone Group won dismissal on Tuesday of an investor class-action lawsuit accusing the private equity of firm of failing to disclose prior to its 2007 initial public offering that some of its holdings were losing value.

Pepsi Bottling Group Inc and Catterton Partners each made an equity investment in O.N.E., a coconut water company. No financial terms were disclosed.

Gregory Summe has joined The Carlyle Group as vice chairman of the firm’s global buyouts practice. He previously was a senior advisor to Goldman Sachs Capital Partners and, before that, spent 11 years as chairman and CEO of PerkinElmer.

VC Deals

Gamma Medica-Ideas Inc., a Northridge, Calif.-based developer of digital molecular imaging systems, has raised $24 million in its first round of institutional funding. Psilos Group led the $14 million equity tranche, and was joined by Capital Resource Partners (which also provided $5m in mezzanine debt). Bridge Banm provided a $5 million revolving line of credit.

Sleep Solutions Inc., a Pasadena, Md.-based developer of medical technologies for the sleep disorder market, has raised $20 million in new equity funding, according to a regulatory filing. Adele Oliva of Quaker BioVentures is listed as a new director. The company previously raised over $46 million in VC funding, from TPG Biotech, MedVenture Associates, Dr. Thomas Fogarty/Emergent Ventures and Lava Ventures.

Humedica, a health care informative company based in Boston, raised $30 million in capital from Bain Capital Ventures, General Catalyst Partners, North Bridge Venture Partners, and! Leerink Swann.

Altius Education, an online college service provider based in San Francisco, raised $8 million in Series A funding co-led by Maveron LLC and Spark Capital along with participation from The Noah Fund. .

Mzinga, a social software developer, raised $10 million in funding in a round led by Acadia Woods Partners and BlueCrest Venture Finance Master Fund. The company has raised at least $42.5 million to date.

Buyouts Deals

China Construction Bank, the investment arm of the second-biggest lender in China, invested 100 million yuan ($14.6 million) in a Jiangyin Lanling Rubber Stopper Co Ltd, in a bid to tap into China’s booming healthcare sector. CCB International is the investment arm of the second-biggest lender in China.

GOME plans to issue 2.05 billion yuan ($300.3 million) in convertible bonds, with the proceeds to be used for the redemption and repurchase of convertible bonds and general corporate purposes. The company earlier this year received an investment from Bain Capital.

MSC Software Corporation received a higher offer from third-party private equity firms to acquire all of the issued and outstanding common shares of MSC for $8.30 in cash. The bid is up from a competing bid from Symphony Technology Group’s $8.15 per share offer.

Navigation Capital Partners, an Atlanta-based middle market private equity firm, has teamed with Robert Shively to target acquisition opportunities in the intelligent infrastructure sector.

PE-Backed IPOs

Peak Sports, a retailer backed by venture capital firm Sequoia Capital, raised HK$1.72 billion ($221 million) in its Hong Kong initial public offering.

Colony Financial Inc and Apollo Commercial Real Estate Finance Inc had planned to price their respective IPOs on Tuesday and begin trading on the New York Stock Exchange the next day, but the pricings were delayed by a day, underwriters for the deals said, declining to say why.

Firms & Funds

PEI Funds, a private equity secondaries fund manager based in new York, has raised $147.7 million from 60 investors toward a $250 million target for Private Equity Investment Fund V LP, according to an SEC filing.

SSM Partners, Memphis, Tenn.-based VC firm focused on expansion-stage companies, has closed on $56.7 million in commitments from 31 investors for its fourth fund, according to an SEC filing. The effort has a target of $125 million. Stanford Group Co. is serving as a placement agent.

Human Resources

Lee Stern has joined KKR as director of the firm’s asset management unit, where he will be responsible for originating and structuring mezzanine investments. He previously was a managing director with GSO Capital Partners.

Chrysalis Ventures has promoted three investment professionals: John Willmoth to venture partner; Matt Winn to senior associate and Elizabeth Rounsavall to director of research and analytics.

Jeff Baxter has joined Variation Biotechnologies Inc. as chief executive officer. He previously was a managing partner with VC firm The Column Group.