My take on various PE and VC-related events and news last week.
On Bubbles: Are seed stage valuations for hot Internet startups getting out of hand? That’s been the subject of raging debate across the venture pundit-sphere in recent weeks. Connie Loizos and Mark Boslet added their takes on the topic this week, looking at new indications that early stage Internet valuations are, if not outright bubbly, clearly moving in that direction. Connie points to indicators including a San Francisco magazine article, which cited early stage VC Dave McClure admitting to investing in startups before meeting their founders in person, and deal matchmaking service AngelList ballooning from 80 accredited investors to 450 since its launch earlier this year. Mark turns to a survey on early stage valuations by law firm Fenwick & West for his bubble-related musings. The report showed that among surveyed startups in the Internet and digital media sectors, 90% had up rounds, while none reported a down round.
Preppy PE: More than a year after selling its remaining stake in J. Crew, TPG is set to own the preppy retailer again. This week, TPG, along with Leonard Green, agreed to buy J. Crew for $43.50 a share or roughly $3 billion, Luisa Beltran reports. J. Crew CEO Millard Drexler is part of the deal and will maintain a “significant equity investment” in the company, according to a statement.
Google’s Group(on) Hug: Google is in advanced talks to buy coupon site Groupon, according to media sites, including the New York Post, which this week pegged the rumored deal at around $2.5 billion. The paper cited a source close to the talks stating that the deal would probably be hammered out in the next month. Tech blog All ThingsD first reported on Friday that the two sides were in talks for a deal north of $3 billion.
Search Startups Still Looking for Gold: The Internet is littered with search engines that tried and failed to stand up to Google, but Blekko backer Saad Khan doesn’t expect the same fate for his startup, Mark Boslet reports. The CMEA Capital partner says there’s room in the market for smaller search startups.
Del Monte’s So Good for Buyout Shops: Buyout shops Kohlberg Kravis Roberts & Co., Vestar Capital Partners and Centerview Partners will acquire Del Monte for $5.3 billion. The deal values Del Monte at $19 per share, a 40% premium over the company’s average closing price during the past three months. The deal includes the assumption of roughly $1.3 billion in assumed debt. Debt financing will come from Bank of America, Merrill Lynch, Barclays Capital Inc., JPMorgan Chase, Morgan Stanley and KKR Capital Markets.
China Approves $3B Program for Foreign PE: China’s foreign exchange regulator has approved a $3 billion pilot program that will allow foreign currencies to be converted into yuan for private equity investments, Reuters reported. The program would benefit private equity firms such as The Carlyle Group and Blackstone Group, which have been raising yuan-denominated funds, Reuters said, adding that the program would also give overseas pension funds and other investors a new avenue for investment in China. The program could begin as soon as December.