SMALL MEDIA, BIG RETURNS

The most well known private equity firms focused on the media space don't tend to get involved in deals where equity cheques of between $3 million (€2.2 million) and $5 million are written. And that's just the way Ted Carroll likes it.

The New York-based principal of Noson Lawen Partners says his firm targets media and information companies so small that they don't even register on the radars of larger private equity firms – that is, until these acorns grow to a size where the larger houses take notice.

The Partners of Noson Lawen recently sold portfolio company HMP Communications to middle-market private equity firm Alta Communications, which also specialises in media deals. Noson Lawen enjoyed a roughly four times return on the deal, which was completed in 1999. HMP Communications provides specialty medical journals and information. Carroll says that when his firm did the deal, the otherwise hot media market had fallen well out of love with traditional medical journals. “This is old-fashioned stuff,” says Carroll.

An earlier deal has also paid off in a big way for the firm. After investing $5 million for an equity stake in Dolan Media in 1997, the company in July went public on the New York Stock Exchange, spelling a three times return for the firm. Key to Dolan's success was the establishment of a service that helps law firms process defaulted mortgages – a growth industry, suddenly.

Carroll has been investing with partner Earl Macomber, who is based in Philadelphia, for 20 years. The two recent exits come from their second fund together, which raised $145 million in 1997. Noson Lawen recently held a second close on a third fund, rounding up a total of $45 million.

Like most general partners of small private equity firms, Carroll has an intimate grasp of portfolio companies' operations and often gets involved in the tiniest details. For example, when the partners once owned a publisher of mass-marketed paperback books, Carroll found himself overseeing the photo shoots for the covers of pot-boilers, which sometimes involved costumed romantic partners in steamy embraces. Noson Lawen's limited partners are no doubt impressed by the results this hands-on strategy appears capable of delivering.

VCS COMMIT $225M TO TELECOM FIRM
US telecommunications company Zayo Bandwidth has received $225 million (€165 million) in Series A funding from a group of US venture firms including Columbia Capital, M/C Venture Partners, Oak Investment Partners, Battery Ventures and Centennial Ventures. Robust bandwidth demand nationwide enabled Zayo to obtain such an unusually large amount of venture funding so soon after its launch, said Centennial managing director Rand Lewis. “Demand has just grown steadily since the mid-1990s,” Lewis said. “We think the companies we're investing in are well positioned to take advantage of that.”

HD SUPPLY SALE PRICE CUT TO $8.5BN
Bain Capital Partners, The Carlyle Group and Clayton Dubilier & Rice will pay $8.5 billion (€6.2 billion) instead of $10.3 billion for Home Depot's wholesale supply unit, HD Supply, as the health of the US credit and housing markets continue to cause concern for investors. The deal's underwriters – JP Morgan, Lehman Brothers and Merrill Lynch – have also revised their debt commitments for the deal, though the banks did not reveal the new terms of the debt.

CITI SPENDS $400M ON PLASTIC CUTLERY
Citicorp Venture Capital, the 39-year old leveraged buyout arm of Citi Alternative Investments, has acquired a controlling stake in Waddington North America in a $400 million (€293 million) transaction. CVC purchased the stake from Code Hennessy & Simmons, a Chicago-based midmarket firm. Headquartered in Kentucky, Waddington produces single use products for the foodservice industry, including cutlery, takeout containers and drink ware. Mid-market firm Norwest Equity Partners, as well as Waddington's management, also participated in the investment, though specific financial details were not disclosed. Ropes & Gray provided legal counsel to CVC, while SG Americas Securities was its financial advisor.

APOLLO'S $10.6BN BID WINS HUNTSMAN
A portfolio company of US buyout firm Apollo Management is to purchase partially listed US chemical manufacturer Huntsman in a $10.6 billion (€7.7 billion) transaction, including the assumption of $3.7 billion in debt. Under terms of the agreement, Hexion Specialty Chemicals will acquire all outstanding Huntsman shares for $28 each in cash. Huntsman has subsequently terminated a previous buyout agreement with Basell, a plastics company owned by Russian billionaire Len Blavatnik's Access Industrial Holdings. Hexion and Huntsman will each pay half of the $200 million break-up fee to Basell.

GOLDMAN, MADRONE CHECK IN AT HYATT
The buyout arm of Goldman Sachs and Wal-Mart affiliated Madrone Capital Partners have invested $1 billion for an undisclosed minority stake in the Global Hyatt Corporation. The hotel group's owners, the Pritzker family, said in a statement they were seeking liquidity; the family of 11 cousins decided in 2001 to split the assets they hold in the company within 10 years. Madrone's Greg Penner and Goldman Sachs' Byron Trott will join the group's board. Global Hyatt plans to open more than 65 hotels over the next three years, including 16 in Greater China, to augment the 213 it already has under management. The entire group is believed to be worth $20 billion under management, according to media reports.

BEHRMAN MAKES 3.6X RETURN ON RESEARCH LABS
Behrman Capital, a private equity firm based in New York and San Francisco, has completed the sale of its portfolio company, WIL Research Laboratories, to an undisclosed buyer for $500 million (€362 million), resulting in a 3.6x return and 63 percent IRR. Behrman bought a 66 percent stake in WIL, which provides product safety and toxicological assessment research and services, in September 2004 for $105 million. TPG Growth co-invested in the deal, taking a 9 percent stake, and exited its investment concurrently with Behrman. Bear Stearns was financial advisor to Behrman Capital for the transaction, while Goodwin Procter provided legal counsel.

APOLLO IN $1BN CRUISE DEAL
Apollo Management has waded further into the leisure cruising industry with a $1 billion (€744 million) deal for a 50 percent stake in NCL Corporation, a Miami-based company with a fleet of 14 cruise ships operating under banners including Norwegian Cruise Line.

Under the terms of the agreement, Apollo will own half the company's stock and appoint a majority of the NCL board. Earlier this year, Apollo purchased luxury cruise line Oceania Cruises in a deal valued at $850 million. It is expected to remain separate from NCL, as the two companies focus on different segments of the cruise market, according to NCL.

GI BUYS NAPA VALLEY WINERIES
Transatlantic private equity firm GI Partners has made its first foray into the wine business, with a controlling investment in Duckhorn Wine Company that Napa Valley sources place at roughly $250 million (€181 million). The company's labels include Duckhorn, Paraduxx, Goldeneye, Decoy and Migration. The auction for the St. Helena, California-based wine company – which has three production facilities and several hundred acres of prime, planted vineyard land in Napa Valley and the Anderson Valley – lasted approximately six months, and included at least one group led by a local vintner which dropped out of the bidding at $220 million, a wine industry source said.

TPG WINS AUCTION FOR US AIRLINE
TPG Capital and Northwest Airlines are on schedule to acquire US regional carrier Midwest Air Group for $450 million (€328 million). The $17 per share, cash offer was TPG's second, made to counter a bid from long-time hostile bidder AirTran Holdings. The investment will be made from TPG Partners V, a $15.3 billion fund, and one or more partners including passive investor Northwest Airlines. TPG has invested in several other airlines, including Continental Airlines, America West Airlines and Ryanair, and at press time was formalising a €3.4 billion bid for Spanish airline Iberia.