DEALS OUTPACE FUNDS

A surge in US buyouts last year brought private equity investment activity near the fevered pace of the late 1990s, according to a recent survey by PricewaterhouseCoopers, Venture Economics and the NVCA. Over the same period, private equity fundraising fell for a third year in a row. Technology deals represented a small proportion of the overall activity, although this is in line with historic norms.

Across North America, total private equity investment increased 67 percent to $108.2 billion, up from the previous year's $64.6 billion. Of the 2003 total, $89 billion was invested in buyouts, a 114 percent increase over 2002, which saw $41 billion in buyouts. According to the survey, 2003 saw the greatest North American buyout activity in 15 years.

Venture investment activity in North America edged up 6 percent to $27.5 billion.

Private equity funds raised in North America fell to $45.3 billion in 2003, down from 2002's $57 billion and well below the $180.5 billion raised in 2000, according to the survey.

In 2003, private equity and venture capital investment around the world surged 43 percent to $155 billion (€128 billion), up from 2002's $102 billion, according to the report.

KKR CLOSES THREE MAJOR DEALS
In 2004's largest US private equity deal, the New York buyout giant has announced an agreement to buy satellite operator, PanAmSat from its majority stakeholder, DirectTV Group. KKR beat out two consortia of private equity firms including Blackstone, Carlyle and Providence Equity; and Thomas H. Lee Partners, Bain and Quadrangle. Folding approximately $750 million of assumed debt into the mix, the deal's total value is $4.3 billion (€3.6 billion).

KKR also spearheaded a $250 million (€206 million) series B financing for Jazz Pharmaceuticals, in what is considered to be one of the largest second round financings on record for a specialty pharmaceutical company without any commercialized drugs. Returning investors Prospect Venture Partners and Versant Ventures were joined by newcomers that included Beecken Peety O'Keefe & Co., Golden Gate Capital and Thoma Cressey Equity Partners. The second round of funding dwarfs the neurological and psychiatric disorders drug maker's previous $15 million series A fundraising completed in April 2003.

Also this month, KKR portfolio company Rockwood Specialties announced its intent to buy four businesses of German chemical company Dynamit Nobel, thereby creating one of the world's largest specialty chemicals companies with revenues of $2.5 billion. CSFB Private Equity, as well as internal company sources, are providing additional capital for the purchase.

AEA-LED GROUP CASHES IN ON NOVEON
The consortium, which also comprises DLJ Merchant Banking Partners, a division of CSFB Private Equity, and MidOcean Capital, formerly part of DB Capital Partners, has agreed to sell off specialty chemicals maker Noveon to publicly traded fluid technology company Lubrizol for $1.84 billion (€1.55 billion). The deal comprises about $920 million in cash and assumption of net debt, reported at $920 million at the end of 2003. New York-headquartered AEA Investors and its co-investors acquired Noveon in February 2001 for about $1.4 billion when they bought out the performance materials division of global aerospace company BFGoodrich.

CD&R BUYS LAB SUPPLIER, SELLS JAFRA
Clayton, Dubilier & Rice, the New York buyout house has completed a $1.65 billion (€1.4 billion) buyout of VWR, a US-based global distribution platform of laboratory supplies. CD&R put $450 million of its own equity towards the deal from its $3.5 billion Fund VI in the acquisition from German pharmaceuticals group Merck. Co-investors Citibank and Bank of America each contributed $35 million to the deal. Prior to this acquisition, CD&R agreed to sell its 84 percent stake in Jafra Cosmetics International to Germany-based household appliance and consumer products company Vorwerk. A source close to the deal said the sale will yield CD&R approximately five times return on capital invested into the company. CD&R bought Jafra back in 1998 from Gillette for $200 million.

NORTH CASTLE RECAPS TO GOLDEN GATE
The private equity firm's recapitalisation of vitamin maker Leiner Health Products, valued at $650 million (€546 million) includes the sale of its more than 80 percent stake bought in 1997. The deal will provide a return of approximately three times capital with an IRR of 17 percent for the seven-year holding period. As part of the recap, San Francisco-based Golden Gate and a new ‘fund investment vehicle’ managed by North Castle will cosponsor an investment of approximately $265 million into Leiner.

JLL PARTNERS IN $1BN PHARMA BENEFITS BLOWOUT
The veteran New York buyout firm completed its sale of pharmacy benefits manager AdvancePCS to Caremark Rx, a publicly traded pharmaceuticals services provider, in a deal roundtrip that nets the firm about $850 million (€714 million) in profits. JLL originally invested $150 million in AdvancePCS in 2000 through a buyout from drug-store chain Rite Aid. Last year, Caremark acquired the company for $7 billion, sending $1 billion in proceeds to JLL Partners and netting the firm an 81 percent IRR.

GOLDMAN SACHS CELEBRATES $540M EXIT
Private equity firms Berkshire Partners and Weston Presidio have agreed to purchase party goods maker Amscan from the global investment bank's buyout arm. As part of the transaction, Goldman Sachs has agreed to refinance Amscan's debt, which is in the form of public bonds. A year ago, Amscan, which in 2003 reported sales of $403 million (€338 million), had decided not to go ahead with a planned initial public offering aimed at raising $180 million.

ARES, JP MORGAN RECAP HOUSE OF BLUES
Los Angeles-based middle market investor Ares Management teamed with New York-based JP Morgan Partners in a $110 million (€92 million) recapitalisation of the entertainment venue company. Ares is investing $30 million in preferred and common stock, with JP Morgan providing an additional $5 million. Banc of America is providing debt facilities for the remaining amount. House of Blues Entertainment operates seven 1,000 to 2,000 capacity clubs in the US that are used for live music performances. The influx of capital is intended to allow the company to expand into markets in the US and eventually Europe.

APAX, SPECTRUM SCORE A BROADCASTER
The two private equity firms have agreed to buy NEP Broadcasting from Wachovia Capital Partners in a deal worth $320 million (€270 million). Apax Partners and Spectrum Equity Investors have each committed an equal amount towards the transaction, with some debt financing coming from Wachovia. NEP provides outsourced equipment and services for live feeds of sports and entertainment events, including the Super Bowl, the Olympic Games and the Academy Awards.

ADVENT BUYS INTO HEALTHCARE INSURANCE SECTOR
Global private equity firm Advent International, in partnership with Hartford, Connecticut Conning Capital Partners, has announced a $130 million (€109 million) buyout of Long Term Care Group, a provider of outsourced services to the long-term healthcare insurance industry. Advent will contribute $46 million in equity, Conning Capital will contribute $23 million and LTCG management will contribute $6 million. Advent has also purchased a controlling interest in J. Malucelli Seguradora, a provider of ‘surety bonds’ in Brazil, from the J. Malucelli family group. The company's bonds are used to guarantee contractual obligations between private companies, such as construction firms. Advent calls Brazil's surety bond market ‘underdeveloped,’ as the country is one of the last in Latin America to deregulate its reinsurance market.

According to Apax partner Salem Shuchman, who heads the firm's US leveraged transaction group, NEP has a strong customer base since most networks now outsource their live broadcasts due to the technical and equipment demands of mobile broadcast production. With the advent of high-definition television (HDTV), he said NEP is strong since it has the necessary expertise and equipment necessary for HDTV production.