PE Week Wire: Tues., March 20, 2007

The sky is bright, uncontested take-private buyouts are becoming are rare breed and I’m still trying to rationalize how Texas’ loss on Sunday didn’t bust my bracket. In other words, it’s time for some Tuesday Talkback.

First up are some thoughts on the prospective Blackstone IPO. Lawrence writes: “The thing I struggle with is how can KKR and Blackstone now go to a prospect and tell them that the trouble of being public has become too onerous – with a straight face. That argument was once upon a time very compelling. Now it flies in the face of what the suitor has become; public.” I wrote yesterday that take-private buyouts are only short-term salves for the onerous nature of public markets, as such targets will eventually go public again. So the “Blackstone is being hypocritical” argument is faulty. I also meant to add that there are two major complaints about being a public company nowadays: Regulation (i.e., SOX) and meeting Wall Street expectations. The first really is only a legitimate complaint for small companies, as the costs are relatively insignificant for a multi-billion dollar group like Blackstone. The latter co! uld be interesting, however, which is why I asked if Blackstone will be more accountable to its LPs or public shareholders. Will Wall Street understand and accept the J-curve, or will Blackstone feel pressure to execute quick flips?

Adam: “This IPO is just driven by greed and the need for Schwarzman to be officially listed as one of the members of the north of $10 billion Forbes’ club… The same greed is driving CEOs of publicly listed company to go private, as through such an exercise they can increase their salaries and overall compensation without attracting the fury of public shareholders… What about the possibility of activists raiding a publicly listed Blackstone for meager performance, or need to divest some investments?”

Josh: “I keep reading that TPG will be the next to file for an IPO, but wouldn’t Carlyle, KKR or Apollo make more sense? You wrote about the importance of Blackstone being a diversified asset management firm as opposed to a private equity-only firm – but TPG is more the latter than the former.” Agreed Josh, and Scott Sperling of TH Lee Partners made a similar point about his own firm on CNBC last Friday. But I expect most of those firms – including TPG – to at least get into queue by filing S-1s, and then waiting to hear about what qualities the Blackstone buyers are most interested in.

*** Arden on my note last Friday that SoCal is poised to surpass New England as the second-most popular place for VC investment: “A big part of it is obviously deal-flow, but I also think that East Coast VCs are more willing to travel west than vice versa. They also are more likely to put partners on the ground in satellite offices. Just look at firms like CRV and Greylock – they are now purely bo-coastal, if not more tilted toward the West.” Great point Arden. Here’s a more extreme case in point: Spark Capital (which is prepping a new fund) is a Boston-based firm with not a single portfolio company in New England. It’s got a couple in New York and in flyover country, but the most are in California.

*** Melanie: “I’m surprised that Romney didn’t perform better in the Presidential Poll, given his private equity background. Maybe even more surprised that Obama was the leader, given how much private equity investors harp about experience.” Agreed on both counts Melanie – and particularly about Romney. I must be in a Boston/Bain cocoon, because all the big PE folks I speak with seem to be supporting Romney (more a Bain cocoon than a Boston one, actually, since the ex-Gov isn’t too popular in these parts anymore). Perhaps they just didn’t participate…

New at

• David Toll is In Praise of the No-Fee Approach at buyout firms like Warburg Pincus and Hellman & Friedman.

• Kelly DePonte of Probitas Partners on What LPs are Fearing.

• Joanna Glaser on Angels Getting More Active and robust VC-Backed IPO activity.

• Alex on fundraising progress at Israel Cleantech Ventures.

And, as always, news and analysis throughout the day. Also, be sure to check out our multiple RSS feeds. For example, you can get alerts sent to you when a new VC deal is entered into the system during mid-day, including stealthy ones based on regulatory filings.

Top Three

TA Associates has agreed to acquire UK-based fund manager Jupiter Asset Management from Commerzbank for just over €1 billion.

Intarcia Therapeutics Inc., an Emeryville, Calif.-based drug company with lead candidates focused on hepatitis C and Type 2 diabetes, has raised $50 million in Series BB funding. New Leaf Venture Partners led the deal, and was joined by Quilvest Ventures and return backers New Enterprise Associates, Venrock Associates, Alta Partners, Omega Fund and Granite Global Ventures. The company has now raised around $194 million in total VC funding since its 1997 inception, including $50 million Series E round in 2004 at a post-money valuation of around $133 million.

Mitch Lasky has joined Benchmark Capital as a general partner. He previously served as CEO of former Benchmark portfolio company Jamdat Mobile Inc. (Nasdaq: JMDT). Before that, was with Electronic Arts as executive vice president of mobile and online.

VC Deals

Transoma Medical, a St. Paul, Minn.–based maker of implantable wireless vital sign monitors, has raised $13 million in Series C funding. Return backers include Canaan Partners, Affinity Capital Management and Polaris Venture Partners.

Zopa Ltd., a London-based online marketplace for people to lend and borrow money, has raised $12.9 million in Series C funding. Bessemer Venture Partners led the deal, and was joined by fellow return backers Benchmark Capital and Wellington Partners. In other Zopa news, the company has named Douglas Dolton as its new CEO. He previously ran San Francisco-based student loan company Chela Education Financing, which was sold to Nelnet.

HemCon Medical Technologies Inc., a Portland, Ore.-based developer of technologies to control bleeding and infection resulting from trauma or surgery, has raised $12 million in venture capital from Camden Partners and Torch Hill Partners.

Cellufun LLC, a New York-based operator of an online community for mobile game distribution, has raised $3 million from Longworth Venture Partners.

Prenova Inc., a Marietta, Ga.-based provider of energy management solutions, has raised $3 million in new VC funding from Siemens Venture Capital. The company has raised over $70 million in total venture capital since its 1997 inception.

Buyout Deals

Cerberus Capital Management has offered to acquire BPO and IT services provider Affiliated Computer Services Inc. (NYSE: ACS) for around $6 billion, according to The Wall Street Journal. Cerberus is being joined on the $59.25 per share bid by ACS founder Darwin Deason, who holds around 40% of ACS common stock and a control position over a second class of stock.

Blackrock has become the third Laureate Education Inc. (Nasdaq: LAUR) shareholder to publicly oppose a $3.8 billion buyout by by a consortium that includes Laureate chairman and CHO Douglas Becker, Kohlberg Kravis Roberts & Co., Citigroup Private Equity; S.A.C. Capital Management, SPG Partners, Bregal Investments, Caisse de dépôt et placement du Québec, Sterling Capital, Makena Capital, Torreal SA and Southern Cross Capital. Prior opposition has been voiced by Select Equity Group and T. Rowe Price. Blackrock believes that the $60.50 per share offer price is too low.

CCMP Capital Advisors and GS Capital Partners have been topped in their efforts to acquire Triad Hospitals Inc. (NYSE: TRI). The two firms agreed on a $6.4 billion buyout last month (including $1.7 billion in assumed debt), but Triad was free to solicit superior proposals for next 40 days. And it found one: Community Health Systems (NYSE: CYH) said yesterday that it has agreed to acquire Triad for $6.8 billion, or $54 per share compared to the original $50.25 per share offer. Triad will owe CCMP and GS a $20 million breakup fee and another $20 million in reimbursement for out-of-pocket expenses. Lehman Brothers is advising Triad on the sale.

Evolution Capital Partners has acquired Learning Horizons Inc. from American Greetings Corp. (NYSE: AM) for an undisclosed amount. Learning Horizons is a provider of supplemental educational products for children.

Inverness Capital Partners has acquired Faxitron X-Ray Corp., a Wheeling, Ill.-based provider of x-ray systems to customers in the medical, animal research and industrial markets. No financial terms were disclosed.

Windjammer Capital has acquired Rotex Inc., a Cincinnati-based maker of screening equipment and technology. No financial terms were disclosed. Harris Williams advised Rotex on the deal.

Doughty Hanson and Mercapital have teamed up to bid on the Continental Auto unit of Actividades de Construccion y Servicios SA, according to Expansion. The offer is believed to be valued at over €700 million, with other interested suitors including Apax Partners, Bridgepoint, 3i, Carlyle Group and Vista Capital. Lazard is running the auction.

Take-Two Interactive Software Inc. (Nasdaq: TTWO), a video game maker known for its Grand Theft Auto series, delayed its shareholder meeting and said that it may put itself up for sale. The move comes after dissident shareholders – including SAC Capital and OppenheimerFunds – threatened to install their own management and board members.

CVC Capital Partners confirmed that it is in buyout talks with Vienna-based specialty steelmaker Boehler-Uddeholm. The company’s stock has skyrocketed over the past week on takeover speculation, with a total market cap of around €4.2 billion at market close last Friday.

Exponent Private Equity has acquired a majority stake in V Holding Ltd., a UK-based provider of ship management and related services in the cargo and leisure segment, for approximately Gbp180 million. HSBC is providing leveraged financing, while Close Brothers Private Equity will make a partial exit of the 45% stake in V Holding it acquired in 2003 (will retain a small minority interest). Rothschild Holding advised V Holding on the sale.

PE-Backed M&A

The Active Network Inc., a San Diego–based marketing and consumer promotions agency, has acquired Thriva LLC, a Bothell, Wash.–based provider of online management software, online registration and payment processing for camps and event organizations. No financial terms were disclosed. The Active Network has raised over $70 million in VC funding since its 1998 inception, from firms like Austin Ventures, Kettle Partners, ABS Ventures, Canaan Partners, Charles River Ventures, DB Venture Partners, North Bridge Venture Partners, Enterprise Partners VC and Ticketmaster.

iCrossing Inc., a Scottsdale, Ariz.-based digital marketing agency, has agreed to acquire Sharp Analytics, a Salt Lake City–based provider of business intelligence solutions for companies and their advertising agencies. No financial terms were disclosed. iCrossing has raised around $76 million in VC funding from such firms as Oak Investment Partners, RRE Ventures and StarVest Partners.

Baker & Taylor, a Charlotte, N.C.–based book distributor, has completed its acquisition of a majority of the assets of San Diego-based Advanced Marketing Services Inc. (OTC BB: MKTSQ), a bankrupt provider of customized merchandising, wholesaling and contract distribution services. No financial terms were disclosed. Baker & Taylor is a portfolio company of Castle Harlan.

California Check Cashing Stores, a retailer of “alternative” financial services like check-cashing and payroll advances, has acquired San Jose, Calif.-based Fast Cash Stories Inc. The deal was backed by CCCS shareholder Golden Gate Capital.

PE Exits

KKR has agreed to sell around 24.5 million common shares of Alliance Imaging Inc. (NYSE: AIQ) to Oaktree Capital Management and MTS Health Investors for $6.25 per share, or around $153.1 million. Oaktree and MTS will own a combined 49.7% stake in the diagnostic imaging company, while KKR will retain less than a 3% position. Oaktree and MTS are not entering into any management fee arrangement with the company.

The Carlyle Group is nearing a deal to sell Landmark Aviation and Standard Aero to Dubai Aerospace Enterprise, according to Reuters. The transaction would be worth in excess of $1.5 billion. Tempe, Ariz.-based Landmark provides aircraft maintenance services, while Winnipeg-based Standard Aero provides repair services at airport terminals. Doughty Hanson is also a Standard Aero shareholder.

PAI Partners is in talks to sell French water distributor Saur to Caisse des Depots, AXA and waste management company Seche Environnement. The sale price is expected to be between €1.3 billion and €1.8 billion.

Firms & Funds

Hellman & Friedman is nearing an $8.4 billion final close on its sixth fund, according to Buyouts Magazine. The firm previously was in market three years ago, when it closed on $3.5 billion. Some of its new windfall might go toward a rival bid for energy giant TXU.

Bear Stearns Merchant Banking has teamed with China-based Eagle Investment Group to form a strategic alliance focused on opportunities in the Chinese retail sector. Each firm will commit $250 million to the platform, for a total of $500 million. Eagle is run by Wong Kwong Yu, founder of Chinese electronics retailer GOME Electrical Group.

Battery Ventures is planning to raise $750 million for its eighth fund, with marketing expected to begin within weeks. The news was first reported by VentureWire this morning, and subsequently confirmed by PE Week Wire.

Spark Capital is planning to raise its second fund next quarter with a still-unspecified target of between $300 million and $350 million. The news was first reported by VentureWire this morning, and subsequently confirmed by PE Week Wire.

Eos Partners has closed its fourth mid-market buyout fund, with $600 million in capital commitments, according to LBO Wire.

Goodwin Procter LLP has opened new offices in San Diego and downtown Los Angeles. The San Diego office will be chaired by new hire Stephen Ferruolo, who previously was a partner with Heller Ehrman and co-chair of that firm’s corporate/VLG group. He will be joined by fellow ex-Heller partner Ryan Murr, while the downtown LA office will include three new partners focused on real estate: Dean Pappas and Dani Vogt, both from Mayer Brown, and Edward Hagerott Jr., who joins from Munger, Tolles & Olson LLP.

Human Resources

Edmund Carpenter has joined Genstar Capital as an operating partner focused on the industrial technology sector. He most recently served as CEO of Barnes Group Inc. (NYSE: B), a manufacturer of precision metal components and assemblies and distributor of industrial supplies. Prior to that, he spent two years as a senior managing director with Clayton, Dubilier & Rice.

John Leone has joined Paul Capital Partners as a partner in the firm’s healthcare practice, which participates in direct deals (including royalty and revenue interests), private equity secondaries and fund-of-funds commitments. He previously was president and CEO of Cambrex Corp. and, before that, was with Aventis as senior vice president and COO of U.S. commercial operations.

Robert Jackowitz has agreed to join New York-based private equity firm Pine Brook Road Partners as CFO, effective April 9. He previously was treasurer and CFO of ESL Investments Inc.

Tim Ebling has joined Battery Ventures as an executive-in-residence focused on the software sector. He previously served as chairman and CEO of former Battery portfolio company ProfitLogic, a retail software optimization company acquired by Oracle.

Marsh Inc. has named chief operating officers for its three business units. They are: Patricia Hagemann, as COO of the Americas; David Lessing, COO of U.S. Middle Market and Philip Petronis, COO of Global Products and Services Management (including PE services). Hagemann previously was CFO of U.S. operations, while Lessing was with Merrill Lynch and Petronis was CFO of Guy Carpenter.