PE Week Wire: Fri., March 23, 2007

Ok, we’ve all had about 18 hours to digest the Blackstone IPO filing – and I accelerated the process last night with a few Red Stripes. So, what have we learned?

Not much, except that Goldman Sachs didn’t have the inside track it had been reported to have.

Almost all of the information in Blackstone’s S-1 filing contained information we either already knew, or thought that we already knew. Yes, it clarified a lot of the specific numbers (including some deal-specific data), but was there really any doubt that Blackstone was generating more in management fees than it was spending in expenses? Or that its assets under management have sky-rocketed in the last few years? Or that its collective IRR is higher than industry benchmarks? Or that Pete Peterson plans to retire? Or that Blackstone would be savvy enough to address the alleged hypocrisy of going public while simultaneously counseling public company CEOs to go private?

If you answered “yes” to any of those rhetorical questions, I’ve posted a lot of the specifics and the actual S-1 filing here. If not, I’d suggest that the ultimate takeaway will not be found in the initial filing, but rather in the actual offering once priced. If you subscribe to the notion (as I do) that Blackstone was prompted to act by Fortress, then other private equity firms likely will be compelled to act by Blackstone… But only if Blackstone replicates Fortress’ success and, arguably, far surpasses it (which is a near-certainty).

So what happens in the meantime? Other interested firms will file vague S-1s, but not rush to roadshow until Blackstone actually proves it can perform on the Big Board. This is the historical pattern for such firms, whether the security was a business development company (BDC) or European special purpose vehicle offering (i.e., KKR in Amsterdam). Also expect at least a couple of mega-firms to abstain, and promote such abstention to limited partners (“We’re dedicated to looking out for you, not for ourselves…”)

Which brings me to an important point: Blackstone’s IPO does not signal the peak of the private equity market. The fourth or fifth copycat’s IPO, however, might.

*** In far more somber news, Wayne Harber of Hamilton Lane Advisors passed away last Friday from an apparent heart attack, at the age of 53. He had joined the firm nine years ago, and focused on business development outside of the United States.

I did not know Wayne, but those who did say that he was known for his sense of humor, love of travel and Tennessee-born drawl. His friends and colleagues at Hamilton Lane have set up an online Guest Book for those who would like to leave a message. They also ask that, in lieu of flowers, you make a contribution to a memorial fund that will benefit the St. Jude Children’s Research Hospital – a cause that both Wayne and his wife Nancy were strong supporters of. Contributions can be made here.

My deepest condolences to Wayne’s family and friends…

New at

• A.T. Kearney yesterday published a study that private equity investment leads to job creation, not to job destruction. I’ve posted the full study and some analysis.

• Alex reports that DFJ will close its ninth early-stage venture fund at month’s end, and perhaps above its $600m target.

• A bunch of insightful comments on the differing U.S./Euro viewpoints toward private equity, as discussed here yesterday. I blamed Enron. You have more nuanced explanation.

• The PwC survey predicting a rise in dividend recaps is now available.

And, as always, news and analysis updated throughout the day.

Top Three

The Blackstone Group has filed for a $4 billion IPO. It plans to trade on the NYSE under an undisclosed ticker symbol, with Morgan Stanley and Citigroup are serving as co-lead underwriters. More information – including the S-1 filing – is available here.

Delta Hydrocarbons, a Dutch oil and gas exploration and production startup, has raised $750 million from 3i Group, Dyas BV and Upstream Capital Partners ($250m per firm). Delta is still seeking an additional $250 million. It was founded by Walter van de Vijver, former CEO of Shell Exploration & Production, and Maarten Scholten, former head of M&A at Schlumberger.

Mike Moritz, a general partner with Sequoia Capital, will not seek re-election to the board of Google Inc. (Nasdaq: GOOG) at the company’s 2007 stockholder meeting in May. He has been a Google director since May 1999.

VC Deals

Amira Pharmaceuticals Inc., a San Diego-based drug company focused on imflammatory diseases, has raised $25 million in Series B funding. Novo AS led the deal, and was joined by return backers Avalon Ventures, Prospect Venture Partners and Versant Ventures.

Reef Point Systems Inc., a Burlington, Mass.-based provider of gateway platforms and solutions for fixed-mobile convergence networks, has raised $25 million in its second round of funding since a 2005 venture recap. One Equity Partners led the deal, and was joined by return backers American Capital Strategies and JVP.

Tribold, a London-based developer of product management software for communications service providers, has raised $15 million in Series B funding. Espirit Capital Partners was joined by return backer Eden Ventures.

Serveron Corp., a Hillsboro, Ore.-based provider of technology and services to monitor electric utility assets, has raised $5 million. Return backers include El Dorado Ventures, Nth Power, Cascadia Pacific Management, Oregon Life Sciences, Perseus, Siemens Venture Capital and Ventures West. The company has raised around $48 million in total VC funding since its 1999 inception.

Bulldog Solutions, an Austin, Texas-based provider of lead optimization and lead management services, has raised $5 million in VC funding from SSM Partners.

Fortress Technologies Inc., an Oldsmar, Fla.-based provider of wireless network security solutions, has raised $4.17 million in Series E funding led by Liberty Partners, according to a regulatory filing. The company previously had raised around $45 million in VC funding.

IlluminOss Medical Inc., a Tiverton, R.I.-based medical device startup, has secured $925,000 of a $2.68 million Series A round led by Foundation Medical Partners, according to a regulatory filing. The company is run by former OmniSonics president and CEO Robert Rabiner.

Buyout Deals

Hellman & Friedman has agreed to acquire Kronos Inc. (Nasdaq: KRON), a Chelmsford, Mass.–based provider of human capital management solutions. The deal is valued at approximately $1.8 billion, with Kornos stockholders to receive $55 per share. JMI Equity will also participate on the equity tranche, while Jefferies Broadview is advising Kornos on the sale.

Vertrue Inc. (Nasdaq: VTRU), a provider of Internet direct marketing services, has agreed to be acquired by One Equity Partners, Oak Investment Partners and Rho Ventures. The deal is valued at a total of $800 million, with Vertrue stockholders to receive $48.50 per share (21% premium to price prior to first media report of a possible buyout). Jefferies Broadview advised Vertrue on the deal, while the equity consortium will receive debt financing from Lehman Brothers and JPMorgan.

Citigroup Venture Capital has acquired a 19.9% stake in Indian financial services company Anand Rathi Securities Ltd. No financial terms were disclosed.

Balanced Equity Management said that it will oppose the Au$11.2 billion buyout of Australian airline Qantas Airways, because the Au$5.45 per share purchase price is too low. BEM owns around 4% of Qantas. The buyout consortium includes Macquarie Bank and TPG.

The Blackstone Group has acquired a controlling interest in RGIS Holdings LLC, an Auburn Hill, Mich.–based inventory and retail services company. No financial terms were disclosed. Goldman Sachs has committed bank note and mezzanine funding.

Bridgepoint Capital and Wendel Investissement are the two remaining bidders for the education unit of Amsterdam-based publisher Wolters Kluwer NV, according to Dow Jones. The offers are reported to be in excess of 700 million, with Bridgepoint believed to have an edge.

Imperial Capital Corp. has acquired Montreal-based cosmetics company Lise Watier Cosmetiques for an undisclosed amount. Kensington Capital Partners also participated.

PE-Backed IPOs

Limelight Networks Inc., a Tempe, Ariz.-based provider of a network for delivering live and on-demand digital media online, has filed for a $201.25 million IPO. It plans to trade on the Nasdaq under ticker symbol LLNW, with Goldman Sachs and Morgan Stanley serving as co-lead underwriters. Limelight raised $130 million in VC funding last year from GS Capital Partners (45.3% pre-IPO stake) and Oak Investment Partners (9.2%).

Pharmasset Ltd., a Tucker, Ga.-based drug company focused on viral diseases, has set its proposed IPO terms to six million common shares at between $12 and $14 per share. It plans to trade on the Nasdaq under ticker symbol VRUS, with Banc of America securities and UBS serving as co-lead underwriters. The company has raised $55.3 million in VC funding since its 1998 inception, from firms like MPM Capital (25.6% pre-IPO stake), TVM Capital (11.7%), Burrill & Co. (11.1%) and MDS Capital (8.1%).

Netezza Corp., a Framingham, Mass.-based provider of enterprise-class data warehouse appliances, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol NTZA, with Credit Suisse and Morgan Stanley serving as co-lead underwriters. It has raised around $83 million in VC funding since its 2000 inception, from firms like Matrix Partners (20.75% pre-IPO stake), Charles River Ventures (19.59%), Battery Ventures (16.82%), Sequoia Capital (15.2%), Meritech Capital Partners (6.8%) and Orange Ventures.

PE Exits

Hewlett-Packard (NYSE: HPQ) has agreed to acquire Tabblo Inc., a Cambridge, Mass.-based provider of photo sharing and printing solutions. No financial terms were disclosed for the deal, which is expected to close within the next few weeks. Tabblo was launched last year with venture funding from Matrix Partners.

Vastox PLC (AIM: VOX) has acquired DanioLabs Ltd., a UK-based drug company focused on neuro disorders. The deal is valued at £15 million, including £159,000 in cash and around 11.73 million ordinary Vastox shares. DanioLabs had raised venture funding from Gateway Global.

Mandarin Holdings has agreed to acquire Chinese fast-food chain Leeann Chin Inc. for an undisclosed amount from Mellon Ventures and BNP Paribas. No financial terms were disclosed.

Kirtland Capital Partners has completed a $50 million dividend recap of portfolio company Essex Crane Rental Corp., a Buffalo Grove, Ill.–based provider of lattice-boom crawler cranes and attachments.

North Castle Partners has completed a dividend recap of portfolio company Octane Fitness Holdings Inc., a Brooklyn Park, Minn.–based designer and distributor of low-impact cardio fitness equipment. The deal was financed via $30 million of revolver and senior-term notes from Golub Capital.

Firms & Funds

EMAlternatives LLC has formed as an advisory focused on private equity opportunities in the emerging markets. The Washington, D.C.-based firm’s founders include: CIO Ernest Lambers, former head of emerging markets with AlpInvest Partners; managing partners Nick Morriss and John Stephens, co-founders and former partners with Cape Point Capital; and investment committee chair Christopher Wright, former global head of private equity with Dresdner Kleinwort Benson.

The Carlyle Group is raising $15 billion for its next general buyout fund, according to Reuters. The news previously has been reported elsewhere.

Fifth Street Capital of White Plains, N.Y. is raising up to $400 million for its third mezzanine fund, according to a regulatory filing.

Human Resources

Leo Puri has joined Warburg Pincus as a managing director, effective April 10. He will initially be based in New York, but will later move to Mumbai to focus on opportunities in India and selected Asian markets. He previously was a director with McKinsey & Co. in India, where he was co-leader of the Asia financial services practice.

Dan Ciporin, former CEO of, has joined Canaan Partners as a venture partners focused on digital media opportunities. He will work out of Canaan’s Westport, Conn. office, and most recently was chairman of the Internet Lab, an Israeli incubator for early stage Internet consumer startups co-founded by Gemini Israel Funds and Lightspeed Venture Partners.

Andreas Hautkappe, Rolf Huenermann and Stefan Joergens have joined Willkie Farr & Gallagher LLP as Germany-based partners focused on private equity transactions. All three previously were with Clifford Chance. The group also will add former Clifford Chance attorneys Ole Oldenburg and Ingo Bednarz as associates.