PE Week Wire: Mon., May 21, 2007

A few months back, I asked for suggestions on how to improve Many of you replied that you’d like to see more in-depth coverage in the news section (i.e., not just brief blurbs). I concurred, but also demurred due to time constraints. Contrary to popular belief, I’m still a one-man band when it comes to compiling the news each day for both PE Week Wire and peHUB.

So what to do? Outsource, of course. Not to India (yet), but rather to the fine folks over at The Associated Press. Beginning today, the news section of peHUB will run copy from both the AP and from AFX (recently acquired by Thomson Financial). For example, you can check out stories on the Alltel buyout or The Blackstone Group’s sale of a management company stake to China. I’ll make sure to keep updating the news section throughout the day, with all of the copy also winding up in our search archives (shouldn’t you have a premium subscription?).

Most of the AP news is more buyout than venture so far, but there will certainly be a decent mix. I’d also wager that peHUB will eventually include Reuters copy, but that’s obviously a few months and multiple billions of dollars away…

*** Highland Capital Partners is opening up shop in Europe, to compete with fellow venture firms like Accel Partners, Atlas Venture, Benchmark Capital and Index Ventures. Its office will be based in Geneva, Switzerland — with general partner Fergal Mullen to formally relocate at the end of July. He will initially be joined by new senior associate Irena Goldenberg, with plans to continue staffing up over the next several years (including a few new partners).

I spoke with Mullen earlier this morning, and he told me that this plan has been in place ever since he joined five years ago from RSA Ventures. “The idea was not just to plant a flag, but rather to get pulled back to Europe by deals,” he says, citing VistaPrint, PhotoBox (f.k.a. Photoways) and Innovative Silicon as examples of such transactions.

The Geneva office represents Highland’s first geographic expansion outside of the United States. The Lexington, Mass.-based firm currently has satellite offices in both Menlo Park, Calif. and Bethesda, Maryland.

*** 3i Group, on the other hand, is closing its Waltham, Mass. office, as part of its continuing move away from early-stage investing in the U.S. The firm will continue to make later-stage venture deals out of its recently-consolidated Silicon Valley office, plus growth equity transactions from New York.

The Boston office dissolution began when Allan Ferguson retired last year, thus leaving just two partners in the Bay State. That was effectively cut to one when Peter Bollier announced his retirement, and Marko Maschek soon began passing out his resume (he’s still job-hunting). The office will be manned/wound down through at least year-end by director David Shapiro. Fellow director Shawn Brownlee has agreed to open a Boston-area venture office for Spanish private equity firm Nauta Capital.

Top Three

TPG and GS Capital Partners have agreed to acquire Alltel Corp. (NYSE: AT), in a transaction valued at $27.5 billion. Under terms of the deal, Alltel shareholders would receive $71.50 per share in cash, which is a 23% premium over the company’s stock price before media reports of a potential buyout were first printed in late 2006. Alltel stock closed last Friday at $65.35 per share. Leveraged financing will be provided by Goldman Sachs, Citigroup, Barclays and RBS. Alltel is being advised by Merrill Lynch, Stephens Inc. and JP Morgan Securities – and said that its CEO Scott Ford would remain in place post-buyout.

Gorilla Nation, a Los Angeles–based online ad firm, has raised $50 million in private equity funding from Great Hill Partners, in exchange for a minority ownership position. It is Gorilla Nation’s first round of financing since its 2001 inception.

KPS Capital Partners has closed its third special situations fund with $1.2 billion in capital commitments. Probitas Partners served as placement agent.

VC Deals

Tri Alpha Energy Inc., a Foothill Ranch, Calif.-based nuclear fusion research company, has raised $40 million in Series C-2 funding, according to a regulatory filing. Backers include Goldman Sachs, Venrock, Vulcan Capital, Enel Produzione SpA and PIZ Signal. Directors include Dick Kramlich of New Enterprise Associates.

Evergrid Inc., a Menlo Park, Calif.-based provider of global resource management software for data centers, has raised $10 million in Series B funding. Menlo Ventures led the deal, and was joined by return backer Acartha Group.

VidSys Inc., an Alexandria, Va.-based provider of physical security information management solutions, has raised $10 million in Series B funding. Motorola Ventures led the deal, and was joined by return backers IDG Ventures Boston. The company raised a $3 million Series A round in late 2005.

FluXXion BV, a Dutch developer of micro-filtration technologies, has raised €6.4 million in second-round funding. Emerald Technology Ventures led the deal, and was joined by Capricorn Cleantech Fund, WHEB Ventures and return backer Koninklijke Philips Electronics NV.

Interlace Medical Inc., a Newton, Mass.-based developer of medical devices for the in-office polypectomy/myomectomy market, has secured $3 million of a $5 million Series B round, according to a regulatory filing. Backers include Spray Venture Partners and New Leaf Ventures.

C9 Media Inc., a Beijing, China-based producer and distributor of interactive television content, has raised $750,000 in seed funding from Dragonvest Partners.

Buyout Deals

Advent International has agreed to acquire UK-based shareholder services provider Lloyds TSB Registrars from Lloyds TSB for £550 million. Lehman Brothers advised Lloyds TSB.

Apax Partners and Permira today are expected to receive first-round bids for portfolio company New Look, the UK’s third-largest fashion retailer. Bidders include: Blackstone Group, PAI Partners, a joint bid between CVC Capital Partners and Dubai retailer Landmark Group and another joint bid from TPG and Warburg Pincus. Offers arec expected to value New Look at around £2 billion, with Merrill Lynch running the auction.

Apollo Management has again sweetened its take-private offer for logistics company EGL Inc. (Nasdaq: EAGL), with its revised $47.50 per share bid valuing the company at $2.01 billion. Apollo has been in a back-and-forth bidding battle with a consortium that includes EGL CEO Jim Crane, Centerbridge Partners and The Woodbridge Co. That group on Friday had raised its bid to $46.25 per share.

Genesis HealthCare Corp. (Nasdaq: GHCI) has agreed to an amended buyout agreement with Formation Capital and JER Partners, after also being pursued by rival bidder Fillmore Capital Partners. The new deal is for $69.35 per share, compared to an initial agreement for $64.25 per share. Fillmore’s most recent offer had been $65.25 per share. Genesis is a Kennett Square, Pa.-based long-term care provider with over 200 skilled nursing centers and assisted living residences in 13 eastern states.

Hellman & Friedman has agreed to acquire Sheridan Healthcare Inc. from J.W. Childs Associates for an undisclosed amount. Company management will remain in place. Leveraged financing is being provided by Lehman Brothers, UBS Securities, Credit Suisse and Citigroup Global Markets. Sheridan Healthcare is a Sunrise, Fla.–based provider of multi-specialty outsourced physician staffing and administrative services to hospitals and ambulatory surgery centers in the U.S. It was advised on the sale by Lehman Brothers, Banc of America Securities and Citigroup Global Markets.

Madison Dearborn Partners has acquired a 20% stake in LA Fitness International LLC for $600 million, according to LBO Wire. Sellers reportedly include Seidler Equity Partners, CIVC Partners and company management. The deal did not include any leveraged financing, and closed in late February.

New Mountain Capital has acquired a majority position in Inmar Inc., a Winston-Salem, N.C.-based provider of reverse logistics and promotions logistics services to over 1,700 retailers, manufacturers and wholesalers across North America. No financial terms were disclosed.

Soros Strategic Partners and Kinderhook Industries have agreed to acquire six high-end steak and seafood restaurants from Mastro Group LLC. The deal is valued at $180 million, including $70 million in equity.

Spectrum Equity Investors and Technology Crossover Ventures have agreed to acquire a majority interest in futures brokerage R.J. O’Brien & Associates Inc. No financial terms were disclosed for the deal, which will result in the O’Brien company retaining a “substantial minority ownership in the company.”

General Electric confirmed that it has agreed to sell its GE Plastics division to chemical company Saudi Basic Industries for approximately $11.6 billion in cash. GE will receive after-tax proceeds of around $9 billion. Other bidders had included Apollo Management and Dutch plastics company Basell.

PE-Backed IPOs

Infinera Inc., a Sunnyvale, Calif.-based provider of digital optical networking systems, has set its proposed IPO terms to 14 million common shares being offered at between $10 and $12 per share. It plans to trade on the Nasdaq under ticker symbol INFN, with Goldman Sachs serving as lead underwriter. The company has raised over $336 million in total VC funding since its 2000 inception, from firms like Advanced Equities (9.3% pre-IPO stake), Kleiner Perkins Caufield & Byers (9.3%), Mobius Venture Capital (7.8%), RWI Ventures (5%), Benchmark Capital, Applied Materials Ventures, Cypress Semiconductor, Sprout Group, Venrock Associates, Worldview Technology Partners, Siebel Systems and Sutter Hill Ventures.

New World Restaurant Group Inc., a Golden, Colo.-based franchisor and operator of Einstein Bros. and Noah’s bagel shops, has set its proposed IPO terms to five million common shares being offered at between $19 and $21 per share. It plans to trade on the Nasdaq under ticker symbol BAGL, with Morgan Stanley and Cown & Co. serving as co-lead underwriters. The company already is quoted on the Pink Sheets, and plans to rename itself Einstein Noah Restaurant Group Inc. prior to the offering. Greenlight Capital holds a 94.1% pre-IPO position.

Starent Networks Corp., a Tewksbury, Mass.-based provider of mobile multimedia infrastructure solutions, has set its proposed IPO terms to 10.5 million common shares being offered at between $9 and $11 per share. It plans to trade on the Nasdaq under ticker symbol STAR, with Goldman Sachs and Lehman Brothers serving as co-lead underwriters. It has raised around $95 million in total VC funding since its 2000 inception, from firms like Matrix Partners (20.1% pre-IPO stake), North Bridge Venture Partners (20.1%), Highland Capital Partners (18.4%), Focus Ventures (6%) and the T-Mobile Venture Fund.

PE-Backed M&A

Warner Music Group (NYSE: WMG) will offer EMI Group a sweetener of up to Gbp100 million if its latest bid for the troubled British music group is blocked by regulators, according to a report in The Sunday Times. The report said the size of the payment reflects the confidence of Edgar Bronfman, Warner’s chairman, that a Gbp4.6 billion merger with EMI will now be approved by competition regulators. Warner Music shareholders include Bronfman, Bain Capital, Thomas H. Lee Partners and Providence Equity Partners.

PE Exits

The Carlyle Group has put Insight Communications Co. on the sales block, just over once year since taking the cable operator private for $2.1 billion. Morgan Stanley and Waller Capital have been retained to manage the process.

Yahoo is nearing a deal to acquire UK social networking company Bebo for upwards of $1 billion, according to The Telegraph. Bebo has raised VC funding from Benchmark Capital Europe.

Hermes Private Equity has sold independent fiduciary services company Walbrook Group Ltd. to Barclays Bank. No financial terms were disclosed. Hermes sponsored a management buyout of Walbrook from Deloitte in December 2003. In January 2006, Walbrook also acquired the Deloittes office in Hong Kong. Hermes was advised on the sale by KPMG and SJ Berwin.

Norwest Equity Partners has agreed to sell jewelry manufacturer Aurafin LLC to Berkshire Hathaway Inc. No financial terms were disclosed. Berkshire Hathaway also will acquire Bel-Oro International, and merge it with Aurafin. The new company will be called Richline Group.

Firms & Funds

The Blackstone Group has set terms for its initial public offering, just one day after confirming that it would sell a $3 billion non-voting stake in its management company to the government of China. The IPO terms work out to around 133.33 million common units being offered at between $29 and $31 per unit, which could net up to $4.13 billion. Blackstone also could offer an additional 20 million units at the underwriters’ discretion, which would bump the total up to $4.75 billion.

Merrill Lynch has acquired a minority stake in GSO Capital Partners, and will invest in certain GSO strategies. No financial terms were disclosed. GSO manages around $8 billion in assets, and was formed in 2005 by former Credit Suisse pros Bennett Goodman, Tripp Smith and Douglas Ostrover.

SBI Holdings Inc. has signed an agreement with Goldman Sachs to jointly invest in growing mid-sized companies in Japan. Under the agreement, SBI will sell 40% of its buyout and enterprise revitalization funds unit, SBI Capital Co. Ltd, to Goldman Sachs. SBI Capital will continue to manage its existing buyout and restructuring fund, plus to launch new funds. The joint venture plans to deploy approximately $820 million within three years, and will not restrict investment activity to Japan or to any specific industry or sector.

Artiman Ventures has closed its second fund with around $185 million in capital commitments, including a $10 million friends and family side fund. Stanwich Advisors served as placement agent, while limited partners include the University of Texas Investment Management Co. and the Pennsylvania State Employees’ Retirement System.

Collins Stewart has agreed to acquire investment bank CE Unterberg, Towbin for $44 million, according to The Financial Times. The deal reportedly includes $32 million in cash/stock, plus $12 million in assumed debt.

Human Resources

Mike Ramsey has joined New Enterprise Associates as a venture partner, where he will focus on consumer opportunities out of NEA’s Menlo Park, Calif. office. Ramsey is co-founder and former chairman and CEO of TiVo.

Matt Gullen has joined H.I.G. Capital as an associate. He recently received his MBA from Wharton, and interned last summer at both Evercore Partners and Clearview Capital.

Patrick Belville has joined the Chicago office of law firm Jones Day as an M&A partner. He previously was a partner with Bell, Boyd & Lloyd LLP.