One Year Later: Where Are The PE Arms of Failed Banks?

The internet is alive with the sound of memorializing. There’s no shortage of retrospective Lehman Brothers coverage as we approach the one-year anniversary of the financial crisis. The New York Times, CNN, Reuters, Forbes, Guardian, and BBC, Times Online, have all chimed in, to name a few.

But since we at peHUB mostly just care about private equity, we wanted to provide a “Where are they now” update on the fate of the buyout businesses affected by the collapses of Merrill Lynch, AIG Lehman Brothers and of course, Bear Stearns.

Starting with Lehman. Here’s some background on the firm’s merchant banking operations, via Buyouts:

The 35-investment professional merchant banking group, established in 1986, has raised and managed at least four institutional funds and several employee investment vehicles with total committed capital of more than $8 billion. Lehman Brothers Merchant Banking Partners IIV LP closed in 2007 at $3.3 billion.

Now: That business was purchased by its management, including Charles Ayres and Daniel James, and today it’s rebranded as Trilantic Capital Partners. The firm has been relatively quiet since the spin-out. Luxembourg-based investment company Reinet Investments also purchased part of the business.

Meanwhile, Lehman Brothers’ asset management business, Neuberger Berman, completed an employee-backed buyout. That business includes a number of alternative asset management business, as well as NB Private Equity Partners, a publicly traded closed-end investment company which invests in private equity funds managed, funds of funds, and direct private equity investments.

Moving on to AIG’s merchant banking outfit:

AIG Investments as of June 30 had raised about $20.6 billion for 46 direct investment funds focused on the United States, Europe, Asia and emerging markets. AIG also holds a roughly 7 percent stake in Blackstone Group, valued at $700 million, that could be sold to raise cash.

Now: As the behemoth continues to slowly sell itself in pieces, the firm this week reached an agreement to sell AIG Investments to Hong Kong tycoon Richard Li, through his investment vehicle, Pacific Century Group, for $300 million. The auction for this business, which manages assets in private equity, hedge fund of funds, equities and fixed income, dragged on for months, with new bidders coming and going on a near-weekly basis, according to reports.

I’ve put a call in to Blackstone regarding AIG’s stake in the company, which was speculated as a natural target for divestiture. Reports estimated the stake to be worth anywhere from $700 million to $2 billion, but there’s been no official word of such a sale. Reports were also unclear as to whether the investments were in Blackstone funds or equity in the listed entity.

When Banc of America and Merrill Lynch were forced into a shotgun wedding, so were their private equity operations.

Banc of America Capital Investors manages some $2 billion of capital for the bank, invests in growth financings, buyouts, acquisitions and recapitalizations. The firm is currently managing its sixth fund. Merrill Lynch Global Private Equity’s operations consist of a staff of 70 which looks to make control-style investments of between $250 million and $750 million.

Now: The merged business is called BAML Capital Partners.

Lastly there’s Bear Stearns. The firm collapsed months earlier than the others, and its merchant banking business, Bear Stearns Merchant Banking, managed to escape unscathed.

Now: The firm became independent and renamed itself Irving Place Capital Partners. The firm is investing its third fund, a $2.7 billion vehicle closed in 2006.

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LP Organization Lays Out Guidelines

The Institutional Limited Partner Association (ILPA) today released “a set of best practices to address important issues relating to the alignment of interest between general partners and limited partners, fund governance and providing greater transparency to investors.”

I’m still working through it, but have posted it below so that you can read along:

ILPA Private Equity Principles

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Yantai Seeks Stake in Permira-Owned BorsodChem

BUDAPEST (Reuters) - China’s Yantai Wanhua Polyurethane Co (600309.SS) is seeking to buy a stake in privately owned Hungarian chemicals firm BorsodChem as a long term strategic investor, business daily Napi Gazdasag said.

The paper said on Tuesday, without naming its sources, that top executives from the Chinese firm have held talks this year with executives from British private equity fund Permira, which bought BorsodChem in 2006.

BorsodChem Chairman-CEO Wolfgang Buchele was not immediately available for comment.

Last week Buchele told business weekly Figyelo that an unidentified investor had bought up most of BorsodChem’s mezzanine debt, junior debt with subordinated claims over the company’s assets.

The Chinese firm Yantai, capitalised at 26.9 billion yuan ($3.94 billion) on the Shanghai stock exchange, specialises in manufacturing Methylene Diphenyl DiIsocyanate, or MDI, according to its website. MDI is also one of BorsodChem’s key products.

BorsodChem is in talks with its creditors about a restructuring of its debts and said last month that its revenues would be 15-20 percent below 2008 levels this year but were expected to recover next year.

Buchele last month told daily Napi Gazdasag the company had debts of between 900 million and 1 billion euros, and expected to reach an agreement with banks on a debt settlement in August.

BorsodChem is one of the biggest employers in eastern Hungary.

(Reporting by Marton Dunai; editing by Elaine Hardcastle)

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Lex Malas Joins Broadpoint

Keith “Lex” Malas has joined Broadpoint Capital as head of capital markets origination for all equity and corporate debt purchases. He also has joined the firm’s management committee. Malas previously was with Deutsche Bank, where he managed leveraged financings in the energy, power, healthcare, paper and packaging sectors.

PRESS RELEASE

Broadpoint Capital, Inc., a broker-dealer subsidiary of Broadpoint Gleacher Securities Group, Inc. (NASDAQ: BPSG), today announced that Keith “Lex” Malas will head its Capital Markets Origination division for all equity and corporate debt products and will join Broadpoint’s management committee.

Mr. Malas brings over 20 years of experience in capital markets to Broadpoint.Gleacher. Most recently, Mr. Malas was at Deutsche Bank, where he managed leveraged financings in the energy, power, healthcare, paper and packaging sectors. Prior to Deutsche Bank, Mr. Malas was a Managing Director in high yield capital markets at UBS, where he led high yield financings in the energy, power, media, and telecom sectors. Mr. Malas started his career in 1988 as a member of the investment banking division at Goldman Sachs, where he ultimately was a Managing Director and Head of Natural Resources Capital Markets. Mr. Malas earned a BA from Johns Hopkins University in 1988 and his MBA from Harvard University in 1992.

Joining Mr. Malas on the capital markets team is Kevin Reynolds, Scott Coburn, David Lessen, Ph.D., Len Sheer, and Jason Partenza.

Mr. Reynolds heads Broadpoint.Gleacher’s Debt Capital Markets Origination effort. Mr. Reynolds has more than 24 years of experience in the financial services industry and he has focused on credit research, bankruptcy and distressed trading, emerging market debt capital markets, and corporate asset backed securitizations. Prior to joining Broadpoint.Gleacher, Mr. Reynolds had spent 12 years at UBS in a number of senior roles, including Global Co-Head of Liability Exchange Offers and Corporate Recapitalizations. Mr. Reynolds earned a BA from Boston College in 1979 and his MBA from The Wharton School of the University of Pennsylvania in 1984.

Mr. Coburn heads Broadpoint.Gleacher’s Equity Capital Markets Origination effort. Previously, Mr. Coburn was with the Citigroup Global Capital Markets and Institutional Investor Group. Prior to Citigroup, Mr. Coburn was Head of Equity Capital Markets at PaineWebber, where he was responsible for the solicitation and execution of the firm’s equity underwritings amounting to $10 billion in total business, including approximately $1 billion in lead managed transactions. He was also a member of the firm’s operating committee and Co-Head of its equity commitment committee. Mr. Coburn has served as Chairman of the Securities Industry Association Syndicate Committee and was previously a board member of the Investment Association. He holds an MBA from Columbia University and an AB from Brown University.

Dr. Lessen heads Broadpoint.Gleacher’s Convertible Debt Origination effort. He has more than 16 years of experience in the financial services industry and has focused on convertible bond and equity derivative origination, structured finance and corporate risk management. Prior to joining Broadpoint.Gleacher, Dr. Lessen spent 9 years at UBS Investment Bank where he was a Managing Director in the Global Healthcare Investment Banking Group. Dr. Lessen earned BS and MEng degrees in Mechanical and Aero Space Engineering from Cornell University, a Ph.D. in Theoretical and Applied Mechanics from Rensselaer Polytechnic Institute and an MBA from the Johnson Graduate School of Management at Cornell University in 1992.

Mr. Sheer is a Principal at Broadpoint.Gleacher and has more than 12 years of experience in the financial services industry. His background includes private placements of debt and equity and domestic and international merger and acquisition advisory roles in a wide variety of industries. Prior to joining Broadpoint.Gleacher, Mr. Sheer was a Senior Analyst at Pardus Capital, a hedge fund based in New York City focused on investing in debt and equity. He was also a Vice President at Lehman Brothers, focusing on M&A advisory assignments. Mr. Sheer earned his BS in Finance and Economics from Babson College in 1996.

Mr. Partenza has approximately nine years of experience in investment banking and capital markets. Since joining Broadpoint.Gleacher in 2002, Mr. Partenza has worked on more than 80 financings raising more than $10 billion in gross proceeds, including public and private equity and debt capital markets transactions. His experience covers various sectors including energy, healthcare, industrials and technology, among others. Prior to Broadpoint.Gleacher, Mr. Partenza was a member of the Investment Banking group at Robertson Stephens where he was a member of the healthcare and communications teams. Mr. Partenza graduated from Georgetown University’s McDonough School of Business with a BS in Finance.

Lee Fensterstock, Chief Executive Officer of Broadpoint.Gleacher, said, “Perhaps Broadpoint.Gleacher’s greatest opportunity is to assist companies in financing the 2 trillion dollars of bank debt that must be repaid over the next 5 years. Our capital markets team, in conjunction with our banking and sales and trading teams, will play a key role in this effort and we are pleased to have assembled such a talented group.”

About Broadpoint.Gleacher

Broadpoint Gleacher Securities Group, Inc. (NASDAQ: BPSG) is an independent investment bank that provides corporations and institutional investors with strategic, research-based investment opportunities, capital raising, and financial advisory services, including merger and acquisition, restructuring, recapitalization and strategic alternative analysis services. The Company offers a diverse range of products through the Debt Capital Markets, Investment Banking and Broadpoint DESCAP divisions of Broadpoint Capital, Inc., its new Investment Banking financial advisory subsidiary, Gleacher Partners LLC, its Equity Capital Markets subsidiary, Broadpoint AmTech and FA Technology Ventures Inc., its venture capital subsidiary. For more information, please visit www.bpsg.com.

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ValenTx Raises $22 Million

ValenTx Inc., a Carpinteria, Calif.-based developer of minimally-invasive treatments for morbid obesity, has raised $22 million in Series B funding. SV Life Sciences led the round, and was joined by Covidien Ventures and return backers EDF Ventures, Affinity Capital Management, Kaiser Permanente Ventures, TGap Ventures and Sapient Capital Management.

peHUB had previously reported on the round, based on a regulatory filing.

PRESS RELEASE

ValenTx, Inc., announced today the closing of a $22 million Series B Preferred Stock financing. The round was led by SV Life Sciences and joined by Covidien Ventures, as well as all the Company’s existing venture capital investors: Sapient Capital, EDF Ventures, Kaiser Permanente Ventures, Affinity Capital Partners, and TGap Ventures.

“This financing is an important corporate milestone for ValenTx in its development of a proprietary less-invasive treatment for morbid obesity and the diseases, like diabetes, associated with morbid obesity,” said Mitchell Dann, Founder and Principal of Sapient Capital and Chairman of ValenTx’s Board of Directors. “The additional capital resources from our new and existing partners position the company for clinical and regulatory development towards commercialization.”

Paul LaViolette, Venture Partner at SV Life Sciences and most recently Chief Operation Officer at Boston Scientific Corporation, will join the Board of ValenTx. “ValenTx holds the promise of a unique and powerful solution to address the national health issue of obesity,” added LaViolette. “We look forward to working with the ValenTx team to realize this promise.”

James Wright, President of ValenTx commented, “Morbid obesity and the co-morbidities it causes, like diabetes, is a significant unmet medical need. This point is highlighted by the recent CDC study stating that obesity is responsible for over 9% of all medical spending in this country. While we are still early in our development, the encouraging results from clinical study of our technology have been presented at four major scientific meetings. With this financing we will continue our Company’s development with the goal of offering a safe and effective treatment option for morbid obesity to help address the challenge this problem presents to our global community.”

About ValenTx

ValenTx, Inc. is developing a less-invasive, implantable medical device to address morbid obesity. The Company’s founding principle was to emulate the proven mechanisms of bariatric surgery with a minimally invasive implantable device. ValenTx is backed by leading medical technology venture capital investors. ValenTx was originally funded by Sapient Capital, later joined by EDF Ventures, Kaiser Permanente, Affinity Capital Partners, TGap Ventures and most recently SV Life Sciences and Covidien Ventures. ValenTx is based in Carpinteria, California.

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Waterland PE Buys Intertrust

AMSTERDAM (Reuters) - Fortis Bank Nederland said on Friday it sold its trust and corporate management business Intertrust to private equity firm Waterland, removing a potential conflict of interest for the Dutch state.

When Fortis’s Dutch operations were nationalised in Oct. 2008, Intertrust was included in the package — putting the government in charge of a business that helps companies minimise their tax burdens.

Terms of the sale were not disclosed. Fortis Bank Nederland and its former Fortis affiliate BGL said the sale should close by the end of the year, pending regulatory approvals.

Intertrust has more than 1,000 employees in 20 countries. Waterland has a 1.4 billion euro portfolio, including holdings in travel and medical companies and nursing homes.

In a statement, Waterland said it intended to expand Intertrust’s operations through internal growth and bolt-on acquisitions.

(Reporting by Ben Berkowitz; editing by John Stonestreet)

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Kofax Buys 170 Systems

Kofax PLC (LSE: KFX) has acquired 170 Systems Inc., a Bedford, Mass.-based provider of financial process automation software, for an enterprise value of $32.9 million. 170 Systems raised nearly $14 million in 2002 from Polaris Venture Partners.

PRESS RELEASE

Kofax plc (LSE: KFX), the leading provider of document driven business process automation solutions, today announced it has acquired 170 Systems, Inc., a leading provider of financial process automation software, for consideration of $32.9 million, net of cash held by the company. The transaction is consistent with Kofax’s stated acquisition strategy and both management and the Board believe it should position the Company for leadership in the rapidly growing invoice processing market.

170 Systems is privately held, venture capital funded company headquartered in Boston, MA and has approximately 140 employees. The company’s flagship product, the 170 MarkView® Financial Suite, is a proven workflow solution for invoice processing and related accounts payable (A/P) functions that is fully integrated and certified for use with both SAP’s and Oracle’s enterprise resource planning (ERP) software and typically delivers a return on investment (ROI) of less than one year. This is complemented by 170 MarkView Advisor, a real time financial process performance management and cash flow optimization software, and SupplierExpress, a hosted software application that streamlines supplier interaction and enables timely, accurate payments. The company’s customers include Bank of Montreal, BT, ConAgra, France Telecom, Juniper Networks, Reader’s Digest, Sandia National Laboratories, Select Medical, Thomson Reuters, University of Pennsylvania, Verizon Wireless and over 150 other companies.

Commenting on the acquisition, Reynolds C. Bish, Chief Executive Officer of Kofax, said: “This acquisition is in line with our strategy of augmenting our organic growth with the acquisition of synergistic technologies or complementary companies that increase our competitive advantage or expand our market reach. In this specific case it addresses a significant competitive disadvantage we’ve publicly acknowledged and discussed in some detail over the past year, and should therefore allow us to better pursue our revenue growth strategies.”

He continued: “Our continuing profitability and strong balance sheet allowed us to effect this transaction from a position of strength. As a result, we’re able to maintain a comfortable cash position and our $16 million working capital line of credit remains available through September of 2011. Furthermore, excluding non cash charges, we expect this acquisition to be earnings neutral this financial year and accretive in subsequent periods.”

By acquiring 170 Systems Kofax has achieved the ability to deliver a complete invoice processing solution that incorporates paper as well as electronic invoice capture and A/P workflow capabilities. Kofax’s management and Board believe this should allow Kofax to gain a larger share of the invoice processing market which, according to Paystream Advisors, is forecasted to grow from $1.1 billion in 2008 to over $1.8 billion in 2012 at an 18.3% compound annual growth rate (CAGR).

Kofax should realize additional revenue growth opportunities by pursuing the following selling strategies:

Less than 20% of 170 Systems’ customers currently utilize capture software. Kofax’s capture software is already integrated with the 170 MarkView® Financial Suite and Kofax intends to market its capture software to those companies.
According to Paystream Advisors electronic invoice processing is forecasted to be the fastest growing segment of the invoice processing market, growing at a 27.0% CAGR, and most of 170 Systems’ customers do not yet utilize electronic invoice processing software. Kofax’s electronic invoice processing software is already integrated with the 170 MarkView® Financial Suite and Kofax intends to also market this software to those companies.
Most Kofax customers do not have an invoice processing solution and the few that do utilize older or proprietary solutions. Kofax intends to market 170 Systems’ software and solutions to those companies.
Most of 170’s Systems’ sales resources and customers are located in the United States. Kofax intends to market 170 Systems’ software on a global basis through its hybrid go-to-market strategy, which supports both direct customer engagements and indirect sales through over 1,000 channel partners in more than 30 countries.
The 170 MarkView® Financial Suite is a proven workflow solution for A/P functions that can also serve as a flexible platform for automating other financial processes, such as “Quote-to-Cash” or Accounts Receivable (A/R) functions and other departmental activities within large companies. Kofax intends to develop and market additional solutions to further expand its market reach.
170 Systems’ audited financial statements for the year ended December 31, 2008 reported revenues of $28.1 million, a net loss from operations of $2.6 million and gross assets of $20.9 million. During the latter part of 2008 the company restructured its operations with the goal of approximately breaking even on the same level of revenues during 2009 and, on an unaudited basis and excluding expenses relating to this transaction, the company achieved that objective during the first six months of 2009. Kofax expects to effect additional cost savings made possible by its acquisition of the company between now and December 31, 2009.

To acquire 170 Systems, Kofax paid total consideration of $43.0 million or net consideration of $32.9 million after deducting $10.1 million of cash held by the company. Of the total consideration $29.7 million was in cash, $9.0 million was in the form of a note payable due on September 4, 2010, bearing interest at the rate of five percent per annum and guaranteed by Kofax’s bank and $4.3 million in the form of a hold back, with $2.3 million to be released on September 4, 2010 and the remainder on September 4, 2011, subject to certain indemnification terms and conditions.

About Kofax

Kofax plc (LSE: KFX) is the leading provider of document driven business process automation solutions. For more than 20 years, Kofax has provided award winning solutions that streamline the flow of information throughout an organization by managing the capture, transformation and exchange of business critical information arising in paper, fax and electronic formats in a more accurate, timely and cost effective manner. These solutions provide a rapid return on investment to thousands of customers in financial services, government, business process outsourcing, healthcare, supply chain and other markets. Kofax delivers these solutions through its own sales and service organizations, and a global network of more than 1,000 authorized partners in more than 60 countries throughout the Americas, EMEA and Asia Pacific. For more information, visit www.kofax.com.

Kofax is a registered trademark of Kofax plc. 170 Systems and 170 MarkView are registered trademarks and SupplierExpress is a trademark of 170 Systems, Inc. All other trademarks and registered trademarks belong to their respective owners.

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Brad Garlinghouse Joins AOL

Brad Garlinghouse has joined AOL as president of Internet and mobile communications. He also will run the firm’s Silicon Valley operations, including as West Coast lead for AOL Ventures. Garlinghouse most recently was a senior advisor to Silver Lake Partners and, before that, was head of communications and community products for Yahoo.

PRESS RELEASE

AOL today named Brad Garlinghouse as President of Internet and Mobile Communications, spearheading AOL’s global efforts to expand the reach of its e-mail and instant messaging. Garlinghouse will also take on an expanded leadership position for the company, heading up AOL’s Silicon Valley operations from its Mountain View campus and serving as the West Coast lead for AOL Ventures, the company’s venture capital arm headed globally by Jon Brod. Garlinghouse was most recently at Silver Lake Partners as an in-house Senior Advisor. Prior to Silver Lake, Garlinghouse spent nearly six years at Yahoo!, where he led that company’s communications and community products. Garlinghouse will report directly to AOL’s Chairman and CEO Tim Armstrong.

“Brad Garlinghouse is an all-star in the Internet industry with an unparalleled background and proven track record, having led Yahoo’s communications products to unprecedented growth,” said Armstrong. “In addition to leading our efforts to grow our communications products, Brad will be bringing his global leadership and business experience as a key member of our company’s executive leadership team. He will also be a major force for AOL in Silicon Valley, working to expand our presence there and in the tech community in general. We’re delighted to have Brad on board and know he’ll do great things for AOL.”

“It’s a tremendous opportunity to join AOL at this pivotal moment in its history,” Garlinghouse said. “Tim has set out a clear strategy and vision for where he is taking this company as it becomes independent again. I’m looking forward to working with him and the rest of the team to realize that vision.”

Armstrong, who joined AOL in April, identified Communications as one of the five key areas of strategic focus for AOL after an extensive 100-day review of the company’s business. Other focus areas include Content, Advertising, Local & Mapping and AOL Ventures.

Garlinghouse spent nearly six years at Yahoo! where he most recently served as SVP of Communications and Communities. Prior to that he served as SVP of Communications, Communities and Front Doors, which included the Yahoo! home page. He came to Yahoo in 2003 as VP, Communication Products. During his time there, Yahoo! Mail went from No. 3 to leading all competitors by a wide margin, and the company’s instant messaging service rose to become the leader in that market as well. Garlinghouse also oversaw the company’s Flickr photo-sharing service and Yahoo! Groups.

Prior to Yahoo!, Garlinghouse was CEO of Dialpad.com Inc., responsible for all aspects of the company’s operations, finance, sales and marketing. He was also General Partner at @Ventures, Category Manager of Media Development for the @Home Network, Inc., and Manager at SBC Communications.

Garlinghouse, 38, received his BA in economics from the University of Kansas and his MBA from Harvard Business School.

About AOL

AOL is a leading global Web services company with an extensive suite of brands and offerings and a substantial worldwide audience. AOL’s business spans online content, products and services that the company offers to consumers, publishers and advertisers. AOL is focused on attracting and engaging consumers and providing valuable online advertising services on both AOL’s owned and operated properties and third-party websites. In addition, AOL operates one of the largest Internet subscription access services in the United States, which serves as a valuable distribution channel for AOL’s consumer offerings. AOL LLC is a wholly owned subsidiary of Time Warner Inc. with employees in 18 countries across the globe.

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RHEA Investments Buys Istanbul VC Trust

RHEA Investments, an Istanbul-based private investment firm, has agreed to buy the controlling shares of Vakif Risk Sermayesi Yatirim Ortakligi AS (ISE: VKFRS), a venture capital trust with a market cap of approximately $6.5 million.

PRESS RELEASE

Istanbul based RHEA Investments, a private investment office and asset management platform with interests in real estate, healthcare, renewable energy and agriculture announced today that it had signed a definite agreement to purchase all of the controlling shares of of Vakif Risk Sermayesi Yatirim Ortakligi A.S. (Vakif Venture Capital Investment Trust), an Istanbul Stock Exhange listed joint stock company (ISE stock code: “VKFRS”). The share sale agreement has been approved by the Boards of Directors of both RHEA and Vakıfbank.

Vakif Venture Capital Investment Trust (“VVCIT”) has been established in June 1996, and listed on Istanbul Stock Exchange in July 2000. VVCIT has been the first venture capital investment trust established in the country and led the formation of regulation on private equity / venture capital investing in the country. VVCIT has a market value of around TL10mn (US$6.5mn) and assets of the company are in fully liquid instruments at this time.

Onur Takmak reflected “As a company aspiring to become a leading regional alternative investment management platform in the EMEA region, RHEA is proud to inherit such prestigious history, and carry the flag to further successes. Going forward, we are aiming to dramatically expand VVCIT’s capital base and provide local and international retail and institutional investors the opportunity to co-invest and access attractive Turkish and Regional investment opportunities together with us.”

RHEA expects the transaction will be closed in the 4th Quarter of 2009 following approval from the Capital Markets Board of Turkey.

About RHEA Investments

RHEA is a private investment office established as an institutional quality and independent asset management platform with interests within and outside Turkey. RHEA platform has been launched by mid-2006, with extensive global investment management experience of its management.

RHEA is under the management of Mr. Onur Takmak who has gained international recognition in global asset management industry in London as a portfolio manager of a global opportunistic investment fund. Currently, Mr. Takmak is also an independent investment committee member of EUR 160mn IVCI Fund (Istanbul Venture Capital Initiative) managed by European Investment Fund (EIF) out of Luxembourg.

RHEA’s management team encompasses senior directors having vast local and international experience in Private Equity and Real Estate Development. Recently, RHEA added the Venture Capital and Private Equity fund management team of Stowbridge Partners and named Mr. Memet M. Yazici as its Head of Asset management.

RHEA has offices and presence in 2 locations in Turkey (Izmir and Istanbul); Dubai, UAE; Bucharest, Romania; London, UK. More information is available at www.rhea.com.tr.

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Arx Equity Raises €102 Million

Arx Equity Partners (fka DBG Eastern Europe), a private equity firm focused on lower-mid-market opportunities in Central and Eastern Europe, has held a €102 million second close on its third fund, which is targeting €125 million. It had held an €83 million first close last October.

PRESS RELEASE

Arx Equity Partners (“Arx Equity”), the leading lower mid-market private equity firm focused on Central and Eastern Europe, has completed the €102m second close of its third fund, Arx III, on schedule to reach its €125m target.  Arx III completed its €83m first close in October 2008 from a number of blue chip global financial institutions.  Arx Equity has been successfully investing in CEE since 1998.    

The fund’s core focus continues to be succession-driven buyouts, where Arx Equity has an established track record as a valued investment partner. Arx Equity has a strong locally based team and has completed more buyouts to date than any private equity group in the CEE lower mid-market.

In recent years, CEE has become an increasingly attractive market for investment and, selectively, continues to offer risk-adjusted value creation opportunities.  EU membership has brought financial stability for core CEE countries.  The geographic proximity of CEE to the markets of Western Europe, coupled with highly skilled and lower-cost labour markets have contributed to rapid economic growth. In addition, the maturing legal and financial framework has enabled leveraged buyouts to become more established.

The lower end of the mid market offers a multiplication of investment opportunities compared to the larger end, with significantly less competition. Arx III has already made 2 investments; Kakadu, a leading Polish pet product retailer and Lexum, a healthcare business based in the Czech Republic.  The fund will continue the proven investment strategy of previous funds, focusing on stable, cash-generative mid-market businesses across the CEE region. Equity investments in the fund will range between €3m-€15m, with deal enterprise values ranging between €10-€50m.

Arx Equity, formerly known as DBG Eastern Europe, was sponsored by Deutsche Beteiligungs AG from inception through early 2008. ARX Equity is now fully independent.  Its first two funds, DBG I and DBG II raised €46m and €67m in 1997 and 2003 respectively. DBG I returned €190m net to investors, and ranks as one of the best performing funds in the CEE region. To date, DBG II’s current portfolio has demonstrated resilience to the current economic downturn, with no write-offs, limited write-downs plus three profitable full or partial exits.

Brian Wardrop, Co-Managing Partner, Arx Equity commented: “We are delighted to have achieved the second close of Arx III, on target, and in an extremely difficult fundraising environment. Our ability to attract new investors, while continuing to maintain interest from investors in our earlier funds, shows the strength of our market leading track record, as well as the attractiveness of our investment model in the current environment. Even though Arx III is larger than our previous funds, we remain firmly focused on our target investment size and market, namely established small to mid-sized businesses across CEE.”
 
Jacek Korpala, Co-Managing Partner, Arx Equity commented: “We perceive the current investment environment in CEE as particularly attractive for established investors who really understand the local market.  Acquisition finance is still available in certain CEE countries, for lower mid-market deals, and while there are few alternative sources of exit liquidity, there are also a large number of business owners who have over-extended into non-core ventures.  All of these factors play to our proven strengths.”

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BNP Planning $300 Million Gulf PE Fund

DUBAI (Reuters) - French bank BNP Paribas (BNPP.PA) may raise up to $300 million for a private equity fund active in the Gulf Arab region to tap opportunities arising from the financial crisis.

BNP is looking to raise $150 million in the first phase by mid-October and possibly a further $150 million later, its regional chief executive, Jean-Christophe Durand, told reporters late on Monday.

Private equity in the Middle East is expected to pick up again by the year-end, as banks become more willing to lend.

In addition, local governments are pouring billions of dollars in transport, infrastructure and healthcare projects, offering opportunities for private equity firms to start investing again.

BNP will contribute 25 percent to the fund, while the remainder will come from large regional investors, Durand said, adding the fund “will be opportunistic and GCC focused,” expecting an uptick in merger and acquisition activity across the world’s largest oil exporting region.

BNP’s fund is the latest signal private equity is gaining traction in the Gulf.

On Monday, Abu Dhabi-based investment bank National Investor said it was setting up a $150 million Islamic fund, while Qatar’s QInvest said last week it had launched a $200 million fund with Fortis Bank Nederland [FORTH.UL] to take advantage of falling asset prices in the shipping sector.

With its local headquarters in Bahrain, BNP Paribas is one of the biggest players in fixed income and project finance regionally. (Reporting by Nicolas Parasie; editing by John Irish and Dan Lalor)

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Rosso Raises $2 Million from Austin Ventures

Rosso Corp., a consumer-focused Internet startup operating in stealth mode, has raised $2 million in first-round funding from Austin Ventures. The company was founded by Manuel Rosso, an AV entrepreneur-in-residence since last November.

PRESS RELEASE
Rosso Corporation, a consumer-focused Internet Content Company operating in stealth mode, today announced that it has secured $2MM in early-stage funding from Austin Ventures, one of the nation’s leading venture capital firms. The funding will be used to accelerate development of the core technology and launch the product.

In November 2008, Mr. Rosso was named Entrepreneur-in-Residence (“EIR”) with Austin Ventures and has spent the last ten months researching ideas to launch a new company that leveraged his background in the Consumer Internet space.

“Austin offers the exact combinations of talent and creativity to succeed in the Consumer Internet space, said Manuel Rosso, founder and CEO. “Austin Ventures has been a phenomenal partner helping me get this company started. Their network and Tom’s expertise in the consumer space have been invaluable to me over the last year”.

“Manuel’s strong Internet marketing expertise coupled with his proven leadership abilities will be instrumental in taking this company to market. We are very pleased to collaborate with the Rosso team and look forward to introducing them into our network of professionals, partners, and customers,” said Thomas Ball, Partner, Austin Ventures.

About Austin Ventures

Austin Ventures (“AV”) has worked with talented entrepreneurs to build valuable companies for nearly twenty-five years. With $3.9 billion under management, AV is the most active venture capital and growth equity firm in Texas and one of the most established in the nation. With an investment focus on business services and supply chain, financial services, media and information services, software and Internet, and Texas special situations, AV invests at all stages of company development, from $100,000 in “planned experiments” in early stage ideas to $100+ million investments in expansion rounds, minority recapitalizations, and buyouts of lower middle market growth companies. AV’s strategy is to partner with talented executives and entrepreneurs through its CEO-in-Residence and Entrepreneur-in-Residence programs. Visit austinventures.com for more information.

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Bain, CVC, Permira Short-Listed for Bellsystem24

TOKYO (Reuters) - Permira, CVC Capital and Bain Capital have been shortlisted for the second round of bidding for Bellsystem24, Citigroup’s (C.N) telemarketing company in Japan, sources with direct knowledge of the deal said.

The sale of Bellsystem24 is expected to fetch more than $1 billion, making it the largest acquisition involving foreign private equity firms in Japan in about two years, and marking the latest in a series of asset sales by Citigroup.

Citigroup has been offloading assets globally to bolster its capital and Bellsystem24 is slated as its last big sale in Japan, having already parted with its asset management and brokerage arms earlier this year.

A joint bid by Kohlberg Kravis Roberts & Co [KKR.UL] and trading house Itochu Corp (8001.T) did not put them on the shortlist, four sources said, asking not to be identified because the bidding process is not public.

Goldman Sachs Group Inc (GS.N) and Nikko Citigroup Ltd, who are advising Citigroup on the transaction, started informing bidders of the results of the first bid on Friday, the sources said, after the first round closed on Sept. 1.

Those selected for the second round will be required to submit their next bids by early November.

Permira is expected to bid for Bellsystem24 on its own, while CVC Capital and Bain Capital may team up with other funds or strategic buyers, sources said.

The sale of Bellsystem24 was originally scheduled for last year but was delayed as the credit crisis deepened, making it difficult for would-be buyers to procure funds.

The deal has been estimated at between $1 billion and $1.5 billion, which would be the biggest transaction involving foreign private equity since October 2007 when Permira agreed to buy agrichemical company Arysta LifeScience Corp for $2.2 billion.

Permira has not made any investments in Japan since then.

Bellsystem24, which operates call centres, competes against Moshi Moshi Hotline Inc (4708.T) and Transcosmos Inc (9715.T) in Japan.

By Junko Fujita

(Additional reporting by Wakako Sato and Emi Emoto, editing by Will Waterman)

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TPG Buys Into Russian Supermarket Chain

MOSCOW (Reuters) - Private equity firm TPG Capital and the private equity arm of Russian state bank VTB (VTBR.MM) bought a large stake in Russian hypermarket chain Lenta, banking sources told Reuters on Monday.

Their comments followed a report in Kommersant business daily that TPG and VTB had teamed up to buy 35.4 percent in Lenta for between $110 million and $115 million. TPG Capital, VTB Capital and Lenta declined comment.

Lenta had earlier planned to tender an 89 percent stake in the company belonging to its key private shareholders with the exception of the European Bank for Reconstruction and Development, which owns the remaining 11 percent.

Sources had named Wal-Mart (WMT.N), the world biggest retailer, as well as France’s Carrefour (CARR.PA) as the main potential bidders.

TPG and VTB bought the stake from Oleg Zherebtzov, the founder of Lenta, who scrapped an earlier option agreement on the share sale with private equity fund Marshall Capital Partners, Kommersant reported.

Lenta is Russia’s fifth largest retailer with 36 hypermarkets in 17 cities and had sales of $2.34 billion in 2008.

(Reporting by Dmitry Sergeyev; Editing by David Holmes)

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China Merchants Sets Up Private Equity Unit

SHANGHAI (Reuters) - China Merchants Securities has set up a unit to invest in pre-IPO companies, bringing to 15 the number of Chinese brokerages with a private equity licence, Securities Times reported on Monday.

China Merchants’s private equity unit, with 100 million yuan ($14.64 million) in registered capital, will invest in industries including manufacturing, new energy, media, modern agriculture and healthcare, said the newspaper, which is affiliated to the Shenzhen Stock Exchange.

So far, 15 Chinese brokerages, including China Citic Securities (600030.SS), Guoyuan Securities (000728.SZ) and Changjiang Securities Co 000783.SZ have been allowed by regulators to start private equity investment, with more than 10 billion yuan raised so far for the business, the newspaper said.

China is encouraging private equity investment as it seeks to channel more money into the private sector to help sustain an economic recovery supported by state-backed stimulus measures.

The rush for private business by brokerages comes ahead of the planned launch of a Nadaq-style second board in Shenzhen. (US$1=6.832 Yuan)

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Vina Capital Sells Hilton Hanoi Stake

(Reuters) - VinaCapital, Vietnam’s largest asset manager, said on Monday it has sold its 70 percent stake in the Hilton Hanoi Opera hotel to a Vietnamese firm.

VinaCapital did not identify the buyer or reveal the price it received for its stake in the landmark hotel, although it said the sale would result in an internal rate of return of 23 percent over three years. The firm had bought the stake in July 2006.

The 5-star 271-room colonial-style Hilton Hanoi Opera is located in Hanoi’s French Quarter beside the Opera House and has been designated a historic landmark property by Vietnamese authorities. (Reporting by Kevin Lim; Editing by Valerie Lee)

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Kai-Fu Lee Forms Chinese Business Incubator

Kai-Fu Lee, who last week resigned as president of Google China, has launched Innovation Works, an incubator for Chinese IT startups. It has been funded with $115 million, including from lead investor WI Harper Group. Other backers include Steve Chen (co-founder of YouTube), Terry Gou (chairman of Foxconn), Liu Chuanzhi (chairman of Legend Group) and Yu Minhong (chairman of New Oriental).

PRESS RELEASE

Dr. Kai-Fu Lee announced today that he has resigned from Google as Google Vice President and President of Google Greater China to launch Innovation Works, a business creation platform focused on establishing the next wave of Chinese high-technology companies and mentoring the next-generation of Chinese entrepreneurs. Innovation Works will concentrate on Internet, mobile computing, and cloud computing technology advancements targeted at the Greater China market, and build “dream teams” to collect, analyze, prioritize and execute on the most promising ideas.

Innovation Works will be funded with $115 million from an elite group of venture investors including Steve Chen (Co-Founder of YouTube), Terry Gou (Chairman of Foxconn), Liu Chuanzhi (Chairman of Legend Group) and Yu Minhong (Chairman of New Oriental). WI Harper Group is the lead venture capital investor.

“The Chinese entrepreneurial environment is still in its formative stage, with significant barriers for the early-stage entrepreneur: the lack of management experience and coaching, the reluctance of venture capitalists to invest in early-stage companies, and the lack of networking and experience to pull a company together,” said Dr. Lee.  “These barriers all contribute to a dearth of high-tech start-ups.  Innovation Works is matching entrepreneurs, engineers, ideas, and capital with a unique business model that improves success rates and speeds time-to-market.”

Dr. Lee continued, “Innovation Works will be the de-facto institution for launching the most promising technology ideas in China.  Through the rigorous development and testing of prototypes, and identification of a ‘founding executive’ to lead the venture, Innovation Works will provide capital, manpower, legal, financial and IT support, so that entrepreneurial teams can focus on building great products without distraction.  Innovation Works helps accelerate the entrepreneur’s ability to prove ideas, obtain additional external funding, and then spin-off into an independent company.”

Mr. Liu Chuanzhi, Chairman of Legend Group, supports this vision,  “With the resilience of the Chinese economy, the abundance of late-stage funding, the newly established China Growth Market Second Board, the emerging 3G and cloud computing, and the exceptional talent pool in China, this is the perfect timing for Dr. Lee’s Innovation Works platform.”

Terry Gou, Chairman of Foxconn, said: “I have known Dr. Lee since he worked for Apple, and I have followed Dr. Lee’s brilliant work from Apple to Microsoft to Google.  I am confident that his creative ideas and charismatic leadership will be fully unleashed at Innovation Works.  I am very pleased to be one of the founding investors of his new venture.”

Added WI Harper Chairman Peter Liu, “Every year Innovation Works will spin-off three to five companies and WI Harper is delighted to help those companies build an institutional investor syndicate to grow and flourish.   Dr. Lee’s experience positions him perfectly to guide these new ventures to successful outcomes, and in doing so deliver value to all shareholders.”

Said Steve Chen, co-founder of YouTube, “As a co-founder of YouTube and PayPal, I deeply believe that passion and dedication are critical success factors of start-ups.  Every time I visited China, I am encouraged by the enthusiasm and commitment shown by the entrepreneurs there.  I am convinced that Innovation Works will provide the best platform for these entrepreneurs to realize their dreams. ”

Dr. Lee is a seasoned business executive with rich experience in the China market. During his tenure at Google, Dr. Lee built a 700-person organization with many successes.  In the past three years, Google China’s market share nearly doubled from 16.1% to 31.0% (Analyses International).  Google Map, Google Mobile Map, Mobile Search, and Google Translate have all become #1 in the China market this year.

“I have been very fortunate,” said Dr. Lee. “Google gave me an opportunity to build Google China from the ground up and we rapidly earned market share and revenue growth.  I am very proud of the talented team that created the most accurate and complete Chinese search engine and over 50 other successful products.  Google China proved that, contrary to our predecessors, foreign Internet companies can prosper in China.”
In addition to his accomplishments in high technology, Dr. Lee has been devoted to fostering the professional growth of Chinese technology students.  He has given hundreds of lectures to about 500,000 students, and has written seven public letters and three books for Chinese students.  His first book, Be Your Personal Best, sold over one million copies and is still on many best-seller lists.  Dr. Lee has built his own website for Chinese students (www.5xue.com) and answered thousands of questions from students.  Dr. Lee is one of the most popular figures with young people in China.  Today’s announcement provides a new platform for Dr. Lee to not only guide young students, but also mentor aspiring entrepreneurs.

More about Dr. Kai-Fu Lee:
Dr. Lee, 47, was born in Taiwan and grew up in the United States.  He holds a B.A. from Columbia University (summa cum laude, 1983), and Ph.D. from Carnegie Mellon University (CMU).  At Carnegie Mellon, he developed the first speaker-independent speech recognition system that was selected as the “Most Important Innovation” in 1988 by BusinessWeek.  In 1989, he developed an Othello-playing computer program that defeated the world’s human champion.

After teaching for two years at CMU, Dr. Lee joined Apple in 1990, where he became the Vice President of its Interactive Media Group, which developed QuickTime and other technologies.  In 1996, Dr. Lee joined Silicon Graphics Inc. (SGI) where he served as Vice President of the Web Products Division, which developed a $200 million product line of web servers, and also started Cosmo Software.

In 1998, he joined Microsoft where he built from the ground up Microsoft Research Asia, one of the world’s top research labs.  MIT Technology Review calls this research lab “the hottest computer science laboratory.”  Dr. Lee was promoted to Corporate Vice President in 2000, and he returned to the United States to co-lead Microsoft’s .Net effort.

In the fall of 2005, Dr. Lee joined Google to become a Vice President and its President of Google Greater China.

About Innovation Works:
Founded in September 2009 and led by Dr. Kai-Fu Lee, Innovation Works is a business creation platform focused on establishing the next wave of Chinese high-technology companies and mentoring the next-generation of Chinese entrepreneurs.  Innovation Works will concentrate on Internet, mobile computing, and cloud computing technology advancements targeted at the Greater China market, and build “dream teams” to collect, analyze, prioritize and execute on the most promising ideas. Innovation Works matches entrepreneurs, engineers, ideas, and capital with a unique business model that improves success rates and speeds time-to-market.

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Stream5 Raises New VC Funding

Stream5, a Munich-based provider of online video technology, has raised a “seven-figure sum” of new VC funding. KfW and angel Klaud Wecken were joined by return backers DuMont Ventures and Tiburon Partners.

PRESS RELEASE

stream5, one of Europe’s leading online video technology providers, has secured fresh capital. Under the leadership of existing shareholders, DuMont Venture and Tiburon Partners, new investors KfW and private investor Klaus Wecken have climbed aboard. The financing involved is a seven-figure sum. stream5 will use the capital to finance the continuing development of its technologies. The Munich enterprise has set itself the goal of becoming the number one provider of this technology.

Private investor Klaus Wecken says: “It’s fun to invest in such a competent team, especially when it’s in an exciting field of the future, such as Internet TV and online video.” An opinion shared by Jorg Binnenbrucker, Managing Director of DuMont Venture: “Since our initial investment in May 2008 we have been supporting this dynamic enterprise in its conquest of the Internet TV market. We are very confident that stream5 will continue its success story.” Binnenbrucker goes on to note that “Web TV is bound to become ever more prevalent as a new marketing channel, and stream5 is undoubtedly among the trendsetters in Internet TV and video, both on a technological and conceptual level.”

“Right from the start stream5 impressed us with their technological approach,” notes Andreas Brinkrolf, a director of Tiburon Partners. “Its successful progress has vindicated our initial decision to invest in stream5 over two years ago.”

The new tranche of financing means that stream5 will be able to continue pursuing its growth targets in the long term. ‘Our goal is…

Find the complete English press release on our website at http://www.stream5.tv/news-uebersicht/ - Download Pressemeldung.

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