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    PE Week Wire -- Tuesday, May 23



Random Ramblings: Clean Coal, Apollo and LinkedIn

Last month, I suggested that cleantech dealflow was not robust enough to justify the recent spike in related venture capital allocations. It was typical worrying over “too much money chasing too few deals.” My attitude has begun to soften a bit, particularly as VCs have indicated an increased willingness to engage in deals that previously might have felt a bit too much like project finance – particularly in the biofuels production space.

But there is at least one cleantech area in which available capital continues to far outpace available disbursement opportunities: Clean Coal. For those unfamiliar with this oxymoron, clean coal generally refers to gasification, whereby dirty coal is converted into clean gas. This certainly isn’t a renewable energy source like ethanol or solar, but coal is the most plentiful of our current nonrenewable resources. General Electric, for example, reports that there is more than 200 years worth of recoverable coal reserves, compared to just 40 years of oil and 70 years of natural gas. Sure we’ll run out of coal by 2206, but by then we’ll already be meeting our energy needs via trash conversion (as has been suggested by both President Gore and Dr. Emmett Brown).

Despite the clean coal potential, however, there are just a small handful of VC-backed companies working in the space. They are:

  • CoalTek Inc., a Tucker, Ga.-based company that ““utilizes a proprietary process technology to convert low rank, mine-run coals into high-rank, clean coal alternative fuels for use by coal-fired electric utilities.” It is backed by Warburg Pincus, Draper Fisher Jurvetson, Braemar Energy Ventures and Technology Partners.
  • GreatPoint Energy Inc., a Cambridge, Mass.-based low-cost gasification company that has raised VC funding from Advanced Technology Ventures and Draper Fisher Jurvetson.
  • Powerspan Corp., a New Durham, N.H.-based developer of air pollution control technology to reduce the four primary air pollutants of concern from coal-fired power plants. It has raised over $50 million from firms like Zero Stage Capital, Rockport Capital Partners, NGEN Partners, Beacon Partners and Calvert Funds.

There also are some related VC-backed companies like GreenFuel Technologies Inc. (converting carbon dioxide into clean biofuel) and Zolo Technologies (process control sensors that can be used in power generation facilities), but it’s still just a drop in the cleantech bucket.

Investors tell me that there are three major reasons for this dearth of clean coal deals. First, gasification facilities are often too capital-intensive for VC funds, and retrofitting existing plants is extremely difficult. It isn’t a surprise, for example, that a deep-pocketed firm like Warburg Pincus was brought into the CoalTek deal. Overall, this means that the space is dominated by big-time energy players like GE.

Second, clean coal already had a brief flirtation with popularity during the late 1970s energy crisis, but public interest faded once the crisis passed. As such, many clean coal advocates/entrepreneurs/academics got burned (no pun intended), and moved on to other endeavors. Finally, environmentalists are hesistant to universally endorse clean coal. Not only is it non-renewable, but there are still a lot of questions surrounding the storage and disposal of sequestered carbon dioxide that is formed by gasification.

I'm told that there are a bunch of pre-VC-stage clean coal companies out there, so maybe this is a niche that simply needs a bit more time to mature. One thing for certain is that there should be some available capital once those companies are ready.

*** The first KKR IPO copycat has emerged, and it’s Apollo Management. Various press reports suggest that the New York-based firm will look to price a $1.5 billion flotation on the Euronext Exchange in Amsterdam, with shares also being sold in the U.S. as a Rule 144A offering. No word yet on specifics, but it’s worth noting that $1.5 billion was also KKR’s target before upping the amount to $5 billion. As an aside, it’s worth wondering how these offerings will affect the secondary market. The KKR vehicle not only acquired positions in older KKR funds, but also has the ability to acquire additional positions. Could this mean that secondary firms will have reduced mega-fund opportunities?

*** Finally, many of you have been sending me LinkedIn invitations over the past few years, but I’ve never responded to one. My personal account was only created because I was doing some research, and I didn’t see the value in forming a large network of people whose contact info I already have. But, just for the sake of curiosity, I will accept any LinkedIn invitations for the rest of this week. Yes this defeats the self-selection process, but engaging such a process seems cumbersome. So invite away…


ACG Boston's 12th Annual Growth Conference
Featuring ACG Capital Connection
Wednesday, June 14, 2006


Network with over 100 private equity firms from around the country
.
The ACG Capital Connection in Boston is one of the
largest in the country. Don't miss out on the deal flow.

Meet privately during ACG DealSource.
A unique opportunity for intermediaries and private equity
firms to have brief pre-scheduled, one-on-one meetings.

For a complete list of participating firms and to
register visit www.acgboston.org.

 

    Top Three



Abraaj Capital has entered into a joint venture with Deutsche Bank and Ithmar Bank, to raise a $2 billion Shari’a-compliant alternative assets fund. Abraaj will manage the vehicle, which will take majority and minority stakes in greenfield projects, participate in large scale privatizations and invest in buyout and restructuring opportunities. The fund also will provide mezzanine funding to companies in its targeted sectors like oil & gas, petrochemicals, roads, water, education and telecom. www.abraaj.com

Microsoft has agreed to acquire Softricity Inc., a Boston–based provider of desktop application virtualization solutions. No financial terms were disclosed. Softricity has raised just over $60 million in total VC funding since its 1999 inception, from firms like Prism Venture Partners, Longworth Venture Partners, FA Technology Ventures, Markpoint Venture Partners, Meritech Capital Partners and TD Capital. www.microsoft.com www.softricity.com

Presto Services Inc., a Mountain View, Calif.-based provider of digital content delivery services, has raised $10 million in first-round funding. Backers include Kleiner Perkins Caufield & Byers and Clearstone Venture Partners. The company’s debut offering will include the Presto Service and a printing mailbox, developed by HP, designed primarily for the country’s 78 million baby boomers and their parents. www.presto.com


Energy Investing in A Carbon-Constrained World
How Climate Change, Energy Prices, New Technologies and Global Demand Are Impacting Private Equity, Wall Street and Society at Large


Join Thomson Financial and Goodwin Procter at this thought leadership and networking forum on June 8, 2006 at Westin Copley Place in Boston, MA.

3:00 PM - Keynote Speech
3:45 PM - Coffee Break
4:00 PM - Panel Discussion
5:30 - 7:00 PM - Cocktail Reception

Please visit http://events.tfn.com/energy for the speaker list, program and registration information.

 


    VC Deals

Tagsys, a provider of item-level RFID infrastructure, has raised $35 million in Series C funding. JPMorgan Partners led the deal, and was joined by Cazenove Private Equity and return backers Endeavour Advisors Elliott Associates. The company also announced that it has moved its headquarters from France to Cambridge, Massachusetts. www.tagsys.net

SuccessFactors Inc., a San Mateo, Calif.-based provider of on-demand software for human capital management, has raised $25 million in new VC funding. Granite Global Ventures led the deal, and was joined by return backers like Greylock Partners, Canaan Capital, TPG Ventures, Cardinal Venture Capital and Emergence Capital Partners. SuccessFactors also secured a $20 million venture debt commitment from Lighthouse Capital Partners. www.successfactor.com

U3 Pharma AG, a Munich-based oncology drug development company, has raised €27 million in Series C funding. Life Sciences Partners led the deal, and was joined by return backers Alta Partners, Atlas Venture, E. de Rothschild Investment Partners, and Bio*One Capital. www.u3pharma.com

Cardiva Medical Inc., a Mountain View, Calif.-based developer of access-site management and closure devices, has raised $13.99 million in Series C funding. Galen Partners led the deal, and was joined by return backers Stockton Partners, Sycamore Ventures, Harbinger VC Corp., WI Harper Group and Amkey Ventures. www.cardivamedical.com

Inrix Inc., a Redmond, Wash.-based provider of real-time and predictive traffic information, has raised $10 million in Series B funding. Bain Capital Ventures led the deal, and was joined by return backers Venrock Associates and August Capital. www.inrix.com

Global Care Quest Inc., an Aliso Viejo, Calif.-based developer of healthcare information systems that deliver patient data to mobile and wireless devices, has raised $5 million in Series A funding led by Lexington Ventures. www.globalcarequest.com

Sphere Medical Holding Ltd., a Cambridge, UK-based developer of micro-analyzers for measuring clinical parameters in real-time, has raised £6.2 million in new VC funding. New backers include Oxford Capital Partners, Fritas AS and Schroder Investment Management, while returnees include Artemis Investment Management, Herald Ventures, Hotbed Ltd. and The Generics Group. www.spheremedical.com

Debitman Card Inc., a San Mateo, Calif.-based electronic payment network for retailer-issued debit cards, has raised $8.7 million in Series B funding. Participants include HSBC-North America, Cardinal Venture Capital and Selby Venture Partners. www.debitman.com

BioVigilant Systems Inc., a Tuscan, Ariz.-based maker of devices that can detect the presence of microbes and bioterrorism agents in air and water, has raised $4 million in second-round funding. Battelle Ventures led the deal, and was joined by Community Investment Corp., Innovation Valley Partners and Pearl Street Venture Funds. www.biovigilant.com

Passport Systems Inc., an Acton, Mass.-based maker of a cargo scanner for port secuirty, has raised $2 million in second-round funding from existing shareholders Shiprock Capital, Topspin Partners and Commons Capital. www.passportsystems.com

Intacct Corp., a San Jose, Calif.-based provider of on-demand financial applications, has raised $7 million in Series B funding. Emergence Capital Partners led the deal and was joined by return backers Hummer Winblad Venture Partners and JK&B Capital. www.intacct.com

    Buyout Deals

Red Diamond Capital is leading a management buyout of Avon Rubber PLC’s automotive division. No financial terms were disclosed for the deal, which is expected to close within three weeks. Avon Rubber’s automotive unit had 2005 revenue of $349 million, more than 3,500 employees and 12 manufacturing facilities located in the U.S., the U.K., Mexico, France, Spain, Portugal, the Czech Republic, India and Turkey. Its headquarters is in Cadillac, Michigan. www.reddiamondcapital.com

Halyard Capital has acquired a majority stake in Educational Directories Unlimited Inc., a Chester, Pa.–based provider of online directories like StudyAbroad.com, GradSchools.com, IIEPassport.org, UCAEdirectory.org and academic recruiter site StudentProspector.com. No financial terms were disclosed. As part of the deal, Halyard has formed an umbrella company called Halyard Education Partners, which combines EDU with existing portfolio company eLearners.com (which it acquired in May 2005). www.halyard.com www.edudirectories.com

Water Street Capital Partners has completed its acquisition of a majority stake in Lakewood Pathology Associates, a Lakewood, N.J.-based provider of multi-specialty anatomic pathology services to clinicians operating in outpatient surgical settings in more than 21 states. As part of the deal, Water Street has committed $50 million in growth equity to Lakewood. No additional financial terms were disclosed. www.waterstreetcapital.com www.lakewoodpath.com

Hellman & Friedman reportedly is in talks to acquire UK-based hedge fund manager Gartmore Investment Management PLC from Nationwide Mutual Life Insurance Co. for up to £500 million.

CCMP Capital Asia and Pacific Equity Partners reportedly have paid more than Au$300 million to acquire Australian vacuum cleaner retailer Godfreys Group.

CAI Capital Partners and British Columbia Investment Management Corp. have acquired a majority interest in Terasen Water and Utility Services from Terasen Inc., a wholly-owned subsidiary of Kinder Morgan Inc. No financial terms were disclosed. Terasen Water and Utility Services is a Vancouver-based utility infrastructure company with more than 900 employees. www.caifunds.com

    PE-Backed IPOs

VeraSun Energy Corp., a Brookings, S.D.-based ethanol producer, has set its proposed IPO terms to 17.25 million common shares being offered at between $18 and $20 per share. It plans to trade on the NYSE under ticker symbol VSE, with Morgan Stanley and Lehman Brothers serving as lead underwriters. Shareholders include Bluestem Capital Partners, Eos Partners, TIAA-CREF and Capitaline Renewable Energy LP. www.verasun.com

Asia Netcom could be taken public within 12 to 18 months of its pending $334 million buyout from China Netcom Group, according to Reuters. The buyout is still awaiting Chinese government approval, with members of the consortium including General Enterprise Management Services, Spinnaker Capital and Ashmore Investment Management.

    PE-Backed M&A

The Hygenic Corp., an Akron, Ohio–based provider of healthcare and wellness products, has acquired Performance Health Inc., maker of the Biofreeze brand of topical analgesics and Prossage brand of warming massage ointment. No financial terms were disclosed. Baird Capital Partners has been Hygenic’s lead investor since 2004, while equity for the acquisition was also provided by American Capital Strategies Ltd, Beecken Petty O’Keefe & Co. and company management. www.hygenic.com www.biofreeze.com

Boingo Wireless Inc., a Santa Monica, Calif.-based Wi-Fi network aggregator, has agreed to acquire Concourse Communications Group LLC, a Chicago–based operator of neutral-host wireless access systems within airports and other commercial facilities. No financial terms were disclosed. Boingo has raised nearly $35 million in VC funding since its 2001 inception, from firms like New Enterprise Associates, Evercore Partners, Mitsui & Co. and Sternhill Partners. www.boingo.com www.concoursecommunications.com

    PE Exits

Royal Philips Electronics NV (NYSE: PHG) has agreed to buy UK-based baby products company Avent Holdings Ltd. from Charterhouse Capital Partners for approximately £460 million. www.philips.com

Boston Ventures has sold its minority position in World Publications, a Winter Park, Fla.-based publisher of travel and luxury lifestyle titles, to the Bonnier Magazine Group of Sweden. No financial terms were disclosed. www.worldpub.net www.bonnier.com

    Misc. Deals

Zipcar Inc., a Cambridge, Mass.-based car sharing company, has secured $20 million in lease line financing from GE Commercial Finance Fleet Services. The financing will be used to support fleet expansion. Zipcar has raised VC funding from firms like Benchmark Capital and Hub Angels. www.zipcar.com

    Firm & Fund News

Thomas H. Lee Partners could recoup at least $50 million of its investment in bankrupt brokerage Refco, according to The Financial Times. The money would be allocated as part of a $600 million-plus settlement that the SEC and U.S. Justice Department are currently negotiating with Austrian bank Bawag.

    Human Resources

Domnin de Kerdaniel and Nicolas Mouté have joined CVC Capital Partners as a managing director and director, respectively, in the firm’s Paris office. De Kerdaniel previously was with the 3i Group’s LBO team in Paris, while Mouté was a managing director and head of acquisition finance for ING in Paris. www.cvceurope.com

Goldman Sachs has named Yoël Zaoui as sole head of European I-banking. He previously had served as co-head, alongside Chris French, Matthew Westerman and Addy Loudiadis. French will become chairman of European I-banking, while Westerman will be sole head of European financing. Loudiadis left Goldman last month to go on a sabbatical. www.gs.com

Leslie Bider has joined Elevation Partners as an executive-in-residence. He previously served as chairman and CEO of Warner/Chappell Music Inc. www.elevation.com

Private Equity Week

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May 23, 2006

















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