DE SHAW'S PRIVATE EQUITY PLAY

New York hedge fund giant DE Shaw is notoriously enigmatic, which is perhaps to be expected in a firm that is doing much to blur the lines between alternative asset classes.

Last month, the firm backed a $575 million (€429 million) take-private of insurance holding company James River Group. A day after the agreement was made public, the firm announced it had hired The Blackstone Group's Darcy Bradbury as its first external affairs director.

Formerly a managing director and co-head of the client relationship and marketing team for Blackstone's hedge fund division, Bradbury was hired to communicate with the government and the media in light of the firm's broadening business activities, DE Shaw managing director Trey Beck said in a statement.

Six days following Bradbury's hire, DE Shaw, founded by David Shaw, expanded its private equity team with the appointment of David Lyon, a former partner with New York private equity firm The Cypress Group. Lyon joined DE Shaw's special situations/distressed team, which was born with the hiring late last year of senior vice president Patrick Collins, the former head of a similar team at Mizuho International.

DE Shaw's private equity push in June follows an April report in the Financial Times that the firm will create a dedicated private equity fund, and the February appointment of former JPMorgan pro Liang Meng as head of its new Greater China private equity division.

The 19-year old hedge fund has been active to some extent in private equity and venture capital for at least 15 years. In 2004, the firm spent more than $60 million purchasing three distressed retail companies: eToys, the online assets of KB Toys; high-end specialty toy seller FAO Schwarz; and slipcover company Sure Fit.

The firm officially organised its private equity division under Louis Salkind two years ago, according to reports. Salkind, a senior executive who joined the firm in 1991, oversees investment teams that focus on areas including venture, buyouts, and special situations as well as regions like China and India. DE Shaw characterises itself as a “global investment and technology development firm” that manages approximately $30 billion in capital. DE Shaw declined to comment.

US TAKE-PRIVATES SURGE
New statistics from Dealogic show that the value of private equitybacked privatizations in the US now represent nearly one-fourth of the total M&A market, or $167 billion (€124 billion). The recent increase is striking. As recently as 2005, US private equity-backed take-privates were only 4 percent of the market. Globally, finance sponsor-backed mergers and acquisitions are also rapidly increasing in volume. Second quarter deals for 2007, at $230 billion, are up 17 percent over the first quarter. Deals involving Kohlberg Kravis Roberts account for 31.4 percent of all buyout deals by value so far this year.

CONSORTIUM PAYS $10BN FOR HOME DEPOT DIVISION
The Carlyle Group, Clayton Dubilier & Rice and Bain Capital have teamed up to pay $10.3 billion (€7.7 billion) for the wholesale distribution business of Home Depot, the world's largest home improvement retailer. The three firms trumped a bid by Thomas H. Lee Partners and CCMP Capital. In February, Home Depot said it was exploring strategic alternatives for the business, and retained Lehman Brothers as its financial advisor (see p. 52).

FORTRESS, CENTERBRIDGE BUY GAMING COMPANY FOR $8.9BN
Fortress Investment Group and Centerbridge Partners have announced an agreement to buy publicly-traded Penn National Gaming, which operates casinos and horse-racing facilities in 14 US states, for $8.9 billion (€6.7 billion). The two firms will pay shareholders $67.00 in cash for each share outstanding in order to take the company private. The deal is the latest in a recent trend of private equity firms to invest in the gambling industry despite its risks and the complexity of licensing procedures, including Apollo Management, Texas Pacific Group, and Oaktree Capital Management. Publicly traded Fortress is based in New York, and manages $19.9 billion in private equity funds. Centerbridge's debut fund closed on $3 billion in September of last year.

TEACHERS' ENTERS BIDDING FOR CANADA'S BCE
The private investment arm of the Ontario Teachers' Pension Plan, Teachers' Private Capital, have entered the battle between Canada's pension funds for the coutnry's telecom giant, BCE. Teachers', like the other Canadian pensions expected to bid, has partnered with a US-based private equity firm, Rhode Island-based Providence Equity Partners. The Hospitals of Ontario Pension Plan has partnered with Cerberus Capital Management, and Caisse de dép^t et placement du Québec and Canada Pension Plan Investment Board have partnered with Kohlberg Kravis Roberts. Should a deal with any of these three groups come to fruition, it would be the largest ever Canadian buyout. The participation of domestic pensions may ease Canadian concerns that a domestic asset will be foreign-owned.

TH LEE, FIDELITY TO PAY $5.3BN FOR CERIDIAN
In yet another private equity deal in the popular payment processing space, Thomas H. Lee and Fidelity National Financial have worked out an agreement to buy Minneapolis, Minnesota-based Ceridian, a payment processing company, for $5.3 billion (€4 billion). The two firms will jointly invest in the all-cash deal, though they are expected to bring in co-investors. The deal is expected to close in the fourth quarter. FNF and TH Lee teamed up last year, along with Evercore Partners, to purchase business services firm Sedgwick for $635 million. They also co-invested $500 million in Fidelity National Information Services, along with TPG and Banc of America.

TPG, SILVER LAKE WIN AVAYA FOR $8.2BN
TPG and Silver Lake Partners have emerged victorious in a fight with Nortel Networks and and Cisco Systems to buy Lucent Technology spin-out Avaya. The two firms paid $8.2 billion (€6 billion) for the partlisted company. This is the latest in a recent spate of private equity activity in the telecoms sector. In May, Goldman Sachs and TPG agreed to buy US wireless provider Alltel for $27.5 billion. Analysts predict the impending buyout of Canadian telecom firm BCE will be the largest ever private-equity deal in the sector.

CONTAINED IPO FOR KELSOBACKED COMPANY
BWAY Holding, a portfolio company of New York private equity firm Kelso & Company, last month went public at $15 per share in a roughly $150 million offering. The valuation was lower than expected and more than 1 million shares less than originally planned. SEC documents originally put the expected IPO in the $16 to $18 range. BWAY Holding, based in Atlanta, makes metal and plastic containers such as buckets. Kelso originally took the company private in 2003 for roughly $174 million. Including assumed debt, the transaction was worth roughly $330 million. Filings revealed that Kelso had been paid an annual “advisory fee” of $495,000 by BWAY, and that with the IPO, the company will pay the private equity firm a one-time termination fee of $5 million.

CARLYLE TO BUY CHEMICAL FIRM FROM CCMP FOR $1.5BN
The Carlyle Group has agreed to buy a former JP Morgan Partners portfolio company, Niagara Holdings, from JP Morgan spin-out CCMP Capital Advisors in a $1.5 billion (€1 billion) transaction. Niagara is the parent company of PQ Corporation, a maker of specialty chemicals, catalysts, and engineered glass products. Like many private equity firms, Carlyle has already invested in the chemicals space. Last year, it invested in Stahl, a Dutch developer, manufacturer, and distributor of specialty chemicals. The deal is expected to close in the third quarter of 2007.

SUMMIT UNCORKS NEW INVESTMENT
US private equity firm Summit Partners has invested an undisclosed amount in North Carolina-based Noël Group, a manufacturer of synthetic wine closures. Kevin Mohan, a general partner in Summit's Boston office, said the private equity firm was attracted to Nomacorc in to outstanding growth prospects in the synthetic wine closure market. Nomacorc founder Marc Noël will remain Nomacorc chairman. Mohan and Jason Glass, a vice president with Summit, will join the board.