PE Week Wire: Fri., June 1, 2007

The next private equity firm going public is… Lehman Brothers.

Ok, Lehman isn’t really a private equity firm, and it’s already public, butit nonetheless is planning to list a private equity fund-of-funds on the Euronext Amsterdam. In a formal statement, the firm said that it would make a substantial investment in the fund, and bear all of the issuance costs. It did not specifically a target capitalization, but various press reports put the figure at $500 million.

I am fairly certain that this would be the first listed private equity fund-of-funds (feel free to correct me), which means that we are suffering from a lack of relevant precedent. Therefore, some questions:

• Will the listed F-o-F invest alongside Lehman Brothers Crossroads XVIII, a traditional (read: private) F-o-F that quietly closed earlier this year on $1.5 billion? If so, is it pro rata? Were LPs informed ahead of time? Will it have separate managers who can pick and choose?

• What will be the listed F-o-F’s disclosure requirements, in terms of its portfolio holdings. Will it have to disclose fund-specific IRRs? If so, it might become less popular than UTIMCO circa 2004. Again – what do the private F-o-F LPs think?

• Why do this at all? It’s not a matter of founder liquidity (i.e., Blackstone) – or a deal like Ares where the capital will be used to launch new products and add new staff. So I’d assume it’s the desire to add some quick fund cash. But why not just try to raise $2 billion for the private F-o-F? Unless they did…

*** Speaking of Ares, Buyouts Magazine has identified the overseas investor that recently acquired a minority stake for $375 million. You can read the full story here.

*** H.I.G. Capital has quietly closed its debut European fund above target, with €600 million. I’ve got more details at peHUB, including the new team members.

*** You might recall that venture capitalist John Doerr teared up on stage earlier this year, while discussing climate change at the TED conference. Well, the video has finally arrived online. It’s definitely worth a watch – as it always in when an important man is impassioned about an important issue. And thank goodness for the tears… Without them, people like me probably wouldn’t have heard about the speech. Here it is.

*** David Tom is Searching for Alpha in Private Equity

*** AskTheVC is doing a great job in its series on compensation at VC-backed companies. Here are some highlights so far, with relevant links.

*** A bunch of you have asked me about the Jazz Pharma IPO, which priced last night even below its reduced offering range. I’m going to write about it later at peHUB, but longtime readers will remember that I wasn’t a fan when this company launched, and not much has changed in the intervening years…

*** TechCrunch points out that the National Rock Paper Sissors Championship is scheduled for October 13 in Toronto. How has some VC firm not yet backed the event organizer? After all, it’s got a built-in player base far larger than anything Curt Schilling is putting together (although he doesn’t have VC funding yet, either). A conservative estimate would have to be that 75% of all Americans have played RPS at one point in their lives — time to trademark and monetize.

Top Three

The Carlyle Group has agreed to acquire Niagara Holdings, the parent company of PQ Corp., from JPMorgan Partners, which is managed by CCMP Capital. The deal is valued at approximately $1.5 billion, and is expected to close in the third quarter. PQ is a producer of specialty inorganic chemicals, catalysts, and engineered glass products – and was acquired by JPMP in February 2005. JPMP is being advised by Lehman Brothers and JPMorgan Securities, while Carlyle is advised by UBS Securities.

Jazz Pharmaceuticals Inc., a Palo Alto, Calif.-based drug development and commercialization company focused on neurology and psychiatry, priced six million common shares at $18 per share, for an IPO take of approximately $108 million. It had originally planned to price at between $24-$26 per share, and then lowered its range to $20-$21 per share. Its initial market capitalization is around $441 million. Morgan Stanley and Lehman Brothers served as co-lead underwriters. Jazz had raised around $265 million in VC funding since its 2003 inception, from firms like KKR (46.24% pre-IPO stake), Thoma Cressey Equity Partners (10.72%), Beecken Petty O’Keefe & Co. (7.15%), Prospect Venture Partners (6.65%), Versant Ventures (6.65%), Golden Gate Capital (5.36%), Lehman Brothe! rs (5.13%), Adams Street Partners, EGS Healthcare Capital Partners and Oak Hill Capital.

Peter Gilbert has agreed to become chief investment officer for Lehigh University’s endowment fund, after having previously served as CIO for the $32 billion Pennsylvania State Employees’ Retirement System. He begins at Lehigh on July 30. PSERS says that it will begin its search for a successor during next Wednesday’s board meeting. Before overseeing PSERS, Gilbert was director of the Mayor’s Pension Unit in the City of New York’s Department of Finance from 1990-1993, and previously worked for a decade in the City of New York’s Office of the Comptroller.

VC Deals

BATS Trading Inc., a Kansas City-based electronic exchange, has raised $45 million in second-round funding led by Citigroup. The company had launched in mid-2005 with around $40 million from Credit Suisse, Getco, Lehman Brothers, Lime Brokerage, Merrill Lynch, Morgan Stanley and Wedbush. Some of those firms reinvested in the new round.

Powerit Holdings Inc., a Seattle–based provider of energy-demand management solutions, has raised $7.1 million in Series A funding. @Ventures led the deal with a $3 million infusion, and was joined by Expansion Capital Partners and return backer Stellar Holding.

Keibi Technologies Inc., a San Francisco-based developer of a media discovery and modernization platform for online communities, has raised around $6 million in Series B funding, according to a regulatory filing. Backers include Catamount Ventures and Hunt Ventures.

Aternity Inc., a Westborough, Mass.-based provider of application management software for enterprise IT, has raised $5 million in Series B funding. Intel Capital led the deal, and was joined by return backers Vertex Venture Capital, Genesis Partners, Clal Industries and Investments Ltd. and Portview Communications Partners. Aternity and Intel also have signed a strategic agreement, under which Aternity’s application management solution will include support for Intel’s new vPro systems.

Advanced BioHealing Inc., a La Jolla, Calif.-based regenerative medicine company, has raised $4.5 million in additional Series C funding from CDIB BioScience Ventures and existing shareholder Safeguard Scientifics. This brings the round total to $30 million, with prior backers including Safeguard Scientifics, Channel Medical Partners, Red Abbey Venture Partners and return backers Canaan Partners and Wheatley Partners.

Buyout Deals

3i Group has acquired a 25% stake in Finnish mobile operator Finnet Oy, for €140 million. The shares were sold by 18 local telecom operators in the Finnet Group, and will represent just 13% once Finnet completes its announced merger with five other Finnish operators (and is renamed DNA).

Biomet Inc. (Nasdaq: BMET) has entered into a memorandum of understanding regarding the settlement of shareholder class-action lawsuits related to the company’s proposed $44 per share buyout by The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. and Texas Pacific Group. Biomet said that it will make certain additional financial information available to shareholders, who are scheduled to vote on the deal June 8. If approved, the total transaction would be worth around $10.9 billion.

Candover has agreed to sell the Swedish sports utility transportation company Thule Group to Nordic Capital. No financial terms were disclosed. Candover sponsored a €465 million management buyout of Thule in December 2004. It also supported Thule’s recent acquisition of Case Logic Inc., from Catterton Partners, Albion Alliance, Stratford Equity Partners and KRG Capital Partners.

CCMP Capital has completed its acquisition of vacuum and semiconductor equipment maker BOC Edwards from The Linde Group. The deal was valued at €685 million, plus up to €65 million in additional earn-out payments.

Cerberus Capital Management is among those expected to make a run at listed Canadian sporting goods retailer Forzani Group, according to The Globe and Mail.

Clarity Partners has acquired a controlling interest in Modern Luxury Media LLC, a publisher of luxury city-regional magazines, from Shamrock Capital. Clarity is joined on the deal by equity co-investor Lehman Brothers, and debt providers Credit Suisse and NewStar Financial. No specific financial terms were disclosed, except that the deal was valued at “several hundred million dollars.” Shamrock originally invested $50 million into MLM in 2004.

Genstar Capital is nearing a deal to acquire ConvergeOne Holdings Corp. from Nautic Partners, according to LBO Wire. No financial terms were disclosed. ConvergeOne is a Coatesville, Pa.-based IP telephony company.

Klesch & Co. has agreed to acquire the Vlissingen smelter in the Netherlands from Alcan and Hunter Douglas, for an undisclosed amount. The Vlissingen aluminum plant employs approximately 700 people and has a smelting production capacity of 200,000 tons, with a turnover of approximately $600 million in 2006. The site primarily manufactures aluminum billet for the European engineered products market.

Monsanto Co. (NYSE: MON) has agreed to sell its U.S. branded cotton seed business, in order to win regulatory approval for its $1.5 billion acquisition of Delta & Pine Land Co. It said that its Stoneville cottonseed brand will go to Bayer CropScience for $310 million, and that it had lined up other buyers for the remaining assets. No additional terms were disclosed.

Saints Capital has acquired a 40% stake in Travel Intelligence Ltd., a London-based luxury travel company. No financial terms were disclosed. The deal results in Travel Intelligence getting its first institutional shareholder, since being launched in 1999.

Veronis Suhler Stevenson has completed its acquisition of New York-based media company Advanstar Communications Inc. from DLJ Merchant Banking Partners for $1.142 billion. VSS was joined by co-sponsors Citigroup Private Equity and New York Life Capital Partners. DLJ acquired Advanstar in 2000 from Hellman & Friedman for approximately $900 million.

WHI Capital Partners has acquired Victory Industrial Products Inc., a Batavia, Ohio-based manufacturer of custom enclosures and fuel tanks for power generating units. No financial terms were disclosed.

Pe-Backed IPOs

Amicus Therapeutics Inc., a Cranbury, N.J.-based drug company focused on genetic diseases like Fabry disease, priced 5 million common shares at $15 per share ($14-$16 range), for an IPO take of approximately $60 million. The offering gave Amicus a market cap of approximately $333 million, but that fell as the stock finished its first day of trading down 4 percent. Morgan Stanley and Merrill Lynch served as co-lead underwriters. Amicus had raised around $146 million in total VC funding, including a $60 million Series D infusion late last year. Backers include New Enterprise Associates (26.3% pre-IPO stake), Frazier Healthcare Ventures (15.2%), Prospect Venture Partners (13.2%), CHL Medical Partners (12.4%), Canaan Partners (12.1%), Quaker BioVentures (8.3%), Och-Ziff Capital Management, Palo Alto Investors and Radius Ventures.

LDK Solar Co. Ltd., a China-based maker of multicrystalline solar wafers, priced 17.38 American depository shares at $27 per share ($25-$27 range), for an IPO take of approximately $469 million. It will trade on the NYSE under ticker symbol LDK, while Morgan Stanley and UBS served as co-lead underwriters. Shareholders include Jafco Asia.

Neff Corp., a Miami, Fla.–based construction rental company, has withdrawn registration for a $345 million IPO. The original filing was made last year, but Neff shareholder Odyssey Investment Partners has since sold the company to a group led by Lightyear Capital.

PE-Backed M&A

Tragus, an Italian restaurant operator owned by The Blackstone Group, has agreed to acquire the Strada pizza chain from Richard Caring. The deal is valued at Gbp140 million, and includes 55 restaurants.

PE Exits

Terra Firma Capital Partners has sold Thresher, a UK chain of off-license stores, to Edmund Truell’s Pension Insurance Corp. No financial terms were disclosed. In related news, Truell is also believed to have acquired the legacy pension assets of the Thorn television rental business from Terra Firma. The latter is thought to have assets of approximately £1 billion and is subject to regulatory approval.

Apax Partners and Permira have asked for another round of first-round bids due today for UK fashion retailer New Look, after several expected suitors failed to meet the initial deadline. The Times of London reports that several parties balked at the £2bn price tag set by the private equity sellers and investment bank Merrill Lynch.

Welsh, Carson, Anderson & Stowe has completed its sale of diagnostics testing company Ameripath to Quest Diagnostics (NYSE: DGX). The deal was valued at approximately $2 billion, including $770 million in debt. WCAS acquired Ameripath in 2003 for approximately $840 million.

Sonoco (NYSE: SON) has completed its acquisition of Matrix Packaging from Tricor Pacific Capital and the company founders, for approximately US $210 million. Matrix Packaging is a Mississauga, Ontario-based manufacturer of custom-designed blow-molded rigid plastic containers and injected-molded products. It was advised on the sale by BMO Capital Markets.

KBC Group Private Equity has sold its 50% stake in Belgian sheet metal company Press & Plat to Japan’s Press Kogyo, which already held the other 50 percent. No financial terms were disclosed.

Firms & Funds

Olympus Partners has closed its fifth fund with $1.53 billion in capital commitments. The Stamford, Conn.-based firm focuses on middle-market management buyouts and growth capital opportunities.

QuestMark Partners today will hold a $260 million first close on its third fund, according to VentureWire. A final close on $300 million in planned for the end of June. The Baltimore, Md.-based firm focuses on expansion-stage and late-stage opportunities in the healthcare and technology spaces. It raised $233 million for its second fund in 2003.

The New York State Teachers’ Retirement System has approved the following fund commitments: $250 million for Lexington Co-Investment Partners; $150 million for Carlyle Partners V; $75 million for Olympus Growth Fund V, $100 million for Sun Capital Partners V and $8.5 million for Apex Venture Partners V.

The Arizona Public Safety Personnel Retirement System has approved the following fund commitments: $25 million for DAG Ventures III, plus another $10 million for possible co-investment; $41 million to MidOcean Partners III, plus another $10 million for possible co-investment.

Human Resources

Thomas Dale has joined BMO Capital Markets as managing director of the firm’s U.S. leveraged finance group. He previously was with G.C. Anderson Partners.