PE Week Wire: Thurs., June 28, 2007

Just a few quick notes before hopping in the hand-me-down VW for a daytrip to New York…

*** Last week I asked for your qualitative responses to the proposed carried interest tax bill. Now let’s get quantitative.

We just launched a quick poll intended to gauge reader sentiment on the bill, and also how it might affect the industry. It won’t take more than a few minutes, and can be taken here. Thanks in advance for your participation. You can keep checking back for results.

*** We are finally beginning to see some tangible signs of political opposition to the carried interest tax bill. Presidential spokesman Tony Snow yesterday said that “this is not an administration that’s predisposed toward tax increases.” U.S. Treasury Secretary Hank Paulson and SEC chairman Chris Cox also expressed negative sentiments, while Rep. Eric Cantor (R-VA) said that he try to marshal opposition to a measure he believes is a precursor to Democrats trying to increase the general 15% capital gains rate. Oh, and then there are the business lobbyists – who rallied to form an ad hoc opposition group called the Coalition for the Freedom of American Investors and Retirees.

*** North Bridge Growth Equity has closed its debut fund with $545 million, after busting through its $500 million target. We broke news on the group last fall, when it was formed by early-stage veteran North Bridge Venture Partners. At the time, NBGE’s team only included former Advent International partners Doug Kingsley and Mike Pehl. The pair is sharing the title of managing general partner, and are now joined by principals Roshen Menon (formerly an associate with Summit Partners), Russell Pyle (partner with M/C Venture Partners), Daniel O’Keefe (senior vice president with Pequot Ventures) and Meg Riley (associate with Advent International).

It will invest between $20 million and $50 million of equity into tech and tech-enabled companies that have annual revenue of between $10 million and $300 million. It hopes to lead of co-led in first institutional rounds that sometimes include leverage, with capital used to provide liquidity to current shareholders, enable growth and fund acquisitions.

*** Some quick data from Thomson Financial: The buyout market last year sponsored 1,449 deals for a combined value of around $442 billion. So far in 2007, we’re at 741 transactions worth over 366 billion. Lots more data tomorrow, as the quarter comes to a close…

*** Tomorrow is also my last day before a two-week vacation (much-needed, if not much-deserved). But don’t worry, your Wire and Hub will continue in my absence…

*** I know this space has spent an inordinate amount of time on carried interest issues over the past week, and has completely neglected what may be a far more significant story: The growing difficulty buyout firms are having selling bonds related to their acquisitions. The promiscuous ATM machines seem to have found some modesty, and the consequences could be very far-reaching.

If you accept the premise that public market value has been driven up by LBO activity, then any noticeable decrease in LBO activity should drive public market value back down. If I were an active investor – which I’m not – I’d be shorting public indices…

*** I just spotted a regulatory filing from The Carlyle Group, pegging its current fundraising target at $17 billion.

*** Entrepreneurs regularly complain that VCs are late to meetings. Well, it seems Sequoia Capital is trying to do something it. The Silicon Valley powerhouse requires staffers to make a $100 charitable donation when late to an entrepreneur meeting — even if it’s only by a minute (no word on who keeps time).

Wow. If other VC firms followed suit, it could become one of the nation’s most well-capitalized charitable endeavors…

Top Three

The Carlyle Group and Onex Partners have agreed to acquire Allison Transmission from General Motors Corp., for $5.575 billion. The $1.5 billion equity tranche would be split evenly between Carlyle and Onex, while current Allison president Lawrence Dewey would become CEO of the newly-independent company. The deal is expected to close next quarter.

Serenex Inc., a Durham, N.C.-based oncology drug company, has raised $26 million in Series D funding. It also has secured a $5 million working capital debt facility. New backers include Cornell Capital Partners, Pearl Street Ventures, MC Life Science Ventures and Pac-Link Bio Venture Capital. Returnees are Ritchie Capital, Intersouth Partners, Lilly Ventures, Mediphase Venture Partners, Takeda Research Investment and Seaflower Ventures. Serenex previously had raised around $60 million in total VC funding since its 2001 inception.

Affinion Group Holdings Inc., a Norwalk, Conn.-based provider of integrated marketing and loyalty solutions, has filed for a $600 million IPO. It did not list underwriters in its S-1 filing, but did say that it plans to trade on the NYSE. Apollo Management acquired the company in October 2005 from Cendant Corp. for approximately $1.83 billion.

VC Deals

Koronis Pharmaceuticals Inc., a Seattle-based developer of antiviral therapeutics, has raised $20 million in Series D funding. Pacific Horizon Ventures led the deal, and was joined by fellow return backer Asset Management Company.

DataCert Inc., a Houston, Texas-based provider of corporate legal and IP spend and matter management solutions, has raised $10 million in Series E funding led by SSM Partners.

Alyotech, a Paris, France-based IT and telecom consultancy, has raised €10 million in new VC funding. CDC Enterprises and Iris Capital co-led the deal, and were joined by return backers ACE Management, Aurel NextStage, Galileo Partners and Desjardins Capital Regional et Cooperatif.

Moberg Derma AB, a Swedish drug company focused on skin diseases, has raised SEK 27.7 million ($4.03 million) in second-round funding. The Baltic Sea Foundation led the deal, and was joined by Iris, company management and individual angels.

Accelerated Care Plus Corp., a Reno, Nev.-based provider of rehabilitation products and services for the sports and orthopedic markets, has raised $24 million in convertible stock funding from ComVest Group. The deal is structured as a recap, with some of the proceeds to be used for possible acquisitions and other growth activities.

Buyout Deals

Aequitas Capital Management has acquired Paramount Graphics Inc., a Beaverton, Ore.-based provider of commercial printing and packaging. The transaction was valued at $10.8 million. Aequitas Capital has been advising and funding Paramount Graphics since 2003.

ClearLight Partners has bought Katzkin Leather Inc. from Florida Capital Partners for an undisclosed amount. Katzkin is a Montebello, Calif.–based maker of made-to-order leather interiors for automobiles and light trucks, sold to and installed by a national network of more than 2,000 independent automotive aftermarket restylers. It was advised on the deal by Goldsmith Agio Helms.

Duke Street Capital and Europa Capital Partners have agreed to sponsor a management buyout of CI Traders Ltd., a retail and leisure conglomerate that owns around 200 properties on the U.K. Channel Islands. The deal is valued at around £260 million.

Mid Europa Partners has acquired Serbia Broadband, a provider of cable TV and broadband Internet services in Serbia, from Bedminster Capital Management. LBO Wire reports that the deal is valued at approximately €170 million.

Olympus Partners has agreed to acquire 95 Chili’s Grill & Bar restaurants located in the Northeastern and mid-Atlantic region from Brinker International Inc. (NYSE: EAT). The deal is valued at $155 million. Olympus will place the restaurants – including new ones it plans to open – under the auspices of a new franchise named Pepper Dining Inc., which will be run by former Chili’s executive John McGlone.

Terra Firma Capital Partners has extended its £2.4 billion buyout offer for UK music publisher EMI Group until July 4 – in order to help it obtain the necessary shareholder approvals.

TPG will not submit a buyout bid for Australian retailer Coles Group Ltd. by the Sunday deadline, but nonetheless expressed interest in continuing acquisition discussions. TPG was leading a consortium that also included Blackstone Group and Carlyle Group. The consortium originally was much larger – as befitting an Au$20 billion deal – but KKR, CVC Asia Pacific and Bain Capital all bailed out last month. The only company expected to make a formal offer is Westfarmers.

American Capital Strategies has committed $100 million in private equity to Oceana Media Finance LLC, a new specialty finance company for the production and marketing of independently produced feature films.

Great Point Partners has agreed to acquire an 80% stake in the proteomics business of Thallion Pharmaceuticals Inc., with Thallion retaining the other 20 percent.

PE-Backed IPOs

Polypore International Inc., a Charlotte, N.C.-based supplier of filtration products, raised $285 million in its IPO. It priced 15 million common shares at $19 per share ($20-$22 range), for an initial valuation of around $766 million. Polypore will trade on the NYSE under ticker symbol PPO, while JPMorgan serving as lead underwriter. Warburg Pincus acquired the company in 2004 from GTCR Golder-Rauner and The InterTech Group.

PROS Holdings Inc., a Houston, Texas-based provider of pricing and revenue optimization software, raised $75.1 million in its IPO. The company priced 6.825 million common shares at $11 per share ($10-$12 range), for an initial valuation of around $284 million. It will trade on the Nasdaq under ticker symbol PROZ, while JPMorgan and Deutsche Bank Securities serving as co-lead underwriters. Shareholders include TA Associates (35.6% pre-IPO stake) and JMI Equity (11.2%).

ShoreTel Inc., a Sunnyvale, Calif.-based provider of IP telecom systems for enterprises, raised $83 million in its IPO. It priced 7.9 million common shares at $10.50 per share ($8.50-$10.50 range), for an initial valuation of around $433 million. The company will trade on the Nasdaq under ticker symbol SHOR, while Lehman Brothers and JPMorgan served as co-lead underwriters. ShoreTel had raised around $107 million in VC funding between 1997 and 2004, from firms like Crosspoint Venture Partners (27.9% pre-IPO stake), Foundation Capital (20.4%), Lehman Brothers Venture Partners (22.7%), JPMorgan Capital (5.3%), Focus Ventures, Globespan Capital Partners, Matrix Partners and Norwest Venture Partners.

Netezza Corp., a Framingham, Mass.-based provider of enterprise-class data warehouse appliances, has set its proposed IPO terms to nine million common shares being offered at between $9 and $11 per share. If it prices at the high end of its range, the company would be valued at around $612 million. It plans to trade on the Nasdaq under ticker symbol NTZA, with Credit Suisse and Morgan Stanley serving as co-lead underwriters. Netezza 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

The Nielsen Co. has agreed to acquire Telephia Inc., a San Francisco-based provider of syndicated consumer research to the telecom and mobile media markets. No financial terms were disclosed. Telephia has raised over $102 million in total VC funding since 1999, from firms like AEA Investors, Centennial Ventures, Oak Hill Venture Partners, The Megunticook Fund, Cedar Grove Investments and Prime New Ventures.

Comverge Inc. (Nasdaq: COMV) has agreed to acquire Enerwise Global Technologies, a Kennett Square, Pa.-based provider of managed energy services to commercial and industrial customers. The deal is valued at $75.7 million, including $25.15 million in cash, $17 million in subordinated convertible notes and around $33.6 million worth of Comverge common stock. Enerwise has raised around $20 million in VC funding since 2001, from firms like EnerTech Capital Partners, Hydro-Quebec CapiTech, Endeavor Capital Management and Exelon Capital Partners.

PE-Backed M&A

ProSiebenSat. 1 Media AG of Germany has agreed to acquire Luxembourg-based SBS Broadcasting SA, in order to form a pan-European broadcaster. The deal is valued at €3.3 billion. KKR and Permira acquired a controlling stake in ProSieben earlier this year, while the two firms also control SBS.

Magnum Semiconductor Inc., a Fremont, Calif.-based supplier of ICs, software and reference platforms for audio and video content, has agreed to acquire the consumer products business of LSI Corp. (NYSE: LSI). No financial terms were disclosed. Magnum recently raised a $27 million Series C round, and has raised a total of $52 million since its 2005 spinout from Cirrus Logic. Shareholders include Investor Growth Capital, WK Technology Fund, KTB Ventures, Gold Hill Capital and return backers August Capital and Investcorp Technology Ventures.

International Port Holdings, a portfolio company of Global Infrastructure Partners, a 25% stake in Chennai Container Terminal Private Ltd., a container terminal within Chennai Port on the South East Coast of India. No financial terms were disclosed. CCT was built and developed by P&O Ports and is now operated by Dubai Ports World, which holds the remaining 75% interest.

Firms & Funds

Greenbriar Equity Partners, a Rye, N.Y.-based private equity firm focused on the transportation industry, has hit the $1 billion target for its second fund. Limited partners include Citigroup Pension Plan, University of Chicago, Allianz and the Bill & Melinda Gates Foundation. The firm was founded in 2001 by former Goldman Sachs transportation pros Regg Jones and Joel Beckman, plus former United Airlines CEO Jerry Greenwald. Its $700 million debut fund had a co-investment agreement with Berkshire Partners, whereby each firm had the right to co-invest in the other’s transportation-related deals. The new Greenbriar fund does not include a similar arrangement.

HealthpointCapital has closed its second fund with $420 million in capital commitments. The New York-based firm focuses on private equity opportunities in the musculoskeletal sector — specifically orthopedics and dental.

Human Resources

Jay Boddu has joined Sofinnova Ventures as a Kauffman Venture Fellow. He will focus on wireless infrastructure deals, and previously managed Juniper Networks’ security gateway platform business.

Liam Camburnhas joined Rutland Partners as an associate. He previously worked in KPMG’s private equity transaction services group.